[From: Consumer Class Actions (1999)]

Introduction to Appendices

Primary Source Materials

The appendices contain two important primary source materials relating to consumer class actions. Appendix A reprints Federal Rule of Civil Procedure 23, that governs class actions in federal court. The Appendix is also found on the Companion Disk, allowing easy copying of the rule for use in briefs and other documents. State court actions will follow state court rules, which are not reprinted. Nevertheless, most state rules are patterned on Federal Rule 23. Appendix B reprints the Consumer Class Action Guidelines adopted in 1998 by the National Association of Consumer Advocates. These guidelines provide not only recommended practices by the leading association of consumer attorneys, but also contain useful analysis of current issues. These guidelines are also found on the companion disk, again allowing easy copying of passages directly into briefs and other documents.

Pleadings Available on Companion WordPerfect Disk

Consumer Class Actions contains a companion WordPerfect disk that contains most of the materials in the appendices. To save disk space, the disk contains only information an attorney would wish to copy or search, and thus does not include certain heavily formatted notices and other forms, this introduction, or the introductions to the appendices. All other appendices are set out as WordPerfect files so that a practitioner can copy the file, edit it to fit the facts of a particular case, and print the document out for submission in an actual case. Of additional utility is the ease with which specific information can be located using keyword WordPerfect searches. For this reason, the disk also includes the index to this volume, and the quick reference to the complete series. See the last page of this volume for installation, use, warranty, and other information about the disk. The disk itself is located in an envelope adhered to the inside back cover of this manual.

About the Sample Pleadings

This volumes appendices also contain sixty-eight samples of documents which have been used in litigated consumer class actions. Some of the names have been changed to protect the privacy of the plaintiff consumers. These samples should not be viewed as models, but rather as examples of the form and content of documents required at various stages of class action litigation. The documents were drafted by several different attorneys, and therefore vary in language, style, and content from one sample to the next. Many appendices provide a number of different samples of the same type of pleading, allowing the practitioner to select the pleading closest to the facts and legal issues of the practitioners own case. The various samples also allow the practitioner to review a number of stylistic alternatives.

Other Class Action Pleadings Available in NCLC Manuals and on Disk

In addition to the sixty-eight class action pleadings and documents found in these appendices, a number of other class action pleadings, orders, notices, and briefs are found in other NCLC publications and their companion WordPerfect disks, specifically Consumer Law Pleadings With Disk, Numbers One (1994) through Five (1999). Individual appendices specify when related pleadings are found in any of these five volumes of Consumer Law Pleadings With Disk, which may sometimes be closer in law or factual allegations to the practitioners case than the samples found in this volume. In addition, several types of documents appear in the five Consumer Law Pleadings With Disk volumes that are not found in this manuals appendices, such as documents pertaining to binding arbitration, cy pres awards, and attorney fees. For a complete listing of documents in these

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Consumer Class Actions: A Practical Litigation Guide five pleading books, go to www.nclc.org, click on manuals, and scroll down to the Consumer Law Pleadings entry. This will provide the complete contents for each book. WordPerfect disk, see National Consumer Law Center, Truth in Lending (3d ed. 1995). D.2 Complaint K.2 Motion for Class Certification L.3 Opening Memorandum in Support of Class Certification M.3 Reply Memorandum in Support of Class Certification TIL Rescission CaseHome Improvement Contract (Ogden): a class action against a financing company for home improvements on behalf of all persons who signed an agreement which had a hidden finance charge, which denied a three day period for rescission guaranteed under TILA and which did not properly disclose the points charged by the company. For more TIL pleadings, both printed and on WordPerfect disk, see National Consumer Law Center, Truth in Lending (3d ed. 1995). P.1 Memorandum in Support of Approval of Class Settlement TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis): a class action against an automobile dealership on behalf of all persons who signed sales contracts in which insurance premiums were not included in the disclosed finance charge and in which the annual percentage rate was understated. The named plaintiff was given title to her trade-in, recovered all her payments, had her indebtedness cancelled, and her credit report corrected. Other class members recovered $150 each. For more TIL pleadings, both printed and on WordPerfect disk, see National Consumer Law Center, Truth in Lending (3d ed. 1995). D.3 Complaint K.3 Motion for Class Certification L.4 Opening Memorandum in Support of Class Certification N.3.2 Combined Rule 23(c) and (e) Notice of Certification/Settlement O.2.1 Stipulations of Proposed Settlement with Dealer O.2.2 Stipulations of Proposed Settlement With Related Lender/Assignee TIL Untimely Disclosure Case (Diaz): a class action against an automobile dealership on behalf of persons who signed a binding contract for the sale of an automobile before Truth in Lending disclosures were made and who signed a confession of judgment. This case resulted in a decision certifying the class and granting summary judgment reported at 1994 U.S. Dist. LEXIS 16300 (N.D. Ill. Nov. 14, 1994). For more TIL pleadings, both printed and on WordPerfect disk, see National Consumer Law Center, Truth in Lending (3d ed. 1995). D.4 Complaint K.4 Motion for Class Certification L.5 Opening Memorandum in Support of Class Certification

Listing of Documents By Case Name

The sixty-eight documents in the appendices primarily come from twenty-two class actions, with each case providing from one to ten documents. The listing below summarizes the twenty-two cases, and enumerates in which appendices the pleadings from each case are to be found. Federal Fair Debt Collection Case (Boddie): a class action on behalf of persons who received debt collection letters which were rubber-stamped by an attorney to give the false impression of legal action by a sales finance agency. The case settled with the provision of $60,000 to a common fund. For more Fair Debt Collection pleadings, see National Consumer Law Center, Fair Debt Collection (3d ed. 1996 and Supp.) and also its companion disk. D.1 Complaint E.1.1 Interrogatories E.1.2 Production of Documents Request E.1.3 Request for Admission N.3.1 Combined Rule 23(c) and (e) Notice of Certification/Settlement O.1 Stipulations of Proposed Settlement Federal Fair Debt Collection Case (Bauer): a class action against a creditor for collecting debts not in its own name (and thus covered by the federal act) for misleading collection notices. K.1 Motion for Class Certification L.1 Memorandum in Support of Motion for Class Certification M.1 Reply Memorandum in Support of Class Certification Federal Fair Debt Collection Case (Smith): a class action against a hospital collection service on behalf of all persons who received letters falsely representing that legal action would be filed. For more Fair Debt Collection pleadings, see National Consumer Law Center, Fair Debt Collection (3d ed. 1996 and Supp.) and its companion disk. J Objection to Defendants Document Request to Named Plaintiff TIL Rescission and Deceptive Practices CaseHome Improvement Contract (Mount): a class action against a financing company for home improvements on behalf of all persons who were denied a three day period of rescission guaranteed by the Truth in Lending Act and who were required to sign a confession of judgment. This case resulted in a decision certifying the class reported at 1994 U.S. Dist. LEXIS 4027 (N.D. Ill. March 31, 1994). For more TIL pleadings, both printed and on 186

Introduction to Appendices M.4 Reply Memorandum in Support of Class Certification Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd): a class action on behalf of all persons who signed an automobile lease with defendant in which default and early termination charges were reported inaccurately, as well as the method of calculating the charges, in which a penalty for default was unconscionable and in which the buyers rights under the warranty were not made clear. For similar state law pleadings, see National Consumer Law Center, Consumer Law Pleadings With Disk, Number One Ch. 9 (1994). D.5 Complaint E.2.1 Interrogatories E.2.2 Production of Documents Request E.2.3 Request for Admissions E.2.4 Production of Documents Request #2 L.6 Opening Memorandum in Support of Class Certification M.5 Reply Memorandum in Support of Class Certification O.3 Stipulations of Proposed Settlement P.2 Memorandum in Support of Approval of Class Settlement RICO and Deceptive Practices CaseAutomobile Sale (Brown): a class action against a financing company on behalf of persons who purchased an automobile from associated dealer and who signed a financing agreement which did not contain the FTC Holder Notice. This case resulted in three reported decisions: 148 F.R.D. 584 (N.D. Ill. 1993) (defendants motion to dismiss the original complaint is granted); 820 F. Supp. 1078 (N.D. Ill. 1993) (defects in the original complaint are cured by the amended one); and 1993 U.S. Dist. LEXIS 11419 (N.D. Ill. Aug. 13, 1993) (class is certified). The case was settled for approximately $350,000 to the class and no more than $150,000 to the class attorneys. Other pleadings in the Brown case are reprinted in and included on the companion WordPerfect Disk for National Consumer Law Center, Consumer Law Pleadings With Disk, Number One Ch. 4 (1994). That volume includes the demand letter, the motion to file an amended complaint, the amended complaint, a memorandum in opposition to the motion to dismiss, discovery, plaintiffs response to the defendants discovery, motion, memorandum, and reply memorandum for class certification, plaintiffs response to defendants motion for reconsideration of class certification, notice of pendency of class action, memorandum in support of a proposed settlement, and request for attorney fees. F Response to Defendants Motion to Stay Discovery Automobile Dealer Deceptive Sale of Service Contract (Norris): a class action against a dealer for failing to disclose that it kept a large portion of service contract payments. Allegations included violations of TIL and the state UDAP statute. The case was settled. N.2.2 Rule 23(e) Settlement Notice RICO and Deceptive Practices CaseLenders Failure to Include FTC Holder Notice (Howard): a class action against a financing company of satellite dishes on behalf of all persons who signed a contract with the company which had omitted the FTCs Holder Notice. D.6 Complaint Deceptive Practices CaseVendors Single Interest Insurance (Ortiz): a class action on behalf of all persons who had automobile single interest physical damage insurance force placed for them by a finance company. The case also included a subclass of all persons whose cars were damaged and who did not recover in accordance with the policy. For more pleadings on force-placed automobile insurance, see National Consumer Law Center, Consumer Law Pleadings With Disk, Number One Ch. 2 (1994). D.7 Complaint E.3.1 Interrogatories E.3.2 Production of Documents Request K.5 Motion for Class Certification L.7 Opening Memorandum in Support of Class Certification M.6 Reply Memorandum in Support of Class Certification Revolving Repossession Case (Corral): a class action against an automobile financing company on behalf of all persons who had their automobile repossessed and resold to an affiliate of the defendant company. For more repossession pleadings, in print and on a WordPerfect disk, see National Consumer Law Center, Repossessions and Foreclosures (3d ed. 1995). H Motion and Order for Protection of Class Members Files Revolving Repossession Case (Carr): a class action against a car dealership and lender for a revolving repossession scheme. While this case was settled with the dealer, the case against the lender has gone up several times to the Fourth Circuit. It now appears that the case will be certified and go forward. D.9 Complaint Revolving Repossession Case (Johnson): a class action against financing company for automobile sales on behalf of all persons who had their automobile repossessed and resold to the dealership from which they had originally purchased the automobile. The case resulted in a $1.1 million cash settlement, waiver of $1.3 million in claimed deficiencies, and $175,000 in attorney fees. For more repossession pleadings, in print and on a WordPerfect

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Consumer Class Actions: A Practical Litigation Guide disk, see National Consumer Law Center, Repossessions and Foreclosures (3d ed. 1995). O.4 Stipulations of Proposed Settlement Loan Flipping and Packing (Walsh): a class action against a finance company for the unconscionable lending practices of flipping loans into additional higher rate loans and packing loans with unrequested, extravagantly priced insurance products. The case is based on violations of Truth in Lending, UDAP, common law fraud, and unconscionability. G Sample Pleadings to Compel Discovery State Usury Case (Adams): a class action on behalf of persons who signed home improvement financing contracts secured by a mortgage on real estate and who paid an interest rate calculated by the illegal Rule of 78 method. The defendant agreed to stop using the Rule of 78, and established a $200,000 common fund. For more usury pleadings, see National Consumer Law Center, The Cost of Credit: Regulation and Legal Challenges (1995). D.8 Complaint E.4.1 Interrogatories E.4.2 Production of Documents Request E.4.3 Request for Admissions L.8 Opening Memorandum in Support of Class Certification N.3.3 Combined 23(c) and 23(e) Notice of Certification/ Settlement O.5 Stipulations of Proposed Settlement Card Issuers Slow Payment on Credit Balances (Coe): a class action of those who overpaid their card balance, requested payment for the credit balance, and were not paid that balance in a timely manner. Allegations were based on TIL, UDAP, and breach of contract. L.2 Memorandum in Support of Motion for Class Certification M.2 Reply Memorandum in Support of Class Certification Campground Membership Fraud (Hughes): a class action against those providing financing for purchase of a campground membership, based on the FTC Holder Rule, alleging fraud, UDAP, and other claims. The case was settled. N.1 Rule 23(c) Notice N.2.1 Rule 23(e) Settlement Notice Insurance Sales Fraud (In Re: Metropolitan Life Insurance Company Policyholders Litigation): two consolidated class actions concerning MetLifes sale of replacement insurance policies which were funded by the cash value in an existing policy, alleging UDAP violations, breach of fiduciary duty and the duty of good faith and fair dealing, concealment by deceit and negligent supervision of its agents in the sale of insurance. I Brief in Support of Plaintiffs Motion to Restrict Defendants Communications with Class Members Hospital Collection Case (Albino): a class action on behalf of women who were eligible for free pregnancyrelated services under Maternal and Child Health Act against Project 502 which failed to pay the hospital for their pregnancy-related services. M.7 Reply Memorandum in Support of Class Certification Objections to Settlement of TIL and RICO Case (Buchet): a class action against a consumer loan company on behalf of all persons whose loans were deferred by the company without knowledge of the consumers. The original proposed coupon or scrip settlement resulted in objections by class members. The settlement was rejected by the court, and the decision rejecting the proposed settlement is reported at Buchet v. ITT Financial Corporation, 845 F. Supp 684 (D. Minn. 1994), amended 1994 U.S. Dist. LEXIS 10020 (D. Minn. 1994). Q.2 Objections to Proposed Settlement Q.3 Memorandum in Support of Counsel for Objectors Request for Attorney Fees Objections to Settlement in Mortgage Escrow Case (Robinson): a class action against a mortgage lender for its escrow practices resulted in a settlement agreement and fees that intervenor argued were unreasonable. Intervenor particularly objected to fees in excess of the real value of a coupon settlement, inadequate recovery for the class members, and a one-way gag order. Q.1 Objections to Settlement Agreement and Fee Petition

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Appendix A

Federal Rule of Civil Procedure 23

Federal Rule of Civil Procedure 23. Class Actions (a) Prerequisites to a Class Action. 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. (b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: (1) the prosecution of separate actions by or against individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. (c) Determination by Order Whether Class Action to be Maintained; Notice; Judgment; Actions Conducted Partially as Class Actions. (1) As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this

subdivision may be conditional, and may be altered or amended before the decision on the merits. (2) In any class action maintained under subdivision (b)(3), the court shall direct to the members of the class the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice shall advise each member that (A) the court will exclude the member from the class if the member so requests by a specified date; (B) the judgment, whether favorable or not, will include all members who do not request exclusion; and (C) any member who does not request exclusion may, if the member desires, enter an appearance through counsel. (3) The judgment in an action maintained as a class action under subdivision (b)(1) or (b)(2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class. The judgment in an action maintained as a class action under subdivision (b)(3), whether or not favorable to the class, shall include and specify or describe those to whom the notice provided in subdivision (c)(2) was directed, and who have not requested exclusion, and whom the court finds to be members of the class. (4) When appropriate (A) an action may be brought or maintained as a class action with respect to particular issues, or (B) a class may be divided into subclasses and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly. (d) Orders in Conduct of Actions. In the conduct of actions to which this rule applies, the court may make appropriate orders: (1) determining the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument; (2) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given in such manner as the court may direct to some or all of the members of any step in the action, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or otherwise to come into the action; (3) imposing conditions on the representative parties or on intervenors; (4) requiring that the pleadings be amended to eliminate therefrom allegations as to representation of absent persons, and that the action proceed accordingly; (5) dealing with similar procedural matters. The orders may be combined with an order under Rule 16, and may be altered or amended as may be desirable from time to time.

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(f) Appeals. A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.

(e) Dismissal or Compromise. A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.

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Appendix B

NACA Consumer Class Action Guidelines

National Association of Consumer Advocates, Standards and Guidelines for Litigating and Settling Consumer Class Actions, 176 F.R.D. 3751

TABLE OF CONTENTS INTRODUCTION ISSUES ADDRESSED 1. The Propriety of Class Actions When Individual Recoveries Are Small A. The Issue B. Viewpoints C. NACA Guideline 2. Certificate Settlements A. The Issues B. Viewpoints C. NACA Guidelines 3. Settlements When Other Class Actions Are on File A. The Issue B. Viewpoints C. NACA Guidelines 4. Additional Compensation to Named Plaintiffs A. The Issue B. Viewpoints C. NACA Guideline 5. Class Member Releases A. The Issue B. Viewpoints C. NACA Guidelines 6. Cy Pres Awards A. The Issue B. Viewpoints C. NACA Guidelines 7. Attorneys Fee Considerations A. The Issue B. Viewpoints
1 The National Association of Consumer Advocates is a nonprofit association of over 500 consumer advocates, attorneys, law professors and law students. It is dedicated to enhancing communication and networking among and between advocates and attorneys whose practice is devoted to curbing abusive business practices and promoting consumer justice. It publishes a bi-monthly newsletter with special issues focusing on different areas of consumer law, as well as a semi-annual member directory for use as a consultation resource. NACA cohosts with NCLC an annual consumer rights litigation conference in the fall and also conducts regional training conferences at other times of the year. NACA can be contacted at 1717 Massachusetts Avenue, N.W., Suite 704, Washington, D.C. 20036, (202) 332-2500, fax number (202) 332-2566, and the e-mail address nacadc@clark.net.

C. NACA Guidelines 8. Improved Notice of Settlement A. The Issues B. Viewpoints C. NACA Position 9. Approval of Settlement Classes A. The Issue B. Viewpoints C. NACA Guidelines 10. Interlocutory Appeal of Class Certification A. The Issues B. Viewpoints C. NACA Position SUMMARY AND CONCLUSION INTRODUCTION Consumer class actions serve an important function in our judicial system and can be a major force for economic justice. They often provide the only effective means for challenging wrongful business conduct, stopping that conduct, and obtaining recovery of damages caused to the individual consumers in the class. Frequently, many consumers are harmed by the same wrongful practice, yet individual actions are usually impracticable because the individual recovery would be insufficient to justify the expense of bringing a separate lawsuit. Without class actions, wrongdoing businesses would be able to profit from their misconduct and retain their ill-gotten gains. Class actions by consumers aggregate their power, enable them to take on economically-powerful institutions, and make wrongful conduct less profitable. In recent years, class actionsand particularly class actions which are resolved by settlementhave been subjected to considerable public criticism. At times, this criticism has been warranted. However, much of the criticism has been generated by self-appointed professional objectors and by selfinterested entities who are motivated by a desire to immunize themselves from liability for wrongs rather than by any concern for the public interest. Certain types of businesses, such as financial institutions and insurers, commonly deal with large numbers of consumers in similar ways. Often, such businesses are essentially immune from individual suits for damages since the amounts at issue as to any particular consumer are small. These entities harbor an expectable dislike for the class action procedural device, since it provides an effective tool for consumer redress in such situations. While such entities are entitled to have their voices heard in any public debate, it appears that a concerted effort has been initiated in recent years to

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not require compliance with the standards set forth here, in others it does, and in yet others there is a split of authority. Except where expressly stated, this paper does not argue for a change in the law. Instead, NACA seeks to educate practitioners about how to avoid conduct which is, or may appear to be, improper and about the most appropriate and effective way to fulfill the special obligations of class counsel to the class. Thus, the paper addresses how to curb abuses, while advocating keeping class actions as a vehicle for protecting consumers and holding economically powerful interests responsible for the harm they do. NACA is comprised of consumer lawyers and advocates. The views of many NACA members were solicited and received before this paper was written, as well as after it was circulated in draft form. Often, different members expressed opposing viewpoints. This paper is intended to reflect the majority view in those instances where there was any significant difference of opinion among members. This paper is directed toward use of class actions within the context of consumer cases. It is not intended to address class actions in other contexts, such as mass torts or employment discrimination cases, which often involve more substantial individual recoveries and a different mix of public policy and procedural considerations. ISSUES ADDRESSED 1. The Propriety of Class Actions When Individual Recoveries Are Small A. The Issue Questions recently have been raised about whether some illegal business practices are inappropriate for class treatment because individual recoveries are too small to warrant individual actions and the attorneys fees which are recovered dwarf the individual damages. The Preliminary Draft of the Proposed Amendments to the Federal Rules of Practice and Procedure issued by the Advisory Committee on Rules of Practice and Procedure of the Judicial Conference of the United States suggests a new subparagraph (F) to Rule 23(b)(3) which would allow courts, in deciding whether to certify a class, to weigh the probable relief to individual class members against the costs and burdens of class litigation. The Summary for Bench and Bar, distributed by the Administrative Office of the U.S. Courts, contains the following comment about proposed subparagraph (F): In small claims class actions, it may justify refusal to certify a class even though subparagraphs (A) and (B) would push toward certification because individual class members are not practically able to pursue separate actions. B. Viewpoints The new proposed subparagraph F requires consideration of the relief to individual class members instead of the size of the total sum that the defendant will pay to the entire class. The genesis of this proposal appears to be the viewpoint that some recoveries to class members may be so trivial that they do not warrant redress. Noting that the traditional justification for litigation is individual remedial benefit and that most private wrongs go without redress, proponents of this rule

undermine the legitimate uses for class actions by overemphasizing the relatively infrequent occasions when abuses of the procedure occur. In Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), the Supreme Court stated: A significant benefit to claimants who choose to litigate their individual claims in a class-action context is the prospect of reducing their costs of litigation, particularly attorneys fees, by allocating such costs among all members of the class who benefit from any recovery. Typically, the attorneys fees of a named plaintiff proceeding without reliance on Rule 23 could exceed the value of the individual judgment in favor of any one plaintiff. Here the damages claimed by the two named plaintiffs totaled $1,006.00. Such plaintiffs would be unlikely to obtain legal redress at an acceptable cost, unless counsel were motivated by the fee-spreading incentive and proceeded on a contingent-fee basis. This, of course, is a central concept of Rule 23. Id., 445 U.S. 326, 338 n. 9 [emphasis added]. In a similar vein, the California Supreme Court recognized in its landmark decision in Vasquez v. Superior Court, 4 Cal. 3d 800, 808 (1971) that: Protection of unwary consumers from being duped by unscrupulous sellers is an exigency of the utmost priority in contemporary society . . . The alternatives of multiple litigation (joinder, intervention, consolidation, the test case) do not sufficiently protect the consumers rights because these devices presuppose a group of economically powerful parties who are obviously able and willing to take care of their own interests individually through individual suits or individual decisions about joinder or intervention. [Citation omitted.] The California court further recognized that class actions generally have beneficial by-products, including a therapeutic effect on sellers who indulge in fraudulent practices, aid to legitimate business enterprises by curtailing illegitimate competition, and avoidance of multiple lawsuits involving identical claims. Even when individual actions could be brought, it is only through class action status and class-wide discovery that the defendants wrongful practice and its effect on large numbers of similarly-situated consumers may be carefully and accurately determined. Class action discovery thus can improve the strength and size of the eventual recovery for affected consumers. Class actions also can be abused. Moreover, any abuse is sure to be the focus of much adverse comment in the media and to be used in an attempt to change the law to disfavor class suits and thereby insulate abusive business practices from effective review. Through this paper, the National Association of Consumer Advocates (NACA) is undertaking to provide guidelines to specify what practitioners should be doing under the current state of the law. In some instances, the law does

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change urge that we should not establish a roving Rule 23 commission that authorizes class counsel to enforce the law against private wrongdoers. Request for Comment at 26. Attorneys who litigate consumer class actions hold the contrary view and believe that the focus on individual compensation misses a central point of class actions: deterring misconduct by the defendants. The class action device is particularly appropriate in consumer cases where individual recoveries are small, but which, in the aggregate, involve substantial sums, often millions of dollars in damages. Class actions serve an important purpose beyond simply compensating the injured. Often, class counsel and class representatives act as private attorneys general vindicating cumulative wrongs and obtaining significant injunctive relief or institutional change, and requiring disgorgement of illegal profits. HERBERT NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS 5.49 & 5.51 (3d ed. 1992) [cited herein as Newberg]. To refuse to permit class actions on the grounds that individual recoveries are small, while ignoring the aggregate amounts involved, would encourage wrongful conduct and largely immunize entities engaged in schemes to steal millions in $10 increments. An illustrative example is found in the consumer class actions challenging excessive late and overlimit charges on credit card accounts which were criticized on the grounds that class members are eligible for only a few dollars apiece in compensation while class counsel get millions. Max Boot, WALL ST. J., Sept. 19, 1996. If Rule 23(b)(3)(F) were adopted, it could provide a basis for refusing to certify these classes because individual recoveries ranged from $3 to $50, which a court might deem to be trivial. Such a constricted view disregards the facts. For example, in the related Wells Fargo Bank and Crocker National Bank cases, total damages of almost $10 million were recovered, plus interest, and more than $6.5 million was distributed directly to the plaintiff classes. Each class member received the full amount which he or she was overcharged, plus interest, through credits to current customers accounts and refunds to former customers. Moreover, $3.3 million was given to consumer organizations which provided indirect benefit to absent class members, and the Banks were required to pay all but $115,668 of the $2,130,118 awarded in attorneys fees for work in the trial court. The plaintiff classes were required to pay only 1.28% of the fund for fees. These charges were imposed by the Banks in violation of California law. It would be unsound as a matter of policy to allow these large corporations to enrich themselves by $10 million through illegal conduct simply because each affected customer was overcharged by $50 or less. The Supreme Court has long recognized that without Rule 23 claimants with small claims would be unable to obtain relief. See Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 338 n. 9 (1980), quoted above. To the same effect is Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985). Class actions . . . may permit the plaintiffs to pool claims which would be uneconomical to litigate individually. For example, this lawsuit involves claims averaging about $100 per plaintiff; most of the plaintiffs would have no realistic day in court if a class action were not available. Id. at 809. In addition, assuming that it is desirable for a court to weigh the potential costs of class action litigation against its poten-

Appx. B-1B

tial benefits, it would be a mistake to focus solely on monetary relief recoverable as damages or restitution. Rather, many consumer class actions provide an additional social benefit deterrence. Recovery of a significant aggregate sum from the defendant will have a deterrent effect on resumption of the same or similar wrongful practices in the future, both by that defendant and by other similarly-situated entities. This deterrent effect is present regardless of the amount recovered by individual class members. Moreover, injunctive relief can specifically prohibit resumption of a wrongful activity. The importance of the deterrence factor in consumer cases is evidenced by the frequency with which Congress and the state legislatures have included fee-shifting provisions in consumer protection statutes. By including fee-shifting provisions, Congress and the state legislatures seek to encourage enforcement of these consumer laws through a system of private attorneys general, even where the amount of damages at stake would be too small to support litigation if the plaintiff had to absorb the cost of attorneys fees. See, e.g., De Jesus v. Banco Popular de Puerto Rico, 918 F.2d 232, 234 (1st Cir. 1990) (construing the Truth in Lending Act). This recognition of the importance of enforcing consumer protection laws, even in cases where the amount of damage to an individual consumer is small, is at least as applicable in the class action context as in the individual case context. Indeed, the use of class actions to deter widespread consumer fraud is probably preferable to the only practical alternative: punitive damage awards. If small compensation class actions are discouraged, the alternative will be to seek large punitive damage awards on behalf of a few consumers who, while litigating relatively small individual claims, can prove willful, wide-spread misconduct by the defendant. While both alternatives result in the appropriate extraction of a large payment from the defendant, class actions result in the distribution of that payment to the victims of the practice, rather than providing a seeming windfall to the few consumers who prevailed in their individual punitive damage claims. Finally, what may seem small to those of us fortunate enough to be lawyers and judges may be significant to those consumers whose annual incomes are at or below the poverty level. The sum of $50.00 represents two percent of the total annual poverty guideline allotment per family member under the United States Department of Health and Human Services 1995 poverty guidelines. For a low income consumer, that trivial $50.00 individual recovery has significant value, equivalent, as a percentage of income, to a $2,000 recovery by a single person earning $100,000 a year. While class actions, like any procedures, sometimes may be abused, protections against abuse already exist. Courts may and do refuse to allow classes to be certified where the potential recovery to each consumer is nominal or where a distribution would consume such substantial time and expense that the class members are unlikely to receive any appreciable benefit. See e.g., Buchet v. ITT Consumer Financial Corp., 845 F. Supp. 684 (D. Minn. 1994); Blue Chip Stamps v. Superior Court, 18 Cal.3d 381, 386, 134 Cal. Rptr. 393, 556 P.2d 755 (1976); City of San Jose v. Superior Court, 12 Cal.3d 447, 459, 15 Cal. Rptr. 797, 525 P.2d 701 (1974). Further protections are found in the requirements that courts must find any settlements to

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in the settlement addressed the animating principle of this lawsuit: that these GM pickup trucks pose a seriousbut remediablesafety hazard. The settlement was criticized and rejected by both federal and state courts. In re: General Motors Corp. Pick-up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995); Bloyed v. General Motors Corp., 881 S.W.2d 422, (Tex. App.Texarkana 1994), affd, General Motors Corp. v. Bloyed, 916 S.W.2d 949 (Tex. 1996). One of the main points of criticism was the inadequacy of the certificates as the sole redress for the injured class members. The GM case, and others, have served to demonstrate the problems inherent in non-cash settlements. It is important to note, however, that settlements that do not actually deliver dollars into the hands of the class may be entirely appropriate. For example, credits to existing accounts are usually adequate substitutes for mailing checks to each class member; indeed, crediting is more efficient than mailing and should serve as the basis for increasing the amount paid to each class member. Similarly, if the amounts available to each class member are so small as to make delivery by checks economically unviable or if the class members are impossible to determine with certainty, distribution of the class benefit through cy pres awards is advisable, as discussed in Issue 6 below. The comments here are directed solely to certificate settlements that only offer class members the opportunity to purchase a product or service from the defendant in the future at a claimed discount from the regular price to the consumer. B. Viewpoints The potential problems with non-cash settlement of class members damages are many: 1 There is no principled reason why delivery of cash settlements cannot be achieved, aside from the fact that the defendant prefers not to do so. 1 For most of the class, redemption may not be an option, because they are unwilling or unable to make a future purchase. Thus the class members are not equally compensatedsome get more, others get less. This situation is at its most aggravated when the certificate requires purchase of a new car or other big ticket item. 1 Even where the coupon is for a small ticket item or is freely transferable, the defendant may be able to use its specialized knowledge of the industry to recover the cost of the coupon in the marketing of the relevant product. 1 Policy considerations disfavor rewarding the wrongdoing defendant with new sales from the victims of its illegal practices. 1 The actual value of certificates is uncertain, making valuation of attorneys fees impossible on a percentage basis, especially where discounted prices are common. 1 Proponents of certificate settlements claim that use of certificates makes settlements easier because the defendant is more willing to settle for terms that will only mean a discount from the retail price of the product or because the cost to the defendant is in the future, requiring the immediate outlay of less money. Proponents stress that the particular facts involved in a proposed certificate settlement may justify it, pointing for example to In re Sears

be fair and reasonable to the members of the class, F. R. CIV. P. 23(e), and that courts must approve amounts to be paid as attorneys fees. C. NACA Guideline The class action device is particularly appropriate in consumer cases where individual recoveries are small, but which, in the aggregate, involve millions of dollars in damages. This is precisely the type of case which encourages compliance with the law and results in substantial benefits to the litigants and the court. Denial of class certification in such instances would result in unjust advantage to the wrongdoer. Class actions should be deemed appropriate precisely because individual damages are too small to warrant redress absent a class suit, so long as significant aggregate pecuniary and/or nonpecuniary benefits to the class are sought. This is particularly true in cases with claims for which a legislative body has provided a fee-shifting remedy to encourage private enforcement actions. 2. Certificate Settlements A. The Issues There appears to be an increasing use of certificate settlements, offering relief to the class members in the form of certificates that are redeemable on future purchases from the defendant. Questions have been raised about the propriety of such settlements. It is important to differentiate between certificate settlements, which are discussed herein, and other settlements that do not deliver dollars directly into the hands of the class members, which may well be appropriate. An example of the latter type of settlement is one in which credits are issued to class members accounts with the defendant. When credits are made to existing accounts, the effect is similar to delivering cash, with increased efficiency. By contrast, the General Motors (GM) sidesaddle pickup truck case is a good example of the type of certificate settlement that should never have been proposed for court approval. That class action sought to resolve the worst vehiclefire safety hazard in history: exploding side-saddle gas tanks on GM pickups that have killed 400 people and badly burned more than 2,000 more. The plaintiffs alleged that these trucks are flawed by a dangerous and latent design defectthe placement of the gas tanks outside the frame railthat increases the likelihood that their fuel tanks will rupture in side-impact crashes, causing fuel-fed fires. The class action sought a recall of these GM trucks, with restitution and refunds to all class members, and an order directing GM to pay for the retrofitting of all GM pickups to correct the fuel tank defects. However, in the settlement, class counsel abandoned the recall/retrofit remedy in favor of an approach that limited class members recovery to discount coupons to buy new GM trucks. There was no provision requiring GM to recall or repair the trucks, or to reimburse owners who made the repairs themselves, nor was there any provision requiring GM to warn consumers about the hazards of the trucks, despite the demand for such relief in the complaint. In other words, nothing

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Automotive Center Consumer Litigation, (N.D. Cal. No. 922227 RHS). Here these proponents averred that the certificates involved could be redeemed for any merchandise sold at Sears stores (not merely the services and merchandise at issue in the litigation) and that 99.6% of the certificates issued were redeemed. C. NACA Guidelines Certificate settlements have many disadvantages and should be proposed by class counsel only in the rare case. For example, if (1) the primary goal of the litigation is injunctive and the defendant agrees to an injunction, or the certificates are good for the purchase of small ticket consumable items which class members are likely to purchase, or the certificates represent true discounts that would not otherwise be available, (2) the certificates are freely transferable, and (3) there is a marketmaker to insure a secondary transfer market, a certificate settlement might be appropriate. A few basic positions are clear: 1 Certificate-based settlements should never require identifiable class members to purchase major, large ticket items from the defendant as the sole significant relief to the class. 1 Certificates should have some form of guaranteed cash value. For example, the certificates could have a lesser cash redemption value (either upon issuance or within a reasonable period of time) that still gives the class members a benefit that is significant in relation to the actual damages which would be provable at trial. As a lesspreferable approach, the defendant could contract with a market maker that would promise to purchase all available certificates for a set price that is significant in relation to the likely recovery at trial. 1 Certificate settlements should never be proposed to the court unless it is apparent that the defendant is providing greater true value (i.e., not just the face value of the certificates or their potential value) to class members than would be available from an all-cash settlement. There may be legitimate tax or financial-accounting reasons why a greater recovery for class members can be had from a non-cash settlement. However, class counsel should inquire about the defendants reasons for preferring a noncash settlement. The beginning assumption should always be that the defendant prefers a non-cash to a cash settlement because it believes the true value to be less. Since the defendant will usually be in a superior position to predict the ultimate redemption rate and benefit to the class, its preference for a non-cash settlement should be viewed with skepticism. 1 A settlement involving certificates should require a minimum level of redemption by the class members within a reasonable period of time. In the event actual redemption does not meet this minimum level, the defendant should provide alternative relief in the form of a common fund. This requirement protects against the use of a meaningless certificate settlement that has little or no impact on a defendant, and little or no compensatory value to the plaintiff class.

Appx. B-3B

1 Class counsel and defendants should submit to the court and all counsel of record detailed information about redemption rates and coupon transfers during the entire life of the coupon. By doing so, a public record will be made of what works and what does not work in non-cash settlement cases. 3. Settlements When Other Class Actions Are on File A. The Issue Settlement of a class action when other similar cases are pending requires consideration of a series of specific questions. How should class counsel approach settlement when other class actions, whether putative or certified, have been filed? How can reverse auctions be avoided? How should counsel deal with differing geographic and/or substantive scope of multiple class actions? B. Viewpoints This issue was the most complex of all issues considered. There is general agreement that class counsel should be sensitive to the potential for wiping out claims asserted in other pending cases by settling a case, and should resist doing so. This problem is particularly apparent where the defendants suggest expanding a settlement class beyond the class definition contained in the complaint or in a prior order certifying a class, or expanding the claims settled, but offer no increased benefit to the additional class members or for settlement of the additional claims. There is also concern about the filing of nationwide class actions and agreeing to settlements which do not exclude from the class cases pending in certain states or locales. In either instance, the interests of the classes will not be well served by settlements which do not maximize benefits to class members. One particular area of concern exists when the multiple cases are pending in both state and federal courts and thus cannot be consolidated under the federal multi-district litigation rules. 28 U.S.C. 1407. Class counsel from California might be concerned about becoming involved in a related case pending in a rural area of Texas or Louisiana, where they are unfamiliar with the rules and traditions of practice. The Manual for Complex Litigation addresses this issue, and proposes several procedural steps to increase coordination. These steps include (1) joint conference calls among all judges (2) coordination of discovery, and (3) joint appointment of experts. MANUAL FOR COMPLEX LITIGATION, THIRD 30.3, 31.14, & 31.3 (1995). Another area of concern is the settlement of cases through a reverse auction by which defendants propose a cheap settlement and shop around among plaintiffs counsel until they find a lawyer willing to settle on their terms. Although there is no empirical evidence that this problem exists, anecdotes abound, and the potential for collusion and abuse is obvious if a lawyer agrees to a bad deal in order to secure fees. Commenters agreed that class counsel in overlapping actions should communicate with each other and work together to ensure that class members obtain the maximum settlement benefit. The personal interests of particular class counsel in receiving attorneys fees could discourage such cooperation at times. One member proposed that courts should be encour-

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4. Additional Compensation to Named Plaintiffs A. The Issue Is it appropriate to provide additional sums to named plaintiffs, beyond what each class member receives, and, if so, when and in what amounts? B. Viewpoints Earlier cases reflect a view that it is a conflict of interest for named plaintiffs to receive anything more than their proportionate share of damages in amounts which are equal to those received by absent class members. The theory was that named plaintiffs, like class counsel, are fiduciaries to the class, so every dollar they receive is taken from class members. Recently, some decisions have recognized that modest incentive awards to named plaintiffs, in the range of $2,0003,000, are generally desirable in order to compensate people for their efforts in achieving the results obtained and thereby encourage them to serve as class plaintiffs. GMAC Mortg. Corp. of Pa. v. Stapleton, 603 N.E.2d 767, 776 (Ill. App. 1 Dist. 1992); In re GNC Shareholder Litigation: All Actions, 668 F.Supp. 450, 451 (W.D. Pa. 1987); Troncelliti v. Minolta Corp., 666 F.Supp. 750, 752 (D.Md. 1987); In re Jackson Lockdown/MCO Cases, 107 F.R.D. 703, 709710 (E.D. Mich. 1985). Payments of even larger sums may be appropriate and necessary to compensate class representatives for the time they spend on the litigation. It is sometimes the case that named plaintiffs are subjected to embarrassment and harassment by defense counsel, and are required to submit to multiple days of depositions or to turn over their financial records for review. Named plaintiffs also may contribute to the litigation by reviewing records, reviewing and commenting on pleadings, responding to written discovery, giving assistance or advice to counsel and testifying at depositions and trial. It is appropriate that they receive additional payments to reimburse them for expenses they incur and time they spend in participating in the litigation. See, e.g., Bryan v. Pittsburgh Plate Glass Co., 59 F.R.D. 616, 617 (W.D. Pa., 1973), affd, 494 F.2d 799 (3rd Cir. 1974), cert. denied., 419 U.S. 900 (1974), reh. den., 420 U.S. 313 (1975) (approving special awards to those members of the plaintiff class who were most active in the prosecution of the case and who devoted substantial time and expense on behalf of the class); Thornton v. East Texas Motor Freight, 497 F.2d 416, 420 (6th Cir. 1974) (approving granting earlier seniority to those class members who had protested and helped to end discriminatory employment policy); Harris v. Pernsley, 654 F. Supp. 1042, 10521053 (E.D. Pa. 1987) (approving damage award to named plaintiff based on meritorious conduct); Genden v. Merrill Lynch, Pierce, Fenner & Smith, 700 F. Supp 208, 210 (S.D.N.Y. 1988) (approving award of $20,085 to one named plaintiff who, as an attorney, rendered consultative services to class counsel). C. NACA Guideline Awards to named plaintiffs are appropriate compensation for the time and expense they incur in serving as class representatives. The consumers who fight on behalf of an entire class should be reasonably compensated for their efforts when those efforts are successful. For anything more than modest sums in the range of $2,0003,000, the amounts of such awards should be based on the amount of time and money expended

aged not to approve settlements in copy cat actions and to consolidate actions whenever possible. However, experience in the federal securities area suggests that use of a first to file rule (whether used to determine who will be lead counsel or which should be favored for settlement approval) often produces unsatisfactory results. Cooperation among class counsel through a variety of means including sharing discovery, conducting joint discovery, using joint experts, coordinating document production, and coordinating scheduling of important motions, including motions for class certification, can expedite the handling of cases and minimize the cost to each counsel. C. NACA Guidelines Class counsel should attempt to learn of any pre-existing cases and to communicate with other plaintiffs counsel in such cases prior to or promptly after filing an overlapping case. Counsel should cooperate with each other to the maximum extent feasible in the pre-trial stage by agreeing to conduct joint discovery, use joint experts, and coordinate document production; or at a minimum sharing discovery among counsel in similar cases; and, where possible, by allocating responsibility for researching and drafting important pleadings and coordinating scheduling of important motions, including motions on the pleadings, for summary judgment, and for class certification. Counsel should be alert to the possibility that a defendant in multiple cases may seek to conduct a reverse auction, in which it negotiates separately with various plaintiffs counsel and attempts to strike a settlement most favorable to it. Bearing in mind the entitlement of class counsel to a fair fee given all the circumstances, the interests of the class must remain paramount. Counsel (1) should be reluctant to agree to expand the class definition at the settlement stage, (2) should refrain from agreeing to unnecessarily-broad releases which wipe out claims asserted in other pending cases, and (3) should be cautious about settling anything beyond what is alleged in the complaint and mindful of preserving the opt-out rights of class members. When a settlement has been reached, counsel should always notify class counsel and the court in other cases involving the same defendant and the same or similar issues. Such notice should occur well before the fairness hearing, in sufficient time to permit those counsel the opportunity to appear. After settlement, class counsel should also consider notifying persons and groups who have an interest in the proceedings that a tentative settlement has been reached and that a preliminary hearing will be scheduled to consider the fairness and adequacy of the settlement. For example, Trial Lawyers for Public Justice and Public Citizen would routinely be notified of class action settlements, the National Association of Attorneys General would receive notice of settlements involving motor vehicles which states purchase in large quantities, the American Association of Retired Persons would receive notice of settlements involving schemes that adversely affect the elderly such as telemarketing fraud and home equity scams, and NACA and the National Consumer Law Center would receive notice of settlements in consumer class actions such as challenges to deceptive home improvement financing schemes or overcharges by financial institutions. While such notification should not be an invariable rule, it should be the practice usually followed.

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in connection with prosecuting the case, or other special circumstances. 5. Class Member Releases A. The Issues When is it appropriate to release class claims without individual class member signatures? May the scope of releases exceed the scope of the claims certified by the Court? B. Viewpoints In agreeing to settle a class action, the defendant understandably wishes to obtain protection against later suits by class members for the same alleged wrongs that are being settled through the class actions. Ordinary principles of res judicata and collateral estoppel apply in the class action context to bar subsequent re-litigation of claims, so long as there was adequate representation of the class in the earlier case. Matsushita Electric Industrial Co., Ltd. v. Epstein, 516 U.S. 367, 116 S. Ct. 873, 134 L.Ed 2d 6 (1996). Nevertheless, as in individual cases, defendants generally insist upon the inclusion of releases within a negotiated settlement document. In some cases, defendants may also seek individual releases from class members, either as part of the language contained in claim forms or as an endorsement on settlement distribution checks. There does not appear to be any benefit from releases which do not exceed the scope of the res judicata bar, but neither does there appear to be any harm. Prior to Matsushita, there was some uncertainty whether class-wide releases which were broader than the scope of the pleadings and/or certified claims were binding upon individual class members in subsequent litigation. As a noted commentator states: A class action settlement agreement cannot release the claims of absent class members. Only absent class members can release their own claims. Newberg 12.17, at 12-52 (3d ed. 1992). However, Newberg subsequently notes that an alternative to individual releases is the inclusion of a constructive release clause in the settlement agreement to the effect that acceptance of settlement benefits releases whatever claims are described in the settlement agreement. Id. at 12-5212-56. The Supreme Courts recent decision in Matsushita, supra, clearly holds that res judicata bars re-litigation of noncertified claims (and even claims not contained in the pleadings) which are released on a class-wide basis, so long as there is adequate representation and an opportunity to opt out. Court approval of a proposed settlement should include a determination that plaintiffs and class counsel adequately represent the class on all of the settled issues, even if certification of some of the issues was previously denied. It was the unanimous view of those who submitted comments that individual releases are unnecessary and unproductive if the scope of the class-wide release is limited to those claims certified by the court for class treatment. There was also consensus that class counsel should be cautious in discussing settlement of claims beyond the scope of a prior class certification order (or, if no order has yet been entered, beyond the scope of the pleadings). Several comments suggested that counsel should seek additional settlement compensation if settlement of such claims is agreed to.

Appx. B-5C

The opportunity to opt out of a proposed settlement is particularly important if claims are being settled which have not been previously certified by the Court. It is common practice to offer class members only one opportunity to opt out of a class action. When there is a contested class certification motion, that opportunity usually comes immediately after certification. A subsequently-proposed settlement requires notice of the settlement terms and an opportunity to object, but usually not a second opportunity to opt out. If claims are being settled which were not described in the initial class notice, serious fairness issues are raised by the lack of a second optout opportunity. In addition, there are very serious, and probably fatal, objections to any settlement that purports to release potential future claims of persons who have not suffered any damage at the time of settlement. Settlements of this nature are rare, or even unknown, in consumer cases. Therefore, this paper will not discuss in depth the many issues relating to these settlements. However, we note that even if it were possible to notify such future-damaged class members, it is impossible to provide any meaningful notice and opportunity to opt out, since they have not been injured and thus cannot assess what the proposed settlement means to them. The Supreme Court addressed future-damage issues this past Term in Amchem Products, Inc. v. Windsor, 521 U.S. , 117 S. Ct. 2231, 138 L.Ed. 689 (1997). In that case, the Court found that including futuredamaged persons in the class defeated the predominance requirement of Rule 23(b)(3) and also made it impossible for the named class members (who were not future-damaged) to represent the interests of the absent future-damaged class members, as required by Rule 23(b)(4). 117 S. Ct. at 225051, 138 L.Ed. at 713714. In addition, the Court noted that there were significant problems of adequate notice to a class that included persons who were not then aware of their damages. 117 S. Ct. at 2252, 138 L.Ed. at 716. C. NACA Guidelines Class counsel should proceed cautiously in discussing settlement of claims other than those alleged in the pleadings and certified by the court. However, since the doctrines of res judicata and collateral estoppel will preclude subsequent litigation based on alternative legal theories arising out of the same set of facts, it is often reasonable to release any such alternative claims which could have been asserted, even if not contained in the pleadings or specifically certified. Except in unusual circumstances, counsel should not agree to any settlement which releases non-certified claims unless class members will be given a subsequent opportunity to exclude themselves from the settlement. If a defendant seeks a release of claims arising from factual circumstances not alleged in the complaint, or as to which certification has been sought but not granted, class counsel should seek additional compensation to the class for such releases. If possible, negotiation of the certified claims should precede negotiations as to non-certified ones. Adequacy of representation as to non-certified claims should be addressed in the briefs supporting a proposed settlement. A general release may be appropriate for the named class representatives. However, absent class members should not be required to release independent individual claims or claims

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pres distribution of unclaimed funds, although it found the specific use which had been approved inappropriate. The court reversed and remanded to the trial court to determine what remedy would best effectuate the goals of the underlying statute and the interests of the absent class members. Id. at 1309. Similarly, the Second Circuit in In Re Agent Orange Product Liability Litigation, 818 F.2d 179, 185 (2d Cir. 1987), concluded that a district court may set aside a portion of settlement proceeds for programs designed to assist the class in order to maximize the beneficial impact of the settlement fund on the needs of the class. The Court distinguished its earlier decision in Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2d Cir. 1973) (Eisen III), vacated and remanded on other grounds, 417 U.S. 156 (1974) which reversed a trial court order allowing fluid recovery through a price reduction. The court explained that the fluid recovery at issue in Eisen III would have allowed plaintiffs to satisfy the manageability requirements of Rule 23 where they otherwise could not and would result in a greatly increased number of doubtful but astronomical class claims in the federal courts. That concern was not present in Agent Orange, which was maintainable as a class action regardless of the form of recovery available to the plaintiff class. In Re Agent Orange Product Liability Litigation, supra, at 185. Other courts approving cy pres remedies also have distinguished Eisen on the basis that the fluid recovery sought in that case would have eliminated statutorily required individual proof of damages and circumvented class action manageability requirements. Nelson v. Greater Gadsden Housing Authority, supra, at 409; Six Mexican Workers v. Arizona Citrus Growers, supra, at 1307. Those issues are very different from the question of cy pres distribution of unclaimed funds, an issue which does not subject defendants to greater liability or alter their substantive rights. Id. In addition, Newberg criticizes the Eisen III rationale as defective and inconsistent with the historic purposes of class action remedies and concludes that cy pres distributions have long been recognized as appropriate exercises of the courts general equitable powers under appropriate circumstances. Newberg, 10.22 at 10-57. State courts have also approved cy pres remedies in a number of unreported decisions in California and Georgia. See, e.g., Vasquez v. Avco Financial Services of Southern California, Los Angeles Superior Court Case No. NCC-11833B; Beasley v. Wells Fargo Bank, San Francisco Superior Court Case No. 861555, and a related case, Kovitz v. Crocker National Bank, San Francisco Superior Court Case No. 868914; McClendon v. Security Pacific National Bank, Alameda County Superior Court Case No. 613722-5; Patterson v. ITT Consumer Financial Corporation, San Francisco Superior Court Case No. 936818; In Re: Domestic Air Transportation Antitrust Litigation, No. 1-90 C 2485 MHOS & MAL No. 861 (consolidated Nov. 2, 1990); and Starr v. Fleet Finance, Inc., et al. Cobb County Georgia Superior Court Civil Action No. 9210-2314-06. The propriety of fluid recovery, including creation of a consumer trust fund, was recognized by the California Supreme Court in State of California v. Levi Strauss, 41 Cal.3d 460 (1986). Following the general principles that wrongdoing must be deterred and that deterrence requires disgorgement of ill-gotten gains, the court approved cy pres distribution of the portion of a damage fund which could not be distributed to the consumers who had been overcharged.

as yet unknown in order to receive settlement benefits. Specifically, if the class settlement only provides injunctive benefits that do not result in restitution or other monetary payments to individual class members, the release should provide that individual damages claims are not being released. 6. Cy Pres Awards A. The Issue It is typically the case that not all class members can be located to receive their pro rata share of a damage award, and questions arise concerning what happens to the undistributed residue. They include: Are there circumstances under which the residue should revert to the defendant? Under what circumstances is a cy pres distribution of all or part of the settlement fund appropriate? What is class counsels role in recommending recipients of such awards? B. Viewpoints Respondents unanimously agreed that cy pres remedies are appropriate to ensure that undistributed residues are used to provide indirect benefit to absent members of the plaintiff class or to further the purposes of the statutes which formed the basis for the underlying litigation. This view is supported by the case law. Bebchick v. Public Utilities Commission (D.C. Cir.) (en banc), cert. denied, 373 U.S. 913 (1963) approved use of the funds collected in an invalid fare increase for the benefit of those who paid it, that is, those who use that transit system. A fund was created in this non-class case to be used by the Commission to benefit transit users in any pending or future rate proceedings or to cover costs which might otherwise lead to an increase in fares, or aid in determining whether fares should be reduced. Several other circuits have approved the use of cy pres remedies. An early antibiotic antitrust class action settlement included the creation of a trust fund from which indirect benefit could be conferred upon consumers as a whole, and the settlement was approved, with the details of the cy pres remedy left to be resolved at later hearings. State of West Virginia v. Chas Pfizer Co., 314 F. Supp. 710, 728 (SDNY 1970), affd, 440 F.2d 1079, 1083 (2d Cir. 1971). The Seventh Circuit has adopted an approach requiring a case-by-case analysis of whether the use of a cy pres remedy is consistent with the policy reflected by the statute violated and whether the statute embodies policies of deterrence, disgorgement, or compensation. Simer v. Rios, 661 F.2d 655, 676 (7th Cir. 1981), cert denied, 456 U.S. 917 (1982) (finding an award inappropriate because it would not serve the goals of deterrence or disgorgement on the particular facts of that case). In Nelson v. Greater Gadsden Housing Authority, 802 F.2d 405, 409 (11th Cir. 1986), the court held that compensatory damages which were not claimed by class member public housing tenants were to be used by the housing authority to increase the energy efficiency of the apartment units or to improve the appliances supplied by defendant. In Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1307 (9th Cir. 1990), the Ninth Circuit noted that the Eleventh Circuits decision expressly approved the use of fluid recovery to distribute unclaimed class action funds and expressed its agreement, holding that the district court properly considered cy

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The court concluded that such awards are appropriate where there is a nexus between the proposed use of the fund and the class on whose behalf the case was litigated, or where the proposed use furthers the purpose of the statutes which formed the basis for the underlying suit. In either instance, the use of the fund will provide indirect benefit to absent class members. The rationale for such awards is further explained in McCall, Sturdevant, Kaplan and Hillebrand, Greater Representation for California ConsumersFluid Recovery, Consumer Trust Funds, and Representative Actions, 46 Hastings Law J. 798 (1995). Thus, the case law supports creation of cy pres remedies in cases which are litigated to conclusion. Moreover, it is clearly permissible to settle with defendants and include a cy pres provision in the agreement, because a defendant may agree to a settlement which provides for fluid recovery notwithstanding the Eisen rule, Beecher v. Able, 575 F.2d 1010, 1016 n.3 (2d Cir. 1978). There are two views on allowing residues to revert to defendants. One considers that an unacceptable alternative which would reward defendants for engaging in wrongful conduct, except where there are no ill-gotten gains to be disgorged. The other is that it is appropriate where there is no incentive for defendants to fail to distribute the damage award or to assist in locating absent class members because allowing the return of the residue may enable counsel to negotiate better relief to known class members and obtain an agreement as to injunctive relief. There are also two divergent views on the propriety of cy pres awards of the entire damage fund with no distribution to the class. One view is that counsels fiduciary duty to the members of the class requires that there must always be a direct distribution to class members, and only the undistributed residue used for a cy pres remedy. The other view is that where individual recoveries are unduly costly to distribute or too small to warrant the cashing of checks, cy pres awards of the entire damage fund is appropriate. There is some authority for using a cy pres remedy for the entirety of a statutory damage award when the amount of damages to each class member is too small to warrant distribution. Gammon v. GC Services Ltd. Partnership, 162 F.R.D. 313 (N.D. Ill. 1995) was a suit under the Fair Debt Collection Practices Act involving a proposed class of four million people, each of whom would be entitled to 13 cents if plaintiffs prevailed. Class counsel, moving to certify the class under Rule 23(b)(2) of the Federal Rules of Civil Procedure, suggested cy pres distribution of the entire damage award. The defendant did not dispute the propriety of this remedy, which the court assumed would be suitable. Citing Newberg, the court noted that class actions are designed not only to compensate individuals who have been harmed, but also to deter violations of the law, especially when small individual claims are involved. It concluded: Disgorgement of illegal gains from wrongdoers, together with . . . application of the recovery for the benefit of class members under cy pres doctrines, would fulfill the deterrence objectives of class actions. Id. at 321, quoting Newberg, 4.36. (Note that in Mace v. Van Ru Credit Corporation, 109 F.3d 338, 345, (7th Cir. 1997), Gammon was limited to its own unique facts.) There is agreement that it is the role of class counsel, who have been found to be adequate representatives of the class,

Appx. B-6C

to recommend cy pres recipients. NACA has adopted the guidelines set forth in the McCall, Sturdevant, Kaplan and Hillebrand article at pp. 850851. Since it is the role of the court to protect the interests of absent class members, the court should carefully review the competence and record of organizations that are proposed as recipients. We believe that serious consideration should be given to using the unclaimed portion of the award for a longterm grant to an existing organization with competence in the issues raised in the underlying litigation. This will ensure that projects are of sufficient duration to result in real and concrete benefit to absent class members. C. NACA Guidelines In proposing a cy pres remedy, class counsel should propose a disposition of the unclaimed portion of the award that will either (1) protect the interests of the persons injured by the illegal conduct and thus indirectly benefit absent class members or (2) promote the purposes of the statutory prohibitions sought to be enforced in the underlying litigation. Counsel should also insist that the recipients of the award be accountable to the court and should enter into memoranda of understanding to that effect with recipient organizations. If counsel wishes to propose that a new organization receive the unclaimed funds, class counsel should be prepared to show the court how that organization has the ability and competence to work for the interests the underlying litigation sought to protect. This can be accomplished by providing information to the court about the current or proposed officers, directors, and staff of the organization. The work to be done by an existing or new organization should be set forth in a comprehensive proposal, together with time tables for accomplishing that work, which should indicate how the class will be indirectly benefited or the purposes of the underlying statutes will be furthered by these efforts. To ensure full accountability, counsel should usually negotiate a formal agreement with the proposed recipients which binds the recipients to restrictions on the use of the funds, and requires them to comply with accounting, auditing, and reporting requirements. Such a negotiated agreement offers assurance to the court that the proposed recipient will use the funds strictly in accordance with the terms of the courts order. For long term projects, counsel can oversee performance by requiring quarterly meetings with recipient organizations, semi-annual plans for work to be undertaken, and periodic reports of past accomplishments. Counsel should be entitled to compensation for work necessary to monitor implementation of the cy pres remedy at standard rates, with no enhancement or multiplier. Class counsel should agree that undistributed residues revert to defendants only in unusual circumstances. For example, reversion may be acceptable where there is no incentive for defendants to fail to perform their obligations in connection with distribution of the damage award and where there are no ill-gotten gains to be disgorged. Class counsel should insist on direct distribution of damages to class members before recommending a cy pres remedy for the undistributed residue except in unusual circumstances. These include instances where individual recoveries are unduly costly to distribute because, for example, defendants have

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Cir. 1974); City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1975); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973), on remand, 383 F. Supp. 999 (E.D. Pa. 1974), revd on other grounds, 540 F.2d 102 (3d Cir. 1976) (en banc). Because the availability of multipliers of the lodestar fee is uncertain, prohibiting percentage fees could make some class actions impossible to bring, if the resources needed to commit to the litigation were so sizable that the only way a law firm could economically justify taking on the case, and running the risk of recovering nothing, would be the potential of a large percentage recovery. In addition, some commentators have suggested that basing a fee on an hourly rate could lead some class counsel to perform unnecessary work (churning). The opposite end of the spectrum from this viewpoint holds that a percentage recovery in the 2030% range is entirely appropriate and should be left to court approval. Percentage fees have been held appropriate in common fund cases: Boeing Co. v. Van Gemert, 444 U.S. 472, 47879 (1980); In re Activision Securities Litigation, 723 F. Supp. 1373 (N.D. Cal. 1989); Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268 (9th Cir. 1989); and have been required in cases not involving a fee shifting statute in Swedish Hospital Corp. v. Shalala, 1 F.3d 1261 (D.C. Cir. 1993) and Camden I Condominium Association v. Dunkle, 946 F.2d 768 (11th Cir. 1991). However, some commenters urge that this approach could in class counsel being unduly compensated for insufficient time and effort. Others feel that a blended approach is bestevaluating both percentage and lodestar fees, to determine a reasonable fee for the particular case. Under this approach judges would make a lodestar calculation based on the hours spent and hourly rates and compare that figure with the percentage awards made in similar cases. See, Strang v. JHM Mortgage Sec. Ltd. Partnership, 890 F. Supp. 499, 50203 (E.D. Va. 1995) (comparing the lodestar and percentage of common fund calculations to conclude that 25% rather than 30% of the fund was a reasonable fee). Still others urge that different bases for fee awards raise different issues and require different solutions. A complicating factor is that it is not always clear whether a case is a common fund, a fee-shifting, or a common benefit case. If the entire case is based on statutes that provide for fee-shifting (and most consumer class actions are primarily based on feeshifting statutes), some commenters felt that it would be inappropriate for class counsel to seek fees based on a percentage of the amount awarded the class. This view finds support in case law holding that the lodestar calculation is required in fee shifting cases: City of Burlington v. Dague, 505 U.S. 557, 562 (1992); Blum v. Stenson, 465 U.S. 886, 895 (1984). These commenters found it even more objectionable if class counsel sought to obtain percentage fees out of the amounts awarded the class, rather than insisting that the defendant pay the fees over and above all amounts given the class. These commenters felt that this problem was particularly acute in instances where fees are assessed against members of the class who did not actually receive any monetary benefit. This situation can arise when class members recoveries are credited to their accounts with the defendant but not every class member receives a credit.

no computerized records which would enable them to generate a list of class members names and addresses, or where individual damages are too small to warrant the issuance, processing, and cashing of checks. Class counsel should recommend cy pres remedies which will provide indirect benefit to absent members of the class or which will further the purposes of the underlying litigation. They should also recommend mechanisms which will provide for monitoring by class counsel, and, ultimately, judicial oversight of the expenditure of the funds. 7. Attorneys Fee Considerations A. The Issue The issue of attorneys fees is extremely important in class actions today, both because it serves as a rallying point for criticism of class actions and because the criticisms of excessive fees are in some instances well grounded. This is also a difficult and complicated issue since fee awards may be made on three different bases: statutory fee shifting, in which defendant pays the fee; common fund, in which the class members pay the fee from their recovery; and common benefit, in which the defendant pays the fee. There is no one problem and no one cure. The prime focus of criticism is the size of the fees. In many instances, this problem is more apparent than real. For example, when the individual recovery is $50.00 per consumer, an attorneys fee of $2 million seems excessive at first glance. However, if the dollars actually recovered by the individual class members in such a case were $15 million, then fees are less than 14% of the total recovery achieved for the class. This makes the fee reasonable with respect to the total actual recovery. However, the cases that receive the most criticism are those where the class does not obtain cash recovery that is several times the fees received by the attorneys. The strongest criticism is directed at cases in which the actual cash received by the class is minimal, if any, and the only other benefits received by the individual members are certificates, of questionable value. The GM Pickup Truck cases, In re: General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995); Bloyed v. General Motors Corp., supra, and the Bronco II case, In re: Ford Bronco II Products Liability litigation, 1995 U.S. DIST. LEXIS 3507 (E.D. La. 1995) (rejecting settlement of a class action challenging dangerous vehicles that provided relief to the class in the form of a flashlight and safety video but no damages) are well known examples of this problem, but it had its roots in cases such as the airline antitrust settlement, which also provided certificates to consumers and millions of dollars in attorneys fees to the class lawyers. B. Viewpoints There are a variety of proposed solutions, none of which would take care of the problem entirely. One viewpoint holds that class counsel should be paid only by hourly lodestar rates, enhanced by multipliers when appropriate, and that percentage calculation of fees is not appropriate. The leading lodestar calculation cases, which primarily consider time spent, hourly rates, the work done, and the results obtained, are: Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th

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These alternative bases for awarding fees are not necessarily in conflict: fees could be recovered from the defendant under a fee shifting statute or other theory and paid into the common fund, with class counsel receiving a percentage of the total recovery. This approach finds support in Skelton v. General Motors Corp., 860 F.2d 250 (7th Cir. 1988), which involved the settlement of statutory fee shifting claims. The court noted that a settlement merges all claims, including the clients statutory fee shifting claim, into one common fund that belongs to the class clients, and ordered fees to be calculated under common fund principles This view is also consistent with case law noting that the amount which an opposing party can be required to pay as a reasonable fee may be substantially less than a reasonable fee owed by the client (or class of clients). Venegas v. Mitchell, 495 U.S. 82 (1990). Whatever the method of calculating fees there is no question that any contingent fee award must take into account the difficulty, complexity, and the risk of the case, the relief obtained for the class, as well as the fact that some cases will result in no fee at all. Therefore, it is entirely appropriate in most class action cases to award fees that are in excess of a fee calculated solely on an hourly basis without any multiplier. When a fee is to be calculated on a percentage basis, there is no fixed percentage that is appropriate to all cases. A fee of 10% on a class recovery of $100 million might be excessive depending on the circumstances. On the other hand, a 40% fee award would be insufficient in a case where the primary relief sought is injunctive and the payment to the class minimal, but where thousands of hours of attorneys time was required and the extent of the injunctive relief justified it. Some commenters argue that there is an inherent problem with negotiating fees with opposing counsel, even when counsel have first agreed on relief to the class. Since the Court has an independent duty to examine the fees, these commenters feel, prior agreement does little but create the appearance of collusion between class counsel and the defendant. Others contend that settlement often would be impossible to achieve unless the defendants understand the extent of their total exposure, and urge that it is preferable to obtain relief promptly for class members and that there is no reason not to reach agreement on fees so long as negotiation of fees follows the obtaining of an agreement to relief for the class on the merits. C. NACA Guidelines Reasonable attorneys fees must be awarded in consumer class actions because fees are the incentive for lawyers to engage in private enforcement of the law, but excessive and unreasonable amounts should not be sought or awarded. Because the issue of reasonable attorneys fees is one that will be determined by the merits of the lawsuit and the nature of the settlement, there is no one possible remedy for the abuses that exist. However, a variety of partial solutions will be beneficial. 1 Time to discuss fees. Because the Supreme Court has recognized that in a fee-shifting case the defendant has an economic interest in resolving the fee issues in a settlement negotiation along with all other statutory claims [see White v. New Hampshire, 455 U.S. 445, 452 n.14 (1982)], class counsel should avoid any conflicts of interest that

Appx. B-7C

may increase the danger of an improper quid pro quo detrimental to the class. For example, if a defendant offers a $5 million lump sum settlement, with $4 million for the class and $1 million to counsel, it would be improper to accept this offer contingent upon $3 million being made available to the class and $2 million available to counsel. It would be appropriate, however, to state that the $4 million for the class is acceptable as long as counsels compensation is increased. One alternative is to obtain the defendants binding agreement to all class relief and then to submit the fees issue to the court for determination. In statutory fee-type cases, an acceptable alternative is to obtain the defendants agreement on class relief contingent on successfully negotiating an agreement on fees. It is also acceptable to negotiate fees after all relief has been agreed on for the class, and then submit the entire agreement as a whole to both the court and the class for review and approval. In common fund cases, there is no need to discuss fees with the defendant since the class clients, not the defendant, pay the fee from the fund that was created by their counsel, subject to court approval. 1 Percentage Benchmarks for most Common Fund Cases. For the vast majority of common fund cases, courts and counsel should examine the reasonableness of the fees requested by the percentage benchmarks that have been recognized in similar cases. See, e.g., Camden I Condominium Assn v. Dunkle, 946 F.2d 768 (11th Cir. 1991); Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir. 1989); Brown v. Phillips Petroleum Co., 838 F.2d 451, 454 (10th Cir.), cert. denied, 488 U.S. 822 (1988); Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1272 (D.C. Cir. 1994); Bebchick v. Washington Metro Area Transit, 805 F.2d 396, 406407 (D.C. Cir. 1986); see also In re General Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 82021 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995); In re Continental Illinois Secs. Litig., 962 F.2d 566, 572 (7th Cir. 1992). In the absence of special circumstances, including either an unusually large monetary recovery or a relatively small monetary recovery coupled with very beneficial but difficult to value equitable relief, the courts have recognized percentage benchmarks ranging from 19 percent to 45 percent of the common fund. See, e.g., In re Greenwich Pharmaceutical Sec. Litig., [1995] Fed. Sec. L. Rep (CCH) k 98,774, p. 92,523 (E.D. Pa. Apr. 26, 1995); In re SmithKline Beckman Corp. Secs. Litig., 751 F. Supp. 525, 533 (E.D. Pa. 1990); In re Unysis Corp. Retiree Med. Benefits ERISA Litig., 886 F. Supp. 445, 467 (E.D. Pa. 1995); Mashburn v. National Medical Healthcare, Inc., 684 F. Supp. 679, 692 (M.D. Ala. 1988); In re Activision Secs. Litig., 723 F. Supp. 1373, 137478 (N.D. Cal. 1989). As one court has observed, [w]hen the prevailing method of compensating lawyers for similar services is the contingent fee, then the contingent fee is the market rate. Kirchoff v. Flynn, 786 F.2d 320, 324 (7th Cir. 1986). In the few (often highly publicized) cases in which the monetary relief, however valued or estimated, exceeds $30 million, reasonable fees will nearly always, though not necessarily, represent smaller than the benchmark percentages. In such cases, courts have encouraged use of a lodestar analysis to cross-check the reasonableness of fees in

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1 Percentage fee request if cash value of settlement cannot be determined at time of settlement approval. In some situations, the total cash value of a settlement may not be calculable at the time the settlement is finally approved. The two most common situations where this is true are (1) certificate settlements, where it is unknown how many of the certificates will ultimately be redeemed; and (2) claims made settlements, where it is unknown what proportion of the available funds will be claimed by class members or paid to a cy pres recipient. In such cases, it is inappropriate for class counsel to seek a percentage fee unless one of the following is true: (a) the settlement provides for a minimum settlement level which is guaranteed to be paid (either to class members or as a cy pres payment) and the fee sought is based upon a percentage of the minimum amount; (b) the settlement provides for an initial payment to class members (or as a cy pres payment) and the fee is sought based on a percentage of that initial payment; or (c) approval of payment of the fee to class counsel is not requested until such time as the court can accurately assess the actual value of the settlement (i.e. after the deadline for class member claims are after the certificates expire). 1 Notice to the class of fees. Another essential, but not sufficient, component of reform is a requirement that the maximum amount of attorneys fees to be sought must be disclosed to the class members at the time the notice of proposed settlement is sent to them, stated as a total dollar amount. In a common fund case where a percentage will be sought, that fact and the specific percentage to be requested should be stated in the notice. In statutory fee shifting cases, the lodestar, if agreed to by the parties, should be disclosed in the class notice. If there is no agreement, the amount class counsel intend to request from the court should be disclosed. It is also a good idea to disclose the amount of fees per class member, but the members of the class have the right to know how much their attorneys are making in total. For example, the class must be told that the lawyers will receive $2 million, but could also be told that this amounts to $6.67 per class member. The average fee per class member need not be disclosed when recoveries vary substantially among class members, since that number would not be meaningful. 8. Improved Notice of Settlement A. The Issues One significant problem with class action settlements is that Rule 23 does not specify the content of notice to the class. Consequently, the notices given to the class, whether individually or by publication, are not uniform and often are in such fine print and sufficiently complicated and unclear that the class members do not understand the nature of the relief sought or obtained in their names. They therefore do not actually have the information necessary to make an informed decision as to whether to remain members of the class, to opt out, or to object to the settlement.

such large cases. See, e.g., General Motors, 55 F.3d at 822; In re Washington Public Power Supply Sys. Litig., 19 F.3d 1291, 1295, 1298 (9th Cir. 1994). Although such crosschecks in typical cases simply add another level of analysis, and may even undermine the purposes of the percentageof-the-fund approach, in large cases the cross-checks are a useful tool in protecting the class from windfall fee awards. Similarly, when the common fund is relatively small or difficult to value precisely and the common benefit is undoubtedly valuable but difficult to quantify, the lodestar approach may properly supplant the percentage-of-thefund benchmarks. Provided the class receives real value and is receiving benefits commensurate with the fees to be awarded to class counsel, it is not per se unreasonable for counsel to set aside a monetary fund from which attorneys fees will be paid even though the class may be receiving primarily equitable benefits. However, counsel should be aware that the timing of fee negotiations in such cases may be considered as a factor by the courts in the review of the adequacy of the class representation. General Motors, 55 F.3d at 803804. 1 Recovering fees from the class. In a common fund case where the underlying claims are based on fee-shifting statutes, it is generally best to negotiate an additional amount representing the right to fees from the defendant directly, in order to limit the fees paid by class counsels clients and maximize the total recovery to the class. It may be appropriate in such a case to merge the statutory fee into the common fund (see Skelton, supra), and to also obtain a portion of the fees from the common fund. The same is true in common benefit cases. In instances where the only source of fees is the common fund, class counsel must insure that (1) no class member is assessed fees if that member did not receive a benefit and (2) the percentage of fees assessed against any class member is a reasonable percentage of that class members recovery. Class counsel must refuse to discuss any proposal by a defendant to pay one amount itself or to pay nothing itself but agree to class counsel seeking a greater amount from a common fund. If the defendant can be persuaded to offer an additional sum for fees, that can be accepted as a credit toward a common fund award made by the court. In a statutory fee shifting case which is not converted to a common fund case, fees should be recovered solely from the defendant and be based on the lodestar. 1 Non-cash settlements. In a case where relief to the class is not paid in cash (or by credit to an existing account), the attorneys fees should be based solely on a lodestar rate, with a multiplier when appropriate under existing case law. Otherwise, it is impossible to determine the value of the actual relief received by the class (as opposed to the theoretical value of non-cash relief) on which to base a percentage amount. If an agreement is negotiated with the defendant as to an amount of fees which the defendant will not contest, class counsel should still submit sufficient documentation to the court to justify, on a lodestar basis, whatever amount of fees is being sought. Alternatively, a percentage fee might be recovered, but only after a delay, as described below.

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B. Viewpoints Currently, there is no group advocating or opposing improved notice to the class. However, industry groups and the defense bar are readying attacks on class actions that could be fatal to the ability of individual consumers to use class actions to stop deceptive and illegal practices and to obtain relief after being victimized. Part of any consideration of changing class action practice should include finding a way to insure that the absent class members have the best tools possible to decide whether or not to support a class action settlement. Both the MANUAL FOR COMPLEX LITIGATION, THIRD and the foremost treatise on class actions recommend the content of notices of proposed settlements. The Manual suggests that notice include a description of the essential terms of the settlement, information about attorneys fees, disclosure of any special benefits for class representatives, specification of the time and place of the hearing to consider approval of the settlement, and an explanation of the procedure for allocating and distributing the settlement. 30.212 (1995). Newberg & Conte recommend that notice contain a description of the litigation, summary of the proposed settlement, requested allowance for attorneys fees, procedure for filing proofs of claims, procedure for filing appearances and objections, and procedure for obtaining documents related to litigation and settlement. Newberg, supra, at 8.32. C. NACA Position NACA supports a drive for simplified, plain-language, standardized disclosure of the salient aspects of a settlement. Disclosure should be required only of those points that are most important for consumers to know. This simplified form would be the first page of the class notice, whether by publication or individual mail. The details would continue to be placed in the body of the class notice. The standard form of notice should include the following: 1 A clear statement of how the consumer can tell whether he or she is a member of the class. 1 The number of members of the plaintiff class. 1 The total amount of relief to be granted the class, stated in dollars where the payment is in cash or credit to an account. 1 The individual relief to be received by each member of the class, broken down into sub-classes if necessary. Where this cannot be determined in advance of the claims process, there should be a good faith estimate of the range of individual recoveries for class members. 1 The total maximum fees, in dollars, to be sought by the class attorneys, and the method whereby they were calculated (hourly, hourly with a multiplier, percentage, or a combination), as well as the source from which payment will be sought. 1 Proposed distribution of any unclaimed funds, including whether they will revert to defendants. 1 Options available to class members including at least opting out and objecting. 1 An address to write for further information regarding the settlement. 9. Approval of Settlement Classes A. The Issue

Appx. B-9B

The growing use of settlement classes, especially when coupled with the increasingly-frequent proposals of settlements where the class members do not receive either monetary or equitable relief, raises serious concerns that the interests of the absent class members have not been adequately represented. The holdings in Amchem Products, Inc. v. Windsor, 117 S.Ct 2231 (1997) and In re: General Motors Corp. Pick-up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995) should serve as a harbinger of increased judicial scrutiny of settlements of this nature. B. Viewpoints Most commenters agreed that the preferred approach is to seek and obtain class certification prior to any discussion of settlement. By seeking court involvement at an early stage, the class has the advantage of an adversary-based determination of such vital issues as adequacy of representation of the class, adequacy of class counsel, and the exact make-up of the class. Settlements before certification create problems. Commenters differed in the best approach to take. One approach to post-settlement certification entails a two-step process. First, the issue of certification would be the subject of a plenary hearing, after notice to the class but without notice of settlement of the merits. After the trial court has determined that the case should be certified as a class following hearing, the notice of settlement and of class certification would not need to be addressed again, and the trial court would focus on the Rule 23(e) determination that the settlement is fair, adequate, and reasonable to the class as a whole, as the law requires. Another approach to post-settlement certification, which is acceptable under the holdings of the Third Circuit, combines the two hearings into one, with notice to the class of both the certification and the fairness issues to be considered. The trial court would conduct a plenary hearing into both the certification of the class and the fairness issues, only reaching the fairness issues after determining the nature of the class to be certified pursuant to both subsections (a) and (b) of the Rule. Under Rule 23(c)(1), the trial court has always had the power to make certification conditional, before decision on the merits. It would appear to be within the scope of the Rule to make certification conditional on finality of the settlement, providing no subsequent res judicata effect if the settlement itself is rejected. Certainly, this approach adheres much more closely to the Rule than certification after less than full consideration of all Rule 23 requirements. This approach meets the holdings of the Third Circuit and also provides the salient benefit of avoiding both the appearance and the actuality of either collusion or inadequate representation of the absent class members. Some commenters felt that negotiating settlement prior to obtaining class certification is appropriate because it enables counsel to obtain prompt resolution of cases to the benefit of the class. Those commenters also felt that it was a waste of time for a court to conduct a hearing on class certification if

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be rejected as it is currently worded. It is unnecessary to amend Rule 23 at all to obtain the positive benefits of appropriate settlement classes. The preferable method is to obtain class certification prior to entering into settlement negotiations. However, the dynamics of settlement often create situations where settlement is reached early in the proceedings, before class certification. In those cases, as part of the settlement, class determination may be made contingent on finality of the approval of the settlement, as is commonly done when a court certifies a class for settlement purposes only. If the Rules Committee proposes a revised new rule, NACA should address it, and this position may change. 10. Interlocutory Appeal of Class Certification A. The Issue The Rules Committee also proposes new Rule 23(f), permitting interlocutory appeals of a district court order granting or denying class certification. The right to appeal is discretionary with the court of appeals. The proposed rule provides also that such an appeal does not stay the proceedings unless the district or appellate court orders. B. Viewpoint It is difficult to imagine a scenario where a defendant would not attempt to appeal an order granting class certification. It is also difficult to imagine a scenario where if appeal is permitted, either the district court or the court of appeals would not stay the proceedings. On the other hand, the likelihood of a plaintiff appealing a denial and seeking a stay of proceedings is minimal. However, it is virtually certain that, if the plaintiff did appeal a denial of certification, the defendant would seek, and likely obtain, a stay pending the appeal. Therefore, the rule as written does little to advance a plaintiffs situation, but does provide significant dilatory opportunities for defendants. The California state court approach is a variant on this theme. It is silent on the issue of stay, but permits immediate appellate review only of denial of certification, on the ground that a denial is a death knell because it effectively terminates the entire action as to the class. Granting class certification is not such an order, and is only harmful to the defendant if the plaintiff prevails at trial and on appeal, both on certification issues and on the merits, so is not immediately reviewable. See Stephen v. Enterprise Rent-A-Car, 235 Cal. App.3d 806 (1991) and Rosack v. Volvo of America Corp.. 131 Cal. App.3d 741 (1988). C. NACA Position The California state court approach is a balanced approach that preserves the rights of both plaintiffs and defendants. Immediate appeal should be allowed only if certification is denied. SUMMARY AND CONCLUSION Most class actions work the way Congress and the courts intended. They provide an efficient and appropriate way to obtain relief for many individuals harmed by illegal practices. In the consumer law area, class actions are particularly appro-

the defendant had agreed to class settlement and that the chance to opt out provided sufficient protection to the class members. The Supreme Court reviewed the Third Circuits holding in Georgine v. Amchem Products, Inc., 83 F.3d 610 (3d Cir. 1996), affd sub nom. Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231, 138 L.Ed.2d 689. The opinion held that the decision of the Court of Appeal bears modification because it did not indicate that settlement is relevant to a class certification. It further held that the court did properly consider the terms of the settlement in concluding that the class certification could not be upheld because common questions did not predominate and future claimants interests were not adequately represented. The rule to be derived from that opinion is that a court must find that the requirements of Rule 23, subdivisions (a) and (b) are satisfied in order to approve a class certification in the context of a settlement. The analysis need not take into account the manageability of the case if it were to be tried, since if the settlement is approved there will be no trial, but must include consideration of the subdivision (a) requirements of numerosity, commonality of questions of law or fact, typicality of the claims or defenses of the representative parties with those of the class, and adequacy of representation in that the representative parties will fairly and adequately protect the interests of the class. Additionally, the court held that certification of a class requires compliance with the provisions of subdivision (b) (1), (2), or (3). In a Rule 23(b)(3) case such as this, in order to certify a class a court must find that common questions of law or fact predominate, but a common interest in a fair compromise can not satisfy the predominance requirement. In language that will be useful to litigators handling consumer protection cases, the court distinguished mass tort cases from consumer class actions, noting: Predominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the anti-trust laws. 117 S. Ct. at 2250; 138 L.Ed.2d at 713. The Committee on Rules of Practice and Procedure of the Judicial Conference of the United States (Rules Committee) has recently proposed for comment an entirely new Rule 23(b)(4) that specifically permits use of a class in a settlement that did not otherwise meet the requirements of Rule 23(b)(3). See Preliminary Draft of Proposed Amendments to the Federal Rules of Appellate, Civil, and Criminal Procedure published in August, 1996. This proposal does not provide any criteria for a courts determination whether such settlement certification is proper; it is based solely on the agreement of the parties. Among others voicing strong opposition to this proposal is a group of some 150 law professors. The objections of the law professors are threefold: (1) the proposal contains no limiting guidelines or principles, (2) it fails to address serious constitutional and statutory problems, and (3) it formalizes what has until now been an extremely controversial practice and invites collusion. C. NACA Guidelines The specific Rule 23(b)(4) proposed by the Rules Committee fails to provide guidance for district courts exercise of discretion in approving a settlement class and therefore must

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priate because many people can be harmed by the same illegal practice, and the damages are often both quantifiable and individually too small to warrant separate lawsuits. Nonetheless, there are abuses by class counsel and the public perception is that some of those abuses are increasing. Rather than precipitously attacking the problem by restricting the availability of the class action device to consumers, the

Appx. B-10C

better practice is a combination of increased court scrutiny of class action settlements and heightened commitment on the part of class counsel to avoid even the appearance of abuse. The NACA guidelines and positions set forth in this paper are intended to give both bar and bench a reference point for aggressive yet responsible class action advocacy.

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Appendix C

Sample Authorization to Represent and Fee Agreement

C.1 Private Attorney Authorization to Represent1

AUTHORIZATION TO REPRESENT The undersigned hereby retains and authorizes [law firm] and any other lawyers they may find necessary to associate with them to investigate potential bases for suit and to represent the undersigned in a class action suit to be brought against [adverse party] with respect to my transactions with it. Defendants may include [adverse party] and any other persons and firms who the attorneys investigation leads them to believe may be liable to me. I understand that any fee for services to the undersigned or the class will be contingent upon effecting a recovery from the defendants, will be determined or authorized by the court, and will be payable solely from the defendants and/or any recovery obtained or protected for members of the class. All such fees belong to the attorneys and may not be waived by me. The attorneys will advance litigation expenses. I agree to cooperate in the prosecution of the litigation, including appearing at deposition and trial and producing documents and providing information. I understand that the attorneys will use their best efforts to achieve a favorable result, but do not guarantee what a court will do. I acknowledge that I have read this contract and received a copy for my reference. [Clients Name] [Address] [City] [State] [Zip] [Telephone number] Dated:

C.2 Private Attorney Fee Agreement2

CONTINGENT FEE AGREEMENT I, [clients name], hereby employ [law firm] to investigate and prosecute any claims I may have on account of my transactions with [adverse party]. Defendants may include [adverse party] and any other persons and firms who the attorneys investigation leads them to believe may be liable to me. As compensation for the attorneys legal services, I agree to pay them an amount equal to [percentage]% of any amounts that may be received by me or on my behalf, whether by suit, settlement or otherwise. Any sums that are credited to me by [adverse party], on my account with it, and any indebtedness which [adverse party] agrees not to collect from me as a result of the lawsuit, shall be treated as sums received by me. I further authorize the attorneys to incur reasonable and necessary expenses in the preparation and/or trial of my claim or lawsuit and agree to reimburse them in the actual amount of the costs and expenses so incurred. The attorneys will advance such expenses. Any expenses remaining unpaid at the time of a recovery will be deducted from the recovery prior to the 60-40 determination of the [percentage]% compensation for the attorneys legal services. The attorneys will also attempt to obtain an order from the court requiring the parties against whom suit will be filed to pay my attorneys fees and litigation expenses. If the case is settled, the attorneys will attempt to require the defendant to pay my attorneys fees and litigation expenses. All such sums belong to the attorneys. Any fees and expenses actually collected from a defendant will be credited against the portion of my recovery payable to the attorneys. The attorneys will attempt to proceed on behalf of others similarly situated with respect to my claim against [adverse party]. I agree to cooperate in the prosecution of the litigation, including appearing at deposition and trial and producing documents and providing information. I understand that the attorneys will use their best efforts to achieve a favorable result, but do not guarantee what a court will do.

1 This authorization is to be considered for use in conjunction with the Contingent Fee Agreement contained in Appendix C.2, infra.

2 This Contingent Fee Agreement is to be used in conjunction with the Authorization to Represent contained in Appendix C.1, supra.

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I understand that the attorneys have an enforceable lien for their fee on the amounts recovered by suit, settlement or otherwise. I acknowledge that I have read this contract and received a copy for my reference. [Clients Name] [Address] [City] [State] [Zip] [Telephone number] Dated:

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Appendix D

Sample Complaints

This appendix provides nine sample class action complaints. Additional examples of class action complaints (in print and on a WordPerfect disk) are included in National Consumer Law Center, Consumer Law Pleadings With Disk, Numbers One through Five. These sample complaints will be listed below by volume number, such as CLP#1 or CLP#2: 1 Case involving car dealers race discrimination against customers and rebate theft, CLP#3 3.6; 1 Creditors illegal practices in force placing automobile insurance, CLP#1 2.1, CLP#5 5.1; 1 Odometer rollbacks, CLP#1 3.1; 1 Complaint against bank that tried to avoid consumers defenses against car dealer, CLP#1 4.3; 1 Revolving repossession scam, CLP#3 9.3.1; 1 Automobile pawn case, CLP#3 4.3.1; 1 Warranty issues in automobile lease, CLP#1 9.1; 1 Campground membership case, CLP#1 6.1; 1 Rent-to-own case, CLP#4 11.1.1; 1 Home improvement financing scheme, CLP#4 1.1, 2.1.1; 1 Bankruptcy complaint objecting to secured claim and seeking enforcement of the TIL rescission remedy, CLP#1 8.2; 1 Uninhabitable mobile home park conditions, CLP#2 2.1.10; 1 Real estate broker fraud case, CLP#2 4.2.1; 1 Land installment sale case, CLP#3 10.1; 1 Nursing home quality of care case, CLP#4 3.1.1; 1 Infertility clinic misrepresentation, CLP#4 13.1; 1 Fair Debt Collection Practices Act case, CLP#3 3.1; 1 Collection agency litigation abuse case, CLP#2 11.2.1; 1 Student loan collection abuse, CLP#2 14.1; 1 Fraud by trade school and its officers, CLP#2 13.4 1 Complaint seeking declaration that loan is unenforceable because of school fraud, CLP#2 13.5; 1 Complaint against Department of Education for failing to provide false certification discharges, CLP#5 9.1.1; 1 Merchants illegal reaffirmation of debts discharged in bankruptcy, CLP#5 2.1.1; and 1 Tax agency filing baseless proof of claims in chapter 13 bankruptcies, CLP#3 7.2.1.

D.1 Federal Fair Debt Collection Case (Boddie)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) Plaintiff, ) ) v. ) ) LARRY CARSON; ) NATIONWIDE CASSEL, L.P.; ) and N.A.C. MANAGEMENT ) CORPORATION, ) Defendant. ) ) BRIAN BODDIE, COMPLAINTCLASS ACTION Brian Boddie (Boddie), suing on behalf of himself and all others similarly situated, complains as follows against Larry Carson (Carson), Nationwide Cassel, L.P. (Nationwide), and N.A.C. Management Corporation (NAC): INTRODUCTION 1. This is an action pursuant to the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 et seq. JURISDICTION 2. This Court has jurisdiction under 15 U.S.C. 1692k(d) and 28 U.S.C. 1331. PARTIES 3. Plaintiff, Boddie, is a resident of Illinois and a consumer as defined by the FDCPA, 15 U.S.C. 1692a(3). 4. Defendant Carson is an attorney. Carson is engaged in the business of collecting consumer debts and regularly collects consumer debts. He is accordingly a debt collector as defined in the FDCPA, 15 U.S.C. 1692a(6). His usual office is located at [address], Chicago, Illinois. 5. Defendant Nationwide is a limited partnership which has its principal place of business at [address] Chicago, Illinois. Nationwide is engaged in the business of a sales finance

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CLASS ALLEGATIONS 18. This action is brought as a class action. Plaintiff tentatively defines the class as all persons who, during the one year prior to the filing of this complaint, were sent letters similar to Exhibit A [not attached herein]. Plaintiff may subsequently refine the class definition in light of discovery. 19. The class is so numerous that joinder of all members is impractical. On information and belief, letters similar to Exhibit A have been sent to hundreds of consumers. 20. There are questions of law and fact common to the class, which predominate over any questions affecting only individual class members. The principal question is whether defendants conduct in connection with the mailing of Exhibit A and similar letters to consumers violates the FDCPA. 21. There are no individual questions, other than whether a class member received one of the offending letters, which can be determined by ministerial inspection of defendants records. 22. Plaintiff will fairly and adequately protect the interests of the class. He is committed to vigorously litigating this matter. He is greatly annoyed at being the victim of defendants illegal practices and wishes to see that the wrong is remedied. To that end, he has retained counsel experienced in handling class claims and claims involving unlawful business practices. Neither plaintiff nor his counsel have any interests which might cause them not to vigorously pursue this claim. 23. Plaintiffs claim is typical of the claims of the class, which all arise from the same operative facts and are based on the same legal theories. 24. A class action is a superior method for the fair and efficient adjudication of this controversy. Most of the consumers who receive Exhibit A undoubtedly believe that they are receiving a letter from an attorney and have no knowledge that their rights are being violated by illegal collection practices. The interest of class members in individually controlling the prosecution of separate claims against defendant is small because the maximum damages in an individual action are $1,000. Management of this class claim is likely to present significantly fewer difficulties than those presented in many class claims, e.g., for securities fraud. COUNT I 25. Plaintiff incorporates kk124. 26. Carson violated 15 U.S.C. 1692e, 1692f, 1692g and 1692j by authorizing Nationwide to send the form of letter represented by Exhibit A [not attached herein]. 27. The use of Exhibit A violates 15 U.S.C. 1692e(3) and the general prohibition of false, misleading or deceptive representations in 15 U.S.C. 1692e, in that it makes the false representation or implication that it was sent by an attorney. 28. The use of Exhibit A violates the prohibition against unfair or unconscionable debt collection practices in 15 U.S.C. 1692f, in that it is calculated to intimidate consumers into paying Nationwide by making them believe that an attorney is about to sue them. 29. The use of Exhibit A violates 15 U.S.C. 1692g, which requires that a debt collector give a consumer 30 days in which to dispute or request validation of a debt, in that it purports to demand a response within five days in order to avoid legal action.

agency. Nationwide purchases motor vehicle retail installment contracts from car dealers and enforces the contracts against consumers. 6. Nationwide is subject to the FDCPA because, as described below, it is a creditor, who, in the process of collecting [its] own debts, uses any name other than [its] own which would indicate that a third person is collecting or attempting to collect such debts. 15 U.S.C. 1692a(6). 7. NAC is an Illinois corporation with its principal place of business located at [same address as Nationwide], Chicago, Illinois. NAC is a general partner of Nationwide and, on information and belief, based on filings with the Department of Financial Institutions, owns 1% of Nationwide. As the general partner, it is vicariously liable for all conduct of Nationwide Cassel. FACTS 8. During 1993, defendants have engaged in acts and practices in violation of the FDCPA in collection activity with respect to Boddies alleged personal debt to Nationwide, and with respect to the personal debts of other consumers similarly situated. 9. On or about May 5, 1993, Nationwide sent to Boddie, via the United States Mails, the letter attached hereto as Exhibit A [not attached herein]. The letter was apparently on the letterhead of defendant Carson, but did not include Carsons actual office address or telephone number. Said letter included a rubber-stamp signature of Larry Carsons administrative assistant, purportedly named Mr. Stone. 10. Exhibit A is a printed form letter which is regularly sent to large numbers of consumers on accounts of Nationwide. 11. Neither Carson nor his administrative assistant personally signed said letter; a mechanical impression was prepared which created the signature. 12. Neither defendant Carson nor anyone employed as his office staff personally prepared, signed or mailed the preprinted form letters in the form exemplified by Exhibit A. A call placed to Mr. Stone at Carsons office at [address], Chicago, Illinois, was answered with the response that Carson did not employ any such administrative assistant. 13. The address and telephone number on Exhibit A is that of Nationwide and NAC. Calls placed to Carson at the number given on Exhibit A are met with the response that Carson is out of the office, or in court. 14. Exhibit A contains the number of Nationwides file relating to Boddie, above his name. 15. Employees of Nationwide prepare and mail letters in the form represented by Exhibit A bearing a rubber-stamp signature of Larry Carsons administrative assistant, purportedly named Mr. Stone. 16. Carson approved the preprinted form letter and authorized Nationwide and NAC to imprint the rubber-stamp signature of his administrative assistant, purportedly named Mr. Stone, on Exhibit A. On information and belief, Carson did not review the file of Boddie or other consumers to whom letters in the form represented by Exhibit A were sent. 17. Because the address on Exhibit A is that of Nationwide, Nationwide receives any payments sent by a consumer in response to a letter in the form represented by Exhibit A.

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30. Carson violated 15 U.S.C. 1692j by authorizing the use of Exhibit A. Section 1692j makes it unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating. The purpose and effect of Exhibit A is to create the false belief in consumers who receive it that Carson is attempting to collect their alleged debts, when Carson is not in fact so participating. WHEREFORE, plaintiff requests that the Court grant the following relief in his favor and in favor of the class and against defendant Carson: a. The maximum amount of statutory damages provided under 15 U.S.C. 1692k. b. Attorneys fees, litigation expenses and costs. c. Such other and further relief as is appropriate. COUNT II 31. Plaintiff incorporates kk124. 32. Nationwide, by sending consumers letters in the form represented by Exhibit A [not attached herein], is a creditor, who, in the process of collecting [its] own debts, uses any name other than [its] own which would indicate that a third person [Carson] is collecting or attempting to collect such debts. 15 U.S.C. 1692a(6). 33. Nationwide violated 15 U.S.C. 1692e, 1692f and 1692g by sending consumers the form of letter represented by Exhibit A. 34. The use of Exhibit A violates 15 U.S.C. 1692e(3) and the general prohibition of false, misleading or deceptive representations in 15 U.S.C. 1692e, in that it makes the false representation or implication that it was sent by an attorney. 35. The use of Exhibit A violates the prohibition against unfair or unconscionable debt collection practices in 15 U.S.C. 1692f, in that it is calculated to intimidate consumers into paying Nationwide by making them believe that an attorney is about to sue them. 36. The use of Exhibit A violates 15 U.S.C. 1692g, which requires that a debt collector give a consumer 30 days in which to dispute or request validation of a debt, in that it purports to demand a response within five days in order to avoid legal action. 37. NAC is liable for all conduct of Nationwide. WHEREFORE, plaintiff requests that the Court grant the following relief in his favor and in favor of the class and against defendants Nationwide and NAC: a. The maximum amount of statutory damages provided under 15 U.S.C. 1692k. b. Attorneys fees, litigation expenses and costs. c. Such other and further relief as is appropriate. [Attorney] JURY DEMAND Plaintiff demands trial by jury. [Attorney]

Appx. D.2

D.2 TIL Rescission and Deceptive Practices CaseHome Improvement Contract (Mount)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION MATTHEW MOUNT, LESLIE MOUNT, JOSEPH HEARD, MICHAEL McMURTRY, JR., LAURA McMURTRY, AMY CRONK and ADAM KLEINFELDER, Plaintiffs, v. LASALLE BANK LAKE VIEW, ) ) ) ) ) ) ) ) ) ) ) ) ) Defendant. ) )

THIRD AMENDED COMPLAINT Plaintiffs, Matthew Mount, Leslie Mount (Mr. and Mrs. Mount), Joseph Heard (Mr. Heard), Michael McMurtry, Jr., Laura McMurtry (Mr. and Mrs. McMurtry), Amy Cronk (Ms. Cronk) and Adam Kleinfelder (Mr. Kleinfelder), suing on behalf of themselves and all others similarly situated, complain as follows against defendant LaSalle Bank Lake View (Lake View Bank). INTRODUCTION 1. This action seeks redress for deceptive practices committed by Lake View Bank in connection with the financing of home improvement transactions. Plaintiffs allege that Lake View Bank, operating in conjunction with home improvement contractors (dealers), arranges for the dealers to procure consumers signatures on purportedly binding contracts, which contain clauses authorizing penalties for cancellation and for default judgment, and then, after the consumers are no longer at liberty to cancel those contracts, presents them with onerous financing terms. Plaintiffs allege, on behalf of themselves and a class of others similarly situated, that this practice violates the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. (Count I), and the Illinois Consumer Fraud Act (CFA), Ill.Rev.Stats., ch. 121-1/2, k262 (Count II), and amounts to common law fraud (Count III). Plaintiffs also assert an individual claim for defective construction work (Count IV). JURISDICTION AND VENUE 2. This Court has subject matter jurisdiction over Count I pursuant to 15 U.S.C. 1640 and supplemental jurisdiction pursuant 28 U.S.C. 1367 over Counts II, III and IV. Venue in this district is proper because all parties are located here and the transactions complained of took place here.

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PARTIES told Mr. and Mrs. Mount that they had to sign Exhibit B because Budget had already commenced performance of the work, the terms in Exhibit B were the only ones Lake View Bank would offer, and if they did not sign Exhibit B, they would have to pay Budget cash for the work. Mr. and Mrs. Mount thereupon signed Exhibit B. 19. Lake View Bank was aware of the existence of Exhibit A and the discrepancy in terms between Exhibits A and B, both because of the conversation described above, and because Exhibit B is incomplete on its face and incorporates Exhibit A by reference. 20. Lake View Bank did not approve Mr. and Mrs. Mounts credit until on or about February 12, 1991. On or about that date, Mr. and Mrs. Mount received a printed form document notifying them that Lake View Bank had approved their credit. Exhibit C, attached [not attached herein], is a true and accurate copy of this document. 21. Exhibit B is written on a standard form supplied and/or approved by Lake View Bank. 22. Exhibit B is initially payable to Budget. Budget assigned the contract to Lake View Bank shortly after it was executed. Mr. and Mrs. Mount were advised that Exhibit B had been assigned to Lake View Bank, were furnished payment books instructing them to make payments to Lake View Bank, and made payments to Lake View Bank. 23. Under the terms of Exhibit B, Lake View Bank remains subject to claims and defenses that Mr. and Mrs. Mount have against Budget: NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CL AIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS AND SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTORS HEREUNDER. This statement is required to be included in all retail installment contracts purchased by Lake View Bank by the Federal Trade Commission regulation abrogating the holder in due course rule in most consumer transactions, 16 C.F.R. part 433. On information and belief, it is in fact included in all such contracts purchased by Lake View Bank. 24. The work performed by Budget Construction Company was shoddy and grossly defective, in the following respects among others: a. The foundation for the addition was laid in a defective and unworkmanlike manner and does not conform to minimum FHA standards. Additionally, it is not bonded to the existing foundation in accordance with accepted construction industry standards. b. The crawl space under the new addition has no ventilation, as required by FHA standards, and has a lower vertical clearance than required by FHA standards. This condition will inevitably result in the wood used in the addition rotting.

3. Mr. and Mrs. Mount own and reside in a home at [address], Chicago, Illinois. 4. Mr. Heard owns and resides in a home at [address], Chicago, Illinois. 5. Mr. and Mrs. McMurtry own and reside in a home at [address], Chicago, Illinois. 6. Ms. Cronk owns and resides in a home at [address], Oak Park, Illinois. 7. Mr. Kleinfelder owns and resides in a home at [address], McHenry, Illinois. 8. Lake View Bank is a banking corporation with its principal place of business located at [address], Chicago, Illinois. FACTS RELATING TO MR. AND MRS. MOUNT 9. Among other things, Lake View Bank purchases consumer credit obligations generated by home improvement contractors (dealers), including but not limited to Budget Construction Company (Budget). 10. In 1990, Mr. and Mrs. Mount purchased home improvement goods and services from Budget, involving the construction of an addition to their home. 11. In connection with this transaction, Mr. and Mrs. Mount signed a contract on a standard printed form used by Budget, of which Exhibit A [not attached herein] is a true and accurate copy. 12. Mr. and Mrs. Mount did not have the funds necessary to pay for the home improvement goods and services in cash. Budget knew they did not have the funds. Accordingly, Budget took a credit application from Mr. and Mrs. Mount. Budget also included financing terms on Exhibit A. 13. Specifically, Budget provided in Exhibit A that Mr. and Mrs. Mount would receive an FHA Title I loan in the amount of $17,500, with an annual percentage rate of 14.0%, and monthly payments of $273.21 for 120 months. Although not stated in Exhibit A, this is a total of $32,785.20. In addition, they would pay Budget a principal amount of $8,500 in 36 monthly payments of $292.11 each. Although not stated in Exhibit A, this is a total of $10,515.96. The combined total of payments provided for in Exhibit A was thus $43,301.16. 14. Budget thereupon proceeded to commence performance of the home improvements. 15. After Budget had begun the work, Mr. and Mrs. Mount were presented with and signed the agreement attached as Exhibit B [not attached herein] to this complaint. They also signed a mortgage or trust deed on their home. 16. Exhibit B provides for an annual percentage rate of 16.0%, an amount financed of $29,550, finance charges of $30,220.80, and 120 monthly payments of $498.09 each, totalling $59,770.80. 17. The total payment obligation under Exhibit B, presented to Mr. and Mrs. Mount after Budget had begun the work, is thus more than $16,000 higher than the total payment obligation was represented to be prior to the time Budget began the work, under Exhibit A. 18. Mr. and Mrs. Mount informed a representative of Lake View Bank, who visited them at their home, that they objected to the terms of Exhibit B because it was more expensive than Exhibit A. The representative of Lake View Bank

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c. The girder support running down the center of the addition is unsafe and fails to conform to accepted construction industry standards, building codes, and FHA standards. Budget should have used a girder over twice as strong as that it actually used. d. Budget used shingles to cover a roof which does not have sufficient slope to permit the use of shingles as covering material. Under accepted construction industry standards, shingles should not be used on a roof which is flat or has a minimal slope because water will collect and leak through the shingles. A more impermeable material (such as tar) should have been used for Mr. and Mrs. Mounts roof. e. Both the heating and air conditioning systems are inadequate and improperly installed. f. Workmanship and finishes are executed poorly throughout. g. The concrete sidewalk installed by Budget was not trowelled and has a very rough surface. h. The construction site was improperly graded and the gutters leak, causing a serious flooding problem. i. The gutters do not connect to the sewer as required by the Chicago Building Code. j. The ceramic tile in the second floor bathroom was improperly installed, and the grout has already begun to crack. 25. Mr. and Mrs. Mount complained to Budget about the defective character of the work. Budget has failed and refused to correct the problems. Some of the problems cannot be corrected without very substantial work. 26. The indebtedness or obligation represented by Exhibit B is still outstanding. 27. Mr. and Mrs. Mount have given notice to Lake View Bank that they elect to rescind their transaction (Exhibit D, attached) [not attached herein], and again give notice by means of this complaint. Mr. and Mrs. Mount are continuing to pay their purported obligation under protest. FACTS RELATING TO MR. HEARD 28. Among other things, Lake View Bank purchases consumer credit obligations generated by home improvement contractors (dealers), including but not limited to Paul Construction Company (Paul). 29. In 1988, Mr. Heard purchased home improvement goods and services from Paul, involving the construction of a new porch with six steps and new gutters and downspouts to his home. 30. In connection with this transaction, Mr. Heard signed a contract on a standard printed form used by Paul, of which Exhibit E [not attached herein] is a true and accurate copy. 31. Mr. Heard did not have the funds necessary to pay for the home improvement goods and services in cash. Paul knew he did not have the funds. Accordingly, Paul took a credit application from Mr. Heard. Paul also included financing terms on Exhibit E. 32. Specifically, Paul provided in Exhibit E that Mr. Mount would be provided:

Appx. D.2
Finance to be obtained for owner (customer) at the best rate available not to exceed payments of $123.98 a month for 48 months. The loan amount of $4,200 was to be paid in monthly payments of $123.98 for 48 months. Although not stated in Exhibit E, this is a total of $5,951.04. 33. Exhibit E also contains the clause: To secure payment hereof, Buyer(s) jointly and severally, irrevocably authorize any attorney of any court of record to appear for any one or more of them in such court in term time or vacation after default in payment hereof and confess a judgment without process in favor of the holder hereof for such amount as may then appear unpaid hereon, together with costs and reasonable attorneys fees and to waive and release all errors which may intervene in any such proceeding and consents to an immediate execution upon such judgment hereby ratifying every act of such attorney hereunder. 34. The Federal Trade Commissions Credit Practices Rule, 16 C.F.R. 444.2, states: (a) In connection with the extension of credit to consumers in or affecting commerce, as defined in the Federal Trade Commission Act, it is an unlawful act or practice within the meaning of Section 5 of the Act for a lender or retail installment seller directly or indirectly to take or receive from a consumer an obligation that: (1) Constitutes or contains a cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit or process thereon. 35. Paul thereupon proceeded to commence performance of the home improvements. 36. Mr. Heard was then presented with and signed the agreement attached as Exhibit F [not attached herein] to this complaint. He also signed a mortgage or trust deed on his home. 37. Exhibit F provides for an annual percentage rate of 15.0%, an amount financed of $4,200.00, finance charges of $1,898.40, and 60 monthly payments of $101.64 each, totalling $6,098.40. 38. The total payment obligation under Exhibit F is thus $147.36 higher than the total payment obligation was represented to be prior to the time Paul began the work, under Exhibit E. 39. Lake View Bank was aware of the existence of Exhibit E, and the confession of judgment clause contained therein, and the discrepancy in terms between Exhibits E and F, because Exhibit F incorporates Exhibit E by reference. 40. Exhibit F is written on a standard form supplied and/or approved by Lake View Bank. 41. Exhibit F is initially payable to Paul. Paul assigned the contract to Lake View Bank shortly after it was executed. Mr.

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49. The Truth In Lending Act, 15 U.S.C. 1635(a), provides: in the case of any consumer credit transaction . . . in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this title, whichever is later, by notifying the creditor, in accordance with the regulations of the Board, of his intention to do so. 50. 1st Choice thereupon proceeded to commence performance of the home improvements. 51. Mr. and Mrs. McMurtry were then presented with and signed the agreement attached as Exhibit H [not attached herein] to this complaint. They also signed a mortgage or trust deed on their home. 52. Lake View Bank was aware of the existence of Exhibit G, and the 50% penalty for cancellation contained therein. 53. Exhibit H is written on a standard form supplied and/or approved by Lake View Bank. 54. Exhibit H is initially payable to 1st Choice. 1st Choice assigned the contract to Lake View Bank shortly after it was executed. Mr. and Mrs. McMurtry was advised that Exhibit H had been assigned to Lake View Bank, were furnished payment books instructing them to make payments to Lake View Bank, and made payments to Lake View Bank. 55. Under the terms of Exhibit H, Lake View Bank remains subject to claims and defenses that Mr. and Mrs. McMurtry has against 1st Choice: NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CL AIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS AND SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTORS HEREUNDER. This statement is required to be included in all retail installment contracts purchased by Lake View Bank by the Federal Trade Commission regulation abrogating the holder in due course rule in most consumer transactions, 16 C.F.R. part 433. On information and belief, it is in fact included in all such contracts purchased by Lake View Bank. 56. The work performed by 1st Choice Remodeling Company was shoddy and grossly defective, in the following respects among others: a. the concrete was improperly poured and put down; b. the basement supports were glued into place rather than being properly installed;

Heard was advised that Exhibit F had been assigned to Lake View Bank, he was furnished payment books instructing him to make payments to Lake View Bank, and he made payments to Lake View Bank. 42. Under the terms of Exhibit F, Lake View Bank remains subject to claims and defenses that Mr. Heard has against Paul: NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CL AIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS AND SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTORS HEREUNDER. This statement is required to be included in all retail installment contracts purchased by Lake View Bank by the Federal Trade Commission regulation abrogating the holder in due course rule in most consumer transactions, 16 C.F.R. part 433. On information and belief, it is in fact included in all such contracts purchased by Lake View Bank. FACTS RELATING TO MR. AND MRS. MCMURTRY 43. Among other things, Lake View Bank purchases consumer credit obligations generated by home improvement contractors (dealers), including but not limited to 1st Choice Remodeling Company (1st Choice). 44. In 1988, Mr. and Mrs. McMurtry purchased home improvement goods and services from 1st Choice, involving the installation of new roofing, sidewalk and walkway, tuck point chimney, etc. to their home. 45. In connection with this transaction, Mr. and Mrs. McMurtry signed a contract on a standard printed form used by 1st Choice, of which Exhibit G [not attached herein] is a true and accurate copy. 46. Mr. and Mrs. McMurtry did not have the funds necessary to pay for the home improvement goods and services in cash. 1st Choice knew they did not have the funds. Accordingly, 1st Choice took a credit application from Mr. and Mrs. McMurtry. 1st Choice also included financing terms on Exhibit G. 47. Specifically, 1st Choice provided in Exhibit G that Mr. and Mrs. McMurtry would be provided financing. The loan amount of $17,650 was limited to monthly payments of $307.65 for 120 months. Although not stated in Exhibit G, this is a total of $36,918.00. 48. Exhibit G also contains the clause: The undersigned property owner agrees if this contract is cancelled by him or them for any reason whatsoever to pay the contractor a sum of money equal to fifty per cent of the contract price herein agreed or contractor may at its option sue for the total of the contract price and render the Materials to be paid as fixed and liquidated damages without further proof of loss.

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c. the materials used were of an inferior quality; d. the wiring was not installed as promised. 57. The indebtedness or obligation represented by Exhibit H is still outstanding. FACTS RELATING TO MS. CRONK 58. Among other things, Lake View Bank purchases consumer credit obligations generated by home improvement contractors (dealers), including but not limited to 1st American Builders of Chicago, Inc. (1st American). 59. In 1990, Ms. Cronk purchased home improvement goods and services from 1st American, involving rebuilding the front porch and installing aluminum siding around the entire house. 60. In connection with this transaction, Ms. Cronk signed a contract on a standard printed form used by 1st American, Exhibit I, attached [not attached herein]. (Exhibit I is the Affidavit of Amy Cronk) 61. Exhibit I states: If I terminate this contract before work is started, I will pay you ten (10%) percent of the case price as liquidated damages and not as penalty. If I terminate this contract after work is started, I will pay you that portion of the case price equal to the portion of the work completed, plus all change orders completed, plus a sum equal to 25% of the cash price as liquidated damages and not as penalty. 62. Ms. Cronk did not have the funds necessary to pay for the home improvement goods and services in cash. 1st American knew she did not have the funds. 1st American supplied Ms. Cronk with the phone number of someone to call regarding financing, who Ms. Cronk called. 63. As a result of this referral, on October 3, 1990, Ms. Cronk signed the agreement attached as Exhibit I. She also signed a mortgage or trust deed on her home. 64. Ms. Cronk was advised that Exhibit I had been assigned to Lake View Bank. Ms. Cronk was given payment books and made payments to Lake View Bank. 65. Exhibit I provides for an annual percentage rate of 16.50%, an amount financed of $7,750.00, finance charges of $5,450.00, and 84 monthly payments of $157.15 each, totalling $13,200.00. FACTS RELATING TO MR. KLEINFELDER 66. Among other things, Lake View Bank purchases consumer credit obligations generated by home improvement contractors (dealers), including but not limited to Northern Illinois Vinyl Dist. (Northern). 67. In 1992, Mr. Kleinfelder purchased home improvement goods and services from Northern, involving the complete residing of his house, installation of new dryer vent and replacing crawl space vents. 68. In connection with this transaction, Mr. Kleinfelder signed a standard printed form used by Northern, of which Exhibit J [not attached herein] is a true and accurate copy. 69. Mr. Kleinfelder did not have the funds necessary to pay for the home improvement goods and services in cash. Northern knew he did not have the funds. Accordingly, Northern took a credit application from Mr. Kleinfelder.

Appx. D.2
70. Exhibit J stated that the price of the job was $5,955.00. Mr. Kleinfelder paid a downpayment of $1,955, leaving a balance of $4,000.00. 71. The $4,000.00 balance due Northern was to be paid in monthly payments of $110.94 for 48 months. Although not stated in Exhibit J, this is a total of $5,325.12. 72. Exhibit J contains the clause: If suit is required in order to secure payment, I agree to pay all collection costs, reasonable attorney fees, 18% interest until date of payment and waive all rights to claim exemption under the state laws. 73. Mr. Kleinfelder was later presented with and signed a retail installment contract, attached as Exhibit K [not attached herein]. 74. Exhibit K provides for the annual percentage rate of 14.0%, an amount financed of $4,000.00, finance charges of $1,275.68, 48 monthly payments of $109.91 each, including the downpayment of $1,955.00, totalling $7,230.68. 75. The total payment obligation under Exhibit K is thus $1,905.56 higher that the total payment obligation represented to be, prior to the time Northern began the work, under Exhibit J. 76. Exhibit K is written on a standard form supplied and/or approve by Lake View Bank. 77. Exhibit K is initially payable to Northern. Northern assigned the contract to Lake View Bank shortly after it was executed. Mr. Kleinfelder was advised that Exhibit K had been assigned to Lake View Bank, was furnished with payment books instructing him to make payments to Lake View Bank. 78. Under the terms of Exhibit K, Lake View Bank remains subject to claims and defenses that Mr. Kleinfelder has against Northern: NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CL AIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS AND SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTORS HEREUNDER. This statement is required to be included in all retail installment contracts purchased by Lake View Bank by the Federal Trade Commission regulation abrogating the holder in due course rule in most consumer transactions, 16 C.F.R. part 433. On information and belief, it is in fact, included in all such contracts purchased by Lake View Bank. POLICY AND PRACTICE OF INTERFERING WITH RESCISSION RIGHTS 79. Under both federal and state law, a consumer who signs a home improvement contract has three business days after

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PURPOSE AND EFFECT OF PRACTICE 86. The purpose and effect of the practices set forth above was as follows: a. Consumers were locked into credit transactions before they learned the actual credit terms, or could evaluate the terms offered through other sources, or exercise their rescission rights in an informed manner. b. Free negotiations concerning credit terms were successfully precluded or inhibited. c. The cost of credit to the consumers was increased. The annual percentage rate charged to the average consumer was inflated by at least several percentage points. AGGRAVATING CIRCUMSTANCES 87. Not only were consumers induced to sign purportedly binding contracts prior to disclosure of the actual financing terms, but in many cases the consumers were promised financing and security terms other than those ultimately approved (i.e., a lower interest rate or more attractive payment structure was promised). For example, Mr. and Mrs. Mount were effectively switched from a 14% loan to a 16% loan, and their total payment obligation was increased by more than $16,000. 88. In other cases, the initial contracts would provide for oppressive termination penalties in the event the consumer attempted to cancel. For example, Mr. and Mrs. McMurtry were required by the contract to pay 50% of the contract price if they cancelled at any time. Confession of judgment provisions, such as that in Mr. Heards contract, waived the consumers defenses and right to redress. These penalties have been ruled unenforceable and illegal by the Federal Trade Commission since the 1970s, but are nevertheless included in contracts for the purpose of deceiving and intimidating unknowing consumers. 89. In some cases, such as that involving Mr. and Mrs. Mount, the dealer would commence work prior to the presentation of the final financing terms. This practice is known as spiking in the home improvement business. IDENTIFICATION OF AFFECTED TRANSACTIONS 90. The employment of the overall unlawful practice in a given instance can be identified by the fact that the credit check and credit approval in the Lake View Bank file are dated subsequent to the date of the original contract (such as Exhibit A signed by Mr. and Mrs. Mount). Sometimes other documents show this as well. The inclusion of illegal cancellation charges can be determined by inspection of the initial contract between the home improvement dealer and the consumer. OTHER VICTIMS 91. During the spring of 1987, Patricia Murphy, of [address], Chicago, Illinois, was induced to sign a home improvement contract by a dealer known as Chicago Lumber & Construction Co., since put out of business as a result of legal action by the Attorney General of Illinois. The contract contained substantial cancellation charges. Chicago Lumber thereafter pre-

the transaction is concluded and all terms are disclosed to reconsider and cancel the transaction, without obligation. This right is conferred by: a. Section 125 of the federal Truth in Lending Act, 15 U.S.C. 1635 (TILA), if the transaction involves an extension of credit secured by the consumers residence that is to be paid for in more than four installments. b. The FTC Home Solicitation Sales Regulation, 16 C.F.R. part 429, with respect to any contracts not covered by TILA. c. Section 2B of the Consumer Fraud Act, Ill.Rev.Stats., ch. 121-1/2, 262B, with respect to contracts with Illinois residents not covered by TILA that involve a sale of merchandise involving $25 or more . . . to a consumer as a result of or in connection with a persons contact with or call on the consumer. Merchandise is defined in Ill.Rev.Stats., ch. 121-1/2, k261 to include any objects, wares, goods, commodities, intangibles . . . or services, and includes home improvement transactions. 80. In each case, the consumer must be furnished with a written notice stating that he or she has until a specified time in which to reconsider and cancel the transaction, without obligation. The three days are to commence when a binding agreement, including the financing terms, is entered into. 81. In each case, the right to cancel is absolute. The seller is not entitled to charge any amount if the consumer exercises his or her right to cancel. 82. Lake View Bank and its dealers, acting in concert, would, as a regular practice, and using forms approved or promulgated by Lake View Bank, induce consumers to enter into binding obligations without complying with this requirement. Lake View Bank would have the dealers secure the consumers signatures on purportedly binding contracts, such as Exhibits A, B, and C, prior to finalization and approval of the credit terms. 83. The consumers would be informed that they had three days from the date of the purportedly binding obligation in which to cancel the home improvement contract, rather than three days from the later date on which all of the terms of the transaction, including financing, were finalized and approved. The effect of this is that the consumers were obligated to proceed with the home improvement purchase prior to disclosure of the actual financing terms. 84. Contracts which contained penalty clauses and confession of judgment provisions intimidated consumers and inhibited them from exercising their right to cancel or dispute those contracts. 85. The practice complained of effectively deprived the consumer of the right, afforded by state and federal law, to three business days in which to reconsider and cancel the entire transaction after its consummation. At the time the consumer was bound to the home improvement purchase (when Mr. and Mrs. Mount signed Exhibit A), he or she had not yet received disclosures of the final financing terms. When the financing terms were finalized and approved, the existence of the purported obligation to purchase the home improvements effectively prevented the consumer from canceling.

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sented Murphy with a retail installment contract and mortgage on forms approved or prepared by Lake View Bank. 92. In the spring of 1987, Mildred Dennis and two relatives, of [address], Chicago, Illinois, were induced to sign a home improvement contract by dealer known as House of Beauty Builders. Thereafter, they were presented with and signed a retail installment contract and mortgage on forms approved or prepared by Lake View Bank. LIABILITY OF LAKE VIEW BANK 93. Lake View Bank was aware of the practice complained of, and frequently had the initial contracts (of which Exhibits A, C, and E are representative) in its files. Lake View Bank also became aware of the practice complained of and the existence and nature of the initial contracts as a result of prior litigation. Notwithstanding its knowledge, Lake View Bank permitted the practice to continue. 94. In addition, and irrespective of its knowledge, Lake View Bank is subject to any claims and defenses that consumers, such as Mr. and Mrs. Mount, Mr. Heard, and Mr. and Mrs. McMurtry, had against the home improvement dealers, such as Budget, Paul and 1st Choice, by virtue of the language required to be included in each retail installment contract by the Federal Trade Commission regulation abrogating the holder in due course doctrine with respect to consumer transactions, 16 C.F.R. part 433. CLASS ALLEGATIONS 95. This action is brought on behalf of a class of all other persons injured by the conduct complained of. The class consists of all persons who satisfy the following criteria: a. They signed a contract with a home improvement contractor. b. They also signed a retail installment obligation that was purchased by Lake View Bank, directly or indirectly. c. The date on the contract with the home improvement contractor is earlier than the date of credit approval by Lake View Bank. d. The obligation to Lake View Bank is secured by real estate. e. The address of the real estate securing the obligation is the same as the consumers residence, as shown by the transaction file. 96. The class includes persons who signed contracts within three years next before the filing of this action, for purposes of Count I, persons whose contracts were outstanding at any time within three years next before the filing of this action, for purposes of Count II, and persons whose contracts were outstanding at any time within five years next before the filing of this action, for purposes of Count III. 97. Plaintiffs allege, on information and belief, that the class is so numerous that joinder of all members is impractical. This allegation is based on the facts that Lake View Bank conducts an extensive home improvement financing business and that the practice complained of took place at least as early as 1987 and continues to the present.

Appx. D.2
98. There are questions of law and fact common to the class, which questions predominate over any questions affecting only individual members. The principal common issues are: a. Whether Lake View Bank engaged in the practice alleged. b. Whether the practice alleged effectively circumvents and negates the consumers right to rescind, in violation of TILA. c. Whether the practice alleged is unfair and deceptive. 99. Plaintiffs claims are typical of those of the class. All are based on the same legal and factual theories. 100. Plaintiffs will fairly and adequately protect the interests of the class. They have suffered substantial pecuniary injury from the practices complained of. They have retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither plaintiffs nor their counsel have any interests which might cause them not to vigorously pursue this claim. 101. Certification of a class under Fed.R.Civ.P. 23(b)(2) is appropriate, in that defendant has acted uniformly with respect to the class, and appropriate relief includes a declaration that each class member is entitled to rescind his or her transaction if he or she so elects and an injunction requiring defendant to permit such rescissions. 102. Certification of a class under Fed.R.Civ.P. 23(b)(3) is also appropriate, in that: a. Common questions predominate over any individual questions. b. A class action is superior for the fair and efficient adjudication of this controversy. The individual class members are likely to be unaware of their rights and are not in a position to commence individual litigation against Lake View Bank. This action is substantially similar to one certified as a class action in Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989). Plaintiffs are represented by the same counsel as represented the class in that case. COUNT ITILA 103. Plaintiffs, Mr. and Mrs. Mount, Ms. Cronk and Mr. Kleinfelder, incorporate kk1102. 104. Defendant is engaged in the business of consumer lending and regularly extends credit to consumers in exchange for finance charges, or which is repayable in more than four installments. Defendant is therefore a creditor within the meaning of TILA. 105. Plaintiffs, Mr. and Mrs. Mount, Ms. Cronk and Mr. Kleinfelder, transactions were an extension of consumer credit by a creditor subject to TILA. 106. The class members transactions are also extensions of consumer credit by a creditor subject to TILA. 107. Since each of the transactions involved the creation of a security interest in the consumers residence other than for purposes of purchasing or constructing that residence, it was also subject to the rescission provisions of TILA, 15 U.S.C. 1635. 108. The right to rescind is fully enforceable against defendant by the terms of the retail installment contracts and by virtue of 15 U.S.C. 1641.

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were included in the contract, class members were inhibited from exercising their right of rescission. WHEREFORE, plaintiffs request that the Court enter judgment in their favor and in favor of the class members and against defendant as follows: a. For a declaration that each of the plaintiffs and class members has a continuing right to rescind his or her transaction. b. Providing a procedure for allowing the class members to exercise that right. c. For any further orders necessary to effectuate the rescission of transactions by class members so electing. d. For a declaration that the penalty clauses and confession of judgment provisions are illegal and for an injunction enjoining the enforcement of such clauses and provisions. e. For compensatory damages. f. For punitive damages sufficient to deter further unlawful conduct by defendant. g. For attorneys fees, litigation expenses and costs. h. For such other or further relief as the Court deems appropriate. COUNT IIICLASS CLAIM FOR COMMON LAW FRAUD 120. Plaintiffs, Mr. and Mrs. Mount, Joseph Heard, Mr. and Mrs. McMurtry, Ms. Cronk and Mr. Kleinfelder, incorporate kk1102 by reference. 121. The statements concerning the dates by which cancellation rights had to be exercised were statements of material fact, as the rescission rights of plaintiffs and the class members were dependent on them. 122. The statements concerning the dates on which the contracts were signed and the dates by which cancellation rights had to be exercised were signed were false. 123. Lake View Bank had a practice of causing or permitting dealers to misstate the date by which rescission rights had to be exercised. 124. Lake View Bank caused the false statements concerning the dates by which cancellation rights had to be exercised to be made intentionally and with full knowledge that the dates were not correct. 125. Lake View Bank caused the false statements concerning the dates by which cancellation rights had to be exercised to be made in order to induce plaintiffs to rely on the incorrect dates and not exercise their rescission rights. 126. The plaintiffs and class members acted in reliance on the false statements concerning the dates by which cancellation rights had to be exercised when they did not exercise their rescission rights. 127. The plaintiffs and class members suffered pecuniary injury as a result of the false statements which deprived them of their rescission rights. 128. The contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession of judgment were statements of material fact, as the rights and duties of plaintiffs and the class members were dependent on them. 129. The statements concerning the enforceability of penalty clauses and confession of judgment provisions were false.

109. The practice complained of is intended to interfere and effectively interferes with and renders nugatory the right to cancel. 110. Accordingly, plaintiffs continue to have a right to rescind Exhibit B. 111. Each class member whose transaction was entered into on or after [3 years prior to filing] also continues to have a right to rescind his or her transaction. Plaintiffs, Mr. and Mrs. Mount, Ms. Cronk and Mr. Kleinfelder, seek a declaration that this right continues to exist. 112. Plaintiffs suffered actual damages from this violation, in that they paid excessive amounts for their financing. 113. The class members also suffered actual damage from this violation, in that the members paid excessive amounts for their financing. WHEREFORE, plaintiffs request that the Court enter judgment in their favor and in favor of the class members and against defendant as follows: a. For a declaration that each of the plaintiffs and class members has a continuing right to rescind his or her transaction. b. Providing a procedure for allowing the class members to exercise that right. c. For any further orders necessary to effectuate the rescission of transactions by plaintiffs and class members so electing. d. For statutory damages as provided by 15 U.S.C. 1640. e. For actual damages. f. For attorneys fees, litigation expenses and costs. g. For such other or further relief as the Court deems appropriate. COUNT II ILLINOIS CONSUMER FRAUD ACT 114. Plaintiffs, Mr. and Mrs. Mount, Joseph Heard, Mr. and Mrs. McMurtry, Ms. Cronk and Mr. Kleinfelder, incorporate kk1102. 115. At all relevant times, CFA 2 provided: [U]nfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact . . . in the conduct of any trade or commerce are hereby declared unlawful. . . . 116. The practices described above, including contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession of judgment, are unfair and deceptive. 117. Defendant committed these practices in connection with the conduct of trade and commerce in (a) home improvement services and (b) the provision of financing. 118. Plaintiffs were damaged by these practices, in that they were charged excessive amounts for credit 119. The class members were damaged by these practices, in that they were charged excessive amounts for credit and, where penalty clauses and confession of judgment provisions

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130. Lake View Bank had a practice of causing or permitting dealers to include contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession of judgment. 131. Lake View Bank caused the false statements concerning the enforceability of contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession of judgment to be made intentionally and with full knowledge that the dates were not correct. 132. Lake View Bank caused the false statements concerning the enforceability of contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession in order to induce plaintiffs and class members to rely on the incorrect statements and not exercise their rights to cancel or dispute the contract. 133. The plaintiffs and class members acted in reliance on the false statements concerning the enforceability of contract clauses or provisions imposing a penalty for cancellation of the contract and/or authorization of confession when they did not exercise their rights to cancel or dispute the contract. 134. The plaintiffs and class members suffered pecuniary injury as a result of the false statements which deprived them of their rights to cancel or dispute the contract. WHEREFORE, plaintiffs request that the Court enter judgment in their favor and in favor of the class members and against defendant as follows: a. For a declaration that each of the plaintiffs and class members has a continuing right to rescind his or her transaction. b. Providing a procedure for allowing the class members to exercise that right. c. For any further orders necessary to effectuate the rescission of transactions by class members so electing. d. For a declaration that contract clauses or provisions imposing penalties for termination of the contract or authorization of confession of judgment are invalid and illegal, and for an injunction enjoining the defendant from enforcing such clauses or provisions or, in the future, accepting assignment of contracts containing such clauses or provisions. e. For compensatory damages. f. For punitive damages sufficient to deter further unlawful conduct by defendant. g. For costs. h. For such other or further relief as the Court deems appropriate. COUNT IV BREACH OF CONTRACT 135. Plaintiffs Mr. and Mrs. Mount incorporate kk127 by reference. 136. Budget breached its contract with plaintiffs by doing defective and shoddy work, as described above. 137. Defendant is subject to all defenses which plaintiffs have against Budget, and is subject to all claims that they have against Budget to the extent of consideration paid by plaintiffs to defendant. WHEREFORE, the Court should enter judgment in favor of plaintiffs and against defendant, as follows: a. For appropriate compensatory damages.

Appx. D.3
b. For costs of suit; and c. For such other and further relief as the Court deems appropriate. [Attorney] JURY DEMAND Plaintiffs demand trial by jury. [Attorney]

D.3 TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) HARVEY CYCLE & ) CAMPER, INC., doing ) business as WATSON ) MOTORSPORT, LTD.; ) and WONDERLIC & ) ASSOCIATES, INC., doing ) business as WONDERLIC ) FINANCE, ) Defendants. ) ) CHRISTINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff, COMPLAINT MATTERS COMMON TO ALL COUNTS INTRODUCTION 1. This action seeks redress for unlawful practices relating to an automobile transaction. Count I, brought on behalf of a class, alleges that defendants systematically understate the amount financed and annual percentage rate on automobile financing transactions. Count II alleges that the same conduct complained of in Count I violates the Illinois Sales Finance Agency Act. Counts III and IV allege that plaintiff was sold a defective and unmerchantable car, in violation of the Magnuson Moss Consumer Warranty Act and Illinois law. JURISDICTION AND VENUE 2. This Court has subject matter jurisdiction under 28 U.S.C. 1331 and 1367 and 15 U.S.C. 1640. Venue in this District is proper because all of the events complained of took place in this District.

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PARTIES COUNT ITRUTH IN LENDING 18. Plaintiff incorporates paragraphs 117. 19. Plaintiffs transaction and the transactions of each member of the class described below were consumer credit transactions within the meaning of the Truth in Lending Act, 15 U.S.C. 1601 et seq. (TILA), and Federal Reserve Board Regulation Z, 12 C.F.R. part 226. 20. The auto dealers through which the transactions of the plaintiff and class members were originated, including Watson, are creditors within the meaning of the Truth in Lending Act, in that each has originated more than 25 consumer credit contracts per annum. 21. The premiums for the V.S.I. Insurance were imposed by Watson and Wonderlic only in connection with credit transactions and were an incident to the extension of credit. The premiums for this insurance accordingly are covered by the general definition of finance charge in 12 C.F.R. 226.4. 22. Under TILA and Regulation Z, premiums for insurance covering property against loss or damage must be included in the finance charge unless the consumer has the option to obtain the insurance from his own company and this fact is disclosed to the consumer. 12 C.F.R. 226.4(d)(2), provides: Premiums for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, may be excluded from the finance charge if the following conditions are met: (i)The insurance coverage may be obtained from a person of the consumers choice, and this fact is disclosed. . . . 23. Wonderlic and the dealers that originated contracts for Wonderlic, including Watson, did not allow a consumer to obtain V.S.I. Insurance from an insurer of the consumers choice, and did not so advise the consumer. 24. Accordingly, the premiums were required to be included in the finance charge and the annual percentage rate. 25. Watson and Wonderlic did not so include them, resulting in an understatement of the finance charge and annual percentage rate in the transactions of plaintiff and each class member. 26. The violation is apparent on the face of each class members retail installment contract. 27. The retail installment contract assigned to Wonderlic provides by its terms that any holder is subject to claims and defenses which the buyer, Ms. Willis, has against the seller, Watson. 28. Watson and Wonderlic are accordingly liable as provided under 15 U.S.C. 1640 and 1641 to each consumer they charged for the V.S.I. Insurance. CLASS ALLEGATIONS 29. Ms. Willis brings Count I of this action on behalf of a class of all other persons similarly situated. The class consists of all persons who satisfy the following criteria:

3. Christine Willis (Ms. Willis) is an individual who resides at [address], Chicago, Illinois. 4. Defendant Harvey Cycle & Camper, Inc., doing business as Watson Motorsport, Ltd. (Watson), is an Illinois corporation which operates a used car dealership located at [address], Midlothian, Illinois. Its registered agent and office are R & S Agents, Inc., [address], Chicago, Illinois. 5. Defendant Wonderlic & Associates, Inc., doing business as Wonderlic Finance (Wonderlic) is a Delaware Corporation with its principal place of business located at [address], Libertyville, Illinois. PLAINTIFFS TRANSACTION 6. In early February 1994, Ms. Willis purchased a used 1985 Buick Century from Watson. Exhibit A, attached, [not attached herein] is a copy of the purchase contract. 7. Ms. Willis financed the purchase by means of a motor vehicle retail installment sales contract which Watson immediately assigned to Wonderlic. Exhibit B, attached, [not attached herein] is a copy of the retail installment contract. The contract was prepared on a printed form which Wonderlic devised and distributed to auto dealers such as Watson. 8. The Buick was worth not more than $2,400. However, Watson charged Ms. Willis $4,135.28 for the vehicle. 9. As part of the transaction, Watson also sold Ms. Willis an extended warranty or service contract for $595. As a result, Watson was prohibited from disclaiming implied warranties under the Magnuson Moss Consumer Warranty Act, 15 U.S.C. 2308 (MMCWA). 10. The retail installment contract financed a purported amount financed of $4,245.28 at a purported annual percentage rate of not less than 43.0%. In addition, it provided for a down payment of $600. 11. Watson, with the knowledge and at the instance of Wonderlic, included in the amount financed on the retail installment contract a charge for $50 to V.S.I. for insurance. 12. The charge was a standard $50 charge that Wonderlic had car dealers such as Watson insert in all retail installment contracts which were intended for sale to Wonderlic. 13. The $50 charge was for insurance protecting Wonderlic and/or Watson in the event that the customer, Ms. Willis, failed to obtain and maintain insurance covering the car against loss or damage. 14. It was the standard policy and practice of Wonderlic and car dealers with which Wonderlic did business, such as Watson, to include the $50 charge in the amount financed and to exclude it from the finance charge and the annual percentage rate. 15. The charge was inserted in the manner stated above by means of a computer. 16. The engine of the Buick sold to Ms. Willis was seriously defective at the time of the sale. Within a few days after the sale, the engine completely broke down and needed to be replaced. As a result, the vehicle was unfit for ordinary driving purposes. 17. Because of this serious defect, Ms. Willis lost confidence in the vehicle and revoked her acceptance. Exhibit C, attached [not attached herein].

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a. They signed a retail installment contract on Wonderlics printed form within one year prior to the filing of this action. b. The retail installment contract included a charge for V.S.I. insurance. c. The charge was included in the amount financed and excluded from the finance charge and the annual percentage rate. d. The transaction was documented as one for personal, family or household purposes (i.e., Truth in Lending disclosures were given). 30. On information and belief, based on the fact that a computer was used to insert the V.S.I. insurance charge on a standard printed form, the class is sufficiently numerous that joinder of all members is impractical. 31. There are questions of law and fact common to the class, which questions predominate over any questions peculiar to individual class members. The principal common question is whether the V.S.I. insurance was required to be included in the finance charge and annual percentage rate. 32. Ms. Willis has the same claims as the members of the class. All of the claims are based on the same factual and legal theories. 33. Ms. Willis will fairly and adequately represent the interest of the class members. Ms. Willis has retained counsel experienced in prosecuting class actions and in consumer protection matters. There is no reason why Ms. Willis and her counsel will not vigorously pursue this matter. 34. A class action is the only appropriate means of resolving this controversy. Most of the customers of Wonderlic and Watson are unsophisticated individuals of modest means, who are not aware of their rights. In the absence of a class action, a failure of justice will result. WHEREFORE, plaintiff requests that the Court grant the following relief on her behalf and that of the class and against Watson and Wonderlic: a. Statutory damages, as provided for in 15 U.S.C. 1640. b. Actual damages equal to all charges for the V.S.I. Insurance and finance charges thereon. c. Attorneys fees, litigation expenses and costs. d. Such other or further relief as the Court deems appropriate. COUNT IISALES FINANCE AGENCY ACT 35. Plaintiff incorporates paragraphs 128. This claim is brought against Wonderlic, only. 36. Wonderlic is a sales finance agency within the meaning of the Sales Finance Agency Act, Ill.Rev.Stats., ch. 17, k5201 et seq. (SFAA), in that it is engaged in Illinois in the business of purchasing retail installment contracts. 37. SFAA 8.5, Ill.Rev.Stats., ch. 17, k5213, defines as a violation of the SFAA the Purchase of any retail contract . . . after actual knowledge that the contract . . . violates . . . the Motor Vehicle Retail Installment Sales Act. The Motor Vehicle Retail Installment Sales Act (MVRISA) requires disclosures similar to those required under TILA, and then provides that disclosures which satisfy TILA also satisfy MVRISA.

Appx. D.3
38. Wonderlic purchased contracts from car dealers with actual knowledge that they violated MVRISA, in that the annual percentage rate and finance charge were understated. 39. SFAA 8.9, Ill.Rev.Stats., ch. 17, k5217, defines as a violation of the SFAA the Fraudulent misrepresentation, circumvention or concealment by the licensee through whatever subterfuge of device of any of the material particulars or the nature thereof required to be furnished to a retail buyer under . . . the Motor Vehicle Retail Installment Sales Act. 40. Wonderlic violated 8.9 in that it caused auto dealers to furnish buyers with retail installment contracts which understated the annual percentage rate and finance charge. 41. SFAA 8.2, Ill.Rev.Stats., ch. 17, k5210, defines as a violation of the SFAA the Willful violation or aiding any person in the willful violation of this Act or of any rule or regulation promulgated by the Director [of the Department of Financial Institutions]. 42. The Regulations of the Department of Financial Institutions require sales finance agencies to comply with TILA. 43. SFAA 16, Ill.Rev.Stats., ch. 17, k5234, provides: An individual who sustains loss as a result of a sales finance agencys violation of this Act may, in a civil action against the sales finance agency, recover damages, or may, in an action brought by the sales agency to collect an indebtedness arising out of a retail sales transaction, raise such damages by way of a counterclaim or offset. In either such action, the court may allow as an additional part of the recovery, offset or counterclaim, penal damages in an amount not more than 25% of the principal amount of the retail contract . . . which is the subject of the action. In addition, the court may allow that aggrieved individual his reasonable attorneys fees. 44. Plaintiff and each member of the class defined below sustained loss as a result of Wonderlics violation of the Sales Finance Agency Act, in that they signed retail installment contracts on which the finance charge and annual percentage rate were understated. CLASS ALLEGATIONS 45. Ms. Willis brings Count II of this action on behalf of a class of all other persons similarly situated. The class consists of all persons who satisfy the following criteria: a. They signed, in Illinois, a retail installment contract on Wonderlics printed form within five years prior to the filing of this action. b. The retail installment contract included a charge for V.S.I. insurance. c. The charge was included in the amount financed and excluded from the finance charge and the annual percentage rate. d. The transaction was documented as one for personal, family or household purposes (i.e., Truth in Lending disclosures were given). 46. On information and belief, based on the fact that a computer was used to insert the V.S.I. insurance charge on a

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61. The retail installment contract assigned to Wonderlic provides by its terms that any holder is subject to claims and defenses which the buyer, Ms. Willis, has against the seller, Watson. WHEREFORE, plaintiff requests that the Court enter judgment in her favor and against Watson and Wonderlic: a. For compensatory damages. b. For costs of suit. c. For such other or further relief as the Court deems appropriate. [Attorney] JURY DEMAND Plaintiff demands trial by jury. [Attorney]

standard printed form, the class is sufficiently numerous that joinder of all members is impractical. 47. There are questions of law and fact common to the class, which questions predominate over any questions peculiar to individual class members. The principal common question is whether the V.S.I. insurance was required to be included in the finance charge and annual percentage rate. 48. Ms. Willis has the same claims as the members of the class. All of the claims are based on the same factual and legal theories. 49. Ms. Willis will fairly and adequately represent the interest of the class members. Ms. Willis has retained counsel experienced in prosecuting class actions and in consumer protection matters. There is no reason why Ms. Willis and her counsel will not vigorously pursue this matter. 50. A class action is the only appropriate means of resolving this controversy. Most of the customers of Wonderlic and Watson are unsophisticated individuals of modest means, who are not aware of their rights. In the absence of a class action, a failure of justice will result. WHEREFORE, plaintiff requests that the Court enter judgment in favor of herself and the class and against Wonderlic for the following relief: a. Appropriate compensatory and statutory damages. b. Attorneys fees, litigation expenses, and costs. c. Such other or further relief as the Court deems appropriate. COUNT IIIMAGNUSON MOSS ACT 51. Plaintiff incorporates paragraphs 117. 52. Watson is a supplier within the meaning of the MMCWA. 53. The car sold to plaintiff was a consumer product within the meaning of the MMCWA. 54. The car sold to plaintiff by Watson was defective and unmerchantable, in violation of 2-314 of the Uniform Commercial Code, for the reasons stated above. 55. Because plaintiff was sold a service contract, Watsons attempted disclaimer of implied warranties is ineffective. 56. Plaintiff is entitled to bring suit for breach of the implied warranty under 15 U.S.C. 2310. 57. The retail installment contract assigned to Wonderlic provides by its terms that any holder is subject to claims and defenses which the buyer, Ms. Willis, has against the seller, Watson. WHEREFORE, plaintiff requests that the Court enter judgment in her favor and against Watson and Wonderlic: a. For compensatory damages. b. For attorneys fees, litigation expenses and costs of suit. c. For such other or further relief as the Court deems appropriate. COUNT IVUNIFORM COMMERCIAL CODE 58. Plaintiff incorporates paragraphs 117. 59. The car sold to plaintiff by Watson was defective and unmerchantable, in violation of 2-314 of the Uniform Commercial Code, for the reasons stated above. 60. Because plaintiff was sold a service contract, Watsons attempted disclaimer of implied warranties is ineffective.

D.4 TIL Untimely Disclosure Case (Diaz)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) WESTGATE LINCOLN ) MERCURY, INC., ) Defendant. ) ) SALVATOR DIAZ, on behalf of himself and all others similarly situated, Plaintiff, COMPLAINT Plaintiff, Salvator Diaz, complains as follows against defendant Westgate Lincoln Mercury, Inc. (Westgate): JURISDICTION AND VENUE 1. This is an action under the Truth in Lending Act, 15 U.S.C. 1601 et seq. The Court has jurisdiction under 15 U.S.C. 1640 and 28 U.S.C. 1331 and 1337. Venue in this District is proper because all events in question took place here. PARTIES 2. Plaintiff is an individual who resides at [address]. 3. Westgate operates a car dealership at [address]. 4. During each of the last three years, Westgate signed contracts with more than 25 consumers who agreed to pay finance charges or interest to Westgate or its assignees. FACTS RELATING TO DIAZ 5. On July 19, 1993, plaintiff, who speaks Spanish, was induced to sign the printed form document attached as Exhibit

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A [not attached herein] in connection with the proposed purchase of a car for personal purposes. 6. Exhibit A provides for the extension of credit to plaintiff, and also provides for the payment of interest at the rate of 20%. 7. Westgate did not furnish plaintiff with any of the disclosures required by the Truth in Lending Act, 15 U.S.C. 1601 et seq., in connection with this transaction. POLICIES AND PRACTICES ALLEGED 8. Exhibit A is a standard printed form document which Westgate has consumers sign where a financed transaction is intended, but before presentation of the disclosures of the financing terms required by the Truth in Lending Act. 9. Exhibit A also provides for a confession of judgment against the consumer. For years, the use of confession of judgment clauses in consumer contracts has been outlawed by Federal Trade Commission regulations. However, most consumers are not familiar with Federal Trade Commission regulations. 10. At the same time as it has the consumer sign Exhibit A, Westgate gives possession of the vehicle being purchased to the consumer and takes possession of any tradein vehicle that the customer has. 11. The purpose and effect of Exhibit A and the actions described in paragraphs 910 is to attempt to lock in the consumer to a binding contract without giving the disclosure of the financing terms required by the Truth in Lending Act. CLASS ALLEGATIONS 12. This action is brought on behalf of a class. The class consists of all persons who, on or after a date one year prior to the filing of the complaint, signed the same printed form as Exhibit A with Westgate, without previously or simultaneously receiving Truth in Lending disclosures relating to Exhibit A. 13. The class is so numerous that joinder of all members is impracticable. 14. There are common questions of law or fact, which predominate over any individual questions. The predominant common questions are whether the use of Exhibit A without making Truth in Lending disclosures complies with the Truth in Lending Act, and the appropriate amount of statutory damages to be assessed against defendant. The only individual question is whether each class member signed Exhibit A, a matter which should be ascertainable by a ministerial inspection of defendants records. 15. Plaintiffs claims are typical of those of the class members. All are based on the same legal and factual theories. 16. Plaintiff will fairly and adequately represent the class. He has retained counsel experienced in this type of litigation and has the same interests as the class members. 17. A class action is superior to other available methods to resolve this controversy. Most of the class members are probably unaware of their rights. The interest of individual class members in controlling the prosecution or defense of separate actions is minimal because the maximum statutory damages are $1,000 per transaction.

Appx. D.5
WHEREFORE, plaintiff requests the following relief for himself and the class: a. Statutory damages. b. Attorneys fees, litigation expenses and costs. c. Such other or further relief as the Court deems appropriate. [Attorney] JURY DEMAND Plaintiff demands trial by jury. [Attorney]

D.5 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, COMPLAINT Comes now IAN SHEPHERD and respectfully shows the Court the following: MATTERS COMMON TO MULTIPLE COUNTS INTRODUCTION 1. This is a class action brought by Ian Shepherd under the Consumer Leasing Act, 15 U.S.C. 1667 et seq., Federal Reserve Board Regulation M, 12 C.F.R. part 213, and state law. JURISDICTION AND VENUE 2. This Court has jurisdiction over Count I under 15 U.S.C. 1640 and 1667d(c) and 28 U.S.C. 1331 and 1337. The Court has jurisdiction over Counts II and III under 28 U.S.C. 1367. Venue in this District is proper under 28 U.S.C. 1391(b). PARTIES 3. Plaintiff, Ian Shepherd (Shepherd), is an individual who resides at [address]. 4. Defendant, Volvo Finance of North America, Inc. (VFNA), is a Delaware corporation which does business in Georgia. Its principal place of business is located at [address]. Its registered agent is United States Corporation Company, [address], Atlanta, GA.

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14. The Consumer Leasing Act provides for substantive regulation of charges for early termination, delinquency and default: Penalties or other charges for delinquency, default, or early termination may be specified in the lease but only at an amount which is reasonable in light of the anticipated or actual harm caused by the delinquency, default, or early termination, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. 15 U.S.C. 1667b(b). 15. The Consumer Leasing Act and Regulation M also require a lessor to provide a lessee with extensive disclosures prior to the consummation of a lease, analogous to those required in the case of credit transactions by the Truth in Lending Act. 15 U.S.C. 1667a. The disclosures must be made clearly, conspicuously, [and] in meaningful sequence and either on a separate written statement or in the contract, above the place for the lessees signature. 12 C.F.R. 213.4(a). The Staff Commentary requires that all lease disclosures be reasonably understandable. 16. The disclosures must be made together on a single page (which may include both sides) and above the place for the lessees signature. (Commentary, 4(a)(2)) No required disclosures may be in fine print on the back. 17. The specific information that must be disclosed includes: a. The amount or method of determining the amount of any penalty or other charge for delinquency, default, or late payments. 12 C.F.R. 213.4(g)(10). b. A statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the lease term and the amount or method of determining the amount of any penalty or other charge for early termination. 12 C.F.R. 213.4(g)(12). c. A statement identifying any express warranties or guarantees available to the lessee made by the lessor or manufacturer with respect to the leased property. 12 C.F.R. 213.4(g)(7). d. The total amount paid or payable by the lessee during the lease term for official fees, registration, certificate of title, license fees, or taxes. 12 C.F.R. 213.4(g)(4). 18. The Consumer Leasing Act provides that any lessor who violates any requirement imposed by 15 U.S.C. 1667a, 1667b, and the implementing regulations is liable as provided in the Truth in Lending Act, 15 U.S.C. 1640. APPLICABILITY OF CONSUMER LEASING ACT TO PLAINTIFFS TRANSACTION 19. The Consumer Leasing Act and Regulation M were applicable to Shepherds lease because: a. VFNA was a lessor, in that it was regularly engaged in the business of leasing and offering to lease vehicles to natural persons for a period of time exceeding four months, and for a total contractual obligation not exceeding $25,000, primarily for personal, family or household purposes.

5. Defendant, Volvo Car Finance, Inc. (VCFI), is a Delaware corporation which does business in Georgia. Its principal place of business at [address] Montvale, NJ. Its registered agent is CT Corporation System, [address], Atlanta, GA. 6. VFNAs regular business activities include leasing and offering to lease motor vehicles and purchasing leases of motor vehicles. Many of the leases are made with natural persons who lease vehicles for personal, family or household purposes. On information and belief, the intended term of most or all VFNA vehicle leases exceeds four months. In many cases, the total contractual obligation under the lease is less than $25,000. 7. VCFIs regular business activities include servicing motor vehicle leases held by VFNA. VCFI was involved in the servicing of Shepherds lease, as more fully described below. VCFI and VFNA are under common ownership and control. PLAINTIFFS TRANSACTION WITH VFNA 8. On May 11, 1992, Shepherd entered into a consumer automobile lease with VFNA covering the lease of a 1992 Volvo 740 series automobile. The vehicle was leased for purposes of personal transportation, and the transaction was so documented by VFNA (the purpose of the lease is indicated by checking a box on the lease form). The scheduled term of the lease was 36 months. The total payments under the lease were $23,400. In connection with this transaction, VFNA issued a combination lease contract/Consumer Leasing Act disclosure statement. Exhibit A, attached, [not attached herein] is a true and accurate copy of this document. 9. In February 1993, Shepherd requested information from VFNA regarding the cost of terminating his lease early. A copy of his correspondence is attached as Exhibit B [not attached herein]. 10. In March 1993, Shepherd received a response from VCFI. A copy of the response is attached as Exhibit C [not attached herein]. 11. Contemporaneous with the filing of this complaint, Shepherd returned the leased car to VFNAs agent and notified VFNA that he was terminating the lease. CONSUMER LEASING ACT 12. The federal Consumer Leasing Act, 15 U.S.C. 1667 et seq. (Consumer Leasing Act), and implementing Federal Reserve Board regulations, 12 C.F.R. part 213 (Regulation M), and Staff Commentary, 12 C.F.R. part 213 Supp. I (Commentary), require extensive disclosures in consumer lease transactions and regulate certain substantive terms of such transactions. 13. The Consumer Leasing Act and Regulation M apply to any consumer lease. A consumer lease is defined as a contract in the form of a lease or bailment for the use of personal property by a natural person for a period of time exceeding four months, and for a total contractual obligation not exceeding $25,000, primarily for personal, family, or household purposes, whether or not the lessee has the option to purchase or otherwise become the owner of the property at the expiration of the lease. . . . Leases for agricultural, business, or commercial purposes are excluded. 15 U.S.C. 1667(1).

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b. Shepherd is a natural person. c. Shepherd leased the vehicle from VFNA for personal, family and household purposes, as was acknowledged by checking the box on Exhibit A [not attached herein] indicating that his was a personal as opposed to a business lease. d. Exhibit A is a contract in the form of a lease . . . for the use of personal property by a natural person. e. The term of the lease exceeded four months. f. Shepherds total contractual obligation under the lease did not exceed $25,000. COUNT ICLASSWIDE DISCLOSURE VIOLATIONS 20. Plaintiff incorporates paragraphs 119. 21. The printed form of lease attached as Exhibit A [not attached herein] violates the disclosure requirements of the Consumer Leasing Act and Regulation M in the following respects: a. The disclosures in Exhibit A of the default and early termination charges are inaccurate. VFNA and VCFI in fact require the lessee to pay in accordance with Exhibit C [not attached herein]. b. Part of the information necessary to determine early termination liability is set forth on a separate addendum, violating the requirement that all required disclosures be on two sides of a single paper. c. Exhibit A does not provide for the disclosure of The total amount paid or payable by the lessee during the lease term for official fees, registration, certificate of title, license fees, or taxes. 12 C.F.R. 213.4(g)(4). Item 7 provides for estimated additional payments on account of these matters during the life of the lease. No item on Exhibit A provides for disclosure of the information required by 12 C.F.R. 213.4(g)(4). d. Exhibit A does not provide a statement of the lessees warranty rights that is understandable by the average consumer. Item 36 states that VFNA agrees to assign you its assignable rights under the manufacturers limited warranties. . . . This requires the reader to know what rights under a warranty are assignable, a matter not within the understanding of the average consumer. e. The disclosure of late payment charges in Exhibit A is ambiguous as to the amount of the charge if part of the payment is timely and part is late. f. Although Item 35 of Exhibit A provides that the lessees liability upon default is based on the value of the leased car, Exhibit A fails to disclose that the consumer has the right to use an appraisal of the cars value where liability upon default or early termination is based on the value of the leased property, as required by 12 C.F.R. 213.4(g)(14). g. Item 35 of Exhibit A threatens the lessee with an unconscionable and unenforceable penalty for default. Specifically, Item 35 states that the lessee will be responsible for all payments and monies due for the balance of this lease and the Early Termination Value (paragraph 8) plus interest at 12% per annum. The lessees ostensible liability is not reduced to present value or otherwise adjusted to take into account the fact that VFNA is accel-

Appx. D.5
erating payments due over a period of years. A lease provision that requires immediate payment of sums due over a period of years without appropriate adjustment is patently unenforceable under state law and 15 U.S.C. 1667b(b), and a disclosure of such a nonexistent liability violates the disclosure requirements of the Consumer Leasing Act and Regulation M. CLASS ALLEGATIONS 22. This claim is brought on behalf of a class consisting of all persons (i) who signed contracts with VFNA using the printed VFNAform attached as Exhibit A (VFNA-82-0888, any revision), (ii) which had a scheduled duration in excess of four months, (iii) which called for total payments of $25,000 or less, (iv) which had the box marked for personal use checked, and (v) which were in effect at any time within one year prior to the filing of this action, or which are presently in effect. 23. Plaintiff seeks certification under Fed.R.Civ.P. 23(b)(2), or alternative or in addition, under Fed.R.Civ.P. 23(b)(3). 24. Shepherd alleges on information and belief that the class is so numerous that joinder of all members is impractical. Shepherd signed in 1992 a lease on a printed form bearing a legend stating that it was a June 1990 revision. Investigation discloses that prior revisions contained the same violations as the June 1990 revision. During a period of two years, VFNA undoubtedly entered into more than the 2030 contracts on this form necessary to satisfy the numerosity requirement. According to published reports, VFNA enters into 8,00012,000 leases per year. 25. There are questions of law and fact common to the class, which questions predominate over any questions affecting only individual class members. The principal issue is whether the lease form contains the disclosure violations alleged herein. 26. The claims of Shepherd are typical of those of the class members, in that they are based on the same legal and factual theories and predominant common questions. 27. Shepherd will fairly and adequately protect the interests of the class. Although his personal claim is not large enough to warrant individual litigation, he has enough at stake to ensure that he will vigorously litigate this matter. He wishes to obtain redress of the wrong. To that end, he has retained counsel experienced in handling class actions and actions involving unlawful business practices, including claims under the Consumer Leasing Act. Neither Shepherd nor his counsel have any interests which might cause them not to vigorously pursue this action. 28. Certification is appropriate under Fed.R.Civ.P. 23(b)(2), in that defendant has imposed uniform policies with respect to the entire class and injunctive and declaratory relief against the imposition of the policies is necessary under the state law claims. The monetary relief sought, including statutory damages, does not detract from the cohesiveness of the class. 29. Alternatively or in addition, plaintiff requests certification under Fed.R.Civ.P. 23(b)(3). The common questions predominate over any individual issues. A class action is superior for the fair and efficient adjudication of this dispute. Because VFNA is misstating its actual termination charges, most lessees will not realize that they have a claim. A class action is

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cal. Shepherd signed in 1992 a lease on a printed form bearing a legend stating that it was a June 1990 revision. Investigation discloses that prior revisions contained the same violations as the June 1990 revision. During a period of two years, VFNA undoubtedly entered into more than the 2030 contracts on this form necessary to satisfy the numerosity requirement. According to published reports, VFNA enters into 8,00012,000 leases per year. 41. There are questions of law and fact common to the class, which questions predominate over any questions affecting only individual class members. The principal issue is whether VFNA and VCFI may enforce termination and default charges that are not computed in accordance with the lease form. 42. The claims of Shepherd are typical of those of the class members, in that they are based on the same legal and factual theories and predominant common questions. 43. Shepherd will fairly and adequately protect the interests of the class. Although his personal claim is not large enough to warrant individual litigation, he has enough at stake to ensure that he will vigorously litigate this matter. He wishes to obtain redress of the wrong. To that end, he has retained counsel experienced in handling class actions and actions involving unlawful business practices, including claims under the Consumer Leasing Act. Neither Shepherd nor his counsel have any interests which might cause them not to vigorously pursue this action. 44. Certification is appropriate under Fed.R.Civ.P. 23(b)(2), in that defendant has imposed uniform policies with respect to the entire class and injunctive and declaratory relief against the imposition of the policies is necessary. The monetary relief sought, including statutory damages, does not detract from the cohesiveness of the class. 45. Alternatively or in addition, plaintiff requests certification under Fed.R.Civ.P. 23(b)(3). The common questions predominate over any individual issues. A class action is superior for the fair and efficient adjudication of this dispute. Because VFNA is misstating its actual termination charges, most lessees will not realize that they have a claim. A class action is therefore essential to prevent a failure of justice. Furthermore, even if a lessee did realize that VFNA is misstating its actual charges, the size of the claims involved does not warrant individual litigation of the magnitude and complexity necessary to challenge the legality of the charges. WHEREFORE, plaintiff requests that the Court enter judgment in his favor and in favor of the class and against defendants VFNA and VCFI: a. Enjoining defendants from imposing or collecting early termination and default charges. b. For compensatory damages equal to all termination and default charges collected by VFNA and/or VCFI that were computed in a manner inconsistent with the lease disclosures. c. For punitive damages. d. For such other or further relief as is appropriate. COUNT IIICLASS CLAIM FOR UNFAIR AND DECEPTIVE ACTS AND PRACTICES 46. Plaintiff incorporates paragraphs 118.

therefore essential to prevent a failure of justice. Furthermore, even if a lessee did realize that VFNA is misstating its actual charges, the size of the claims involved does not warrant individual litigation of the magnitude and complexity necessary to challenge the legality of the charges. WHEREFORE, plaintiff requests that the Court enter judgment in his favor and in favor of the class and against defendant VFNA: a. For statutory damages. b. For compensatory damages equal to all termination and default charges collected by VFNA that were computed in a manner inconsistent with the lease disclosures. c. For attorneys fees, litigation expenses and costs. d. For such other or further relief as is appropriate. COUNT IICLASS CLAIM FOR DECLARATORY AND OTHER RELIEF UNDER STATE LAW 30. Shepherd incorporates paragraphs 118. 31. On information and belief, based on a study conducted by the Attorney General of New York, a majority of automobile lessees terminate their leases prior to the scheduled expiration. The largest single reason for early termination is that lessees find it necessary or desirable to get newer vehicles. Some leases are terminated because of a casualty to the leased vehicle. Some lessees default because of financial difficulties; however, this category is typically a minority of early terminations. 32. Early termination charges under vehicle leases typically range between $2,000 and $30,000. 33. The lessees liability for default or early termination is therefore material information which should be accurately described by the lessor. 34. By misstating the charges actually imposed, VFNA misrepresented material information to lessees. 35. The default and early termination charges actually imposed by VFNA and VCFI are excessive and unreasonable, and are not necessary to compensate defendants for any loss actually anticipated. As such, they are unenforceable penalties. 36. Because of the unreasonable nature of the charges, and VFNAs misstatement of the charges actually imposed in its lease, VFNA and its affiliate VCFI should therefore be barred from enforcing their default and early termination charges. 37. A dispute exists between Shepherd and the class described below, on the one hand, and VFNA and VCFI, on the other, concerning the validity of these termination charges. CLASS ALLEGATIONS 38. This claim is brought on behalf of a class consisting of all persons (i) who signed contracts with VFNA using the printed VFNA form attached as Exhibit A [not attached herein] (VFNA-82-0888, any revision), (ii) who had early termination or default charges assessed against them at any time within six years prior to the filing of this action, or whose leases are presently in effect. 39. Plaintiff seeks certification under Fed.R.Civ.P. 23(b)(2), or alternative or in addition, under Fed.R.Civ.P. 23(b)(3). 40. Shepherd alleges on information and belief that the class is so numerous that joinder of all members is impracti-

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47. At all times during which VFNA used the forms of which Exhibit A is an example, each state had in force a statute, modelled after the Federal Trade Commission Act, prohibiting unfair and deceptive acts and practices in connection with consumer transactions. The New Jersey Consumer Fraud Act is N.J.S.A. 56:8-1 et seq. 48. VFNAs leases were sales of merchandise as defined in N.J.S.A. 56:8-1 et seq. N.J.S.A. 56:801(e) defines sale to include any sale, rental or distribution, offer for sale, rental or distribution or attempt directly or indirectly to sell, rent or distribute. N.J.S.A. 56:8-1(a) defines advertisement to include the attempt directly or indirectly by publication, dissemination, solicitation, indorsement or circulation or in any other way to induce directly or indirectly any person to enter or not enter into any obligation or acquire any title or interest in any merchandise. . . . 49. At all relevant times, N.J.S.A. 56:8-2 provided: The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale of advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice. . . . Unconscionable has been judicially determined to include any conduct which is incompatible with good faith, honesty in fact, and observance of fair dealing. 50. Plaintiff contends that the New Jersey statute applies to the entire class, in that VFNA and VCFI are headquartered in New Jersey and in that the practices complained of were conceived in and directed from that state. The statute has been judicially determined by New Jersey courts to apply to practices of a business headquartered in New Jersey directed against persons located elsewhere. 51. Defendants engaged in deceptive and unconscionable acts and practices by: a. Imposing unreasonable termination and default charges on lessees. b. Failing to accurately disclose the termination and default charges actually imposed. c. Misrepresenting the method of calculation of termination and default charges. 52. VFNA has imposed and/or collected the default and early termination charges specified in the form of which Exhibit A is an example from numerous lessees. Other lessees are subject to such charges by reason of having signed contracts using the same form as Exhibit A. VCFI has assisted VFNA in servicing the leases and imposing and collecting the charges. 53. N.J.S.A. 56:8-19 provides: Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of

Appx. D.5
the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefor in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. In all actions under this section the court shall also award reasonable attorneys fees, filing fees and reasonable costs of suit. 54. Shepherd and the members of the class defined below suffered ascertainable loss of moneys or property as a result of being induced to sign through deceptive and unconscionable practices leases which require them to (i) pay money if they keep the leases in force or (ii) pay money to terminate the leases. Shepherd and each member of the class paid money, under one alternative or the other. 55. A dispute exists between Shepherd and the class defined below, on the one hand, and VFNA and VCFI, on the other, concerning the validity of these termination charges. CLASS ALLEGATIONS 56. This claim is brought on behalf of a class consisting of all persons (i) who signed contracts with VFNA using the printed VFNA form attached as Exhibit A (VFNA-82-0888, any revision), and (ii) who had early termination or default charges assessed against them at any time within six years prior to the filing of this action, or whose leases are presently in effect. 57. Plaintiff seeks certification under Fed.R.Civ.P. 23(b)(2), or alternative or in addition, under Fed.R.Civ.P. 23(b)(3). 58. Shepherd alleges on information and belief that the class is so numerous that joinder of all members is impractical. Shepherd signed in 1992 a lease on a printed form bearing a legend stating that it was a June 1990 revision. Investigation discloses that prior revisions contained the same violations as the June 1990 revision. During a period of two years, VFNA undoubtedly entered into more than the 2030 contracts on this form necessary to satisfy the numerosity requirement. According to published reports, VFNA enters into 8,00012,000 leases per year. 59. There are questions of law and fact common to the class, which questions predominate over any questions affecting only individual class members. The principal issue is whether VFNA and VCFI may enforce termination and default charges that are not computed in accordance with the lease form. 60. The claims of Shepherd are typical of those of the class members, in that they are based on the same legal and factual theories and predominant common questions. 61. Shepherd will fairly and adequately protect the interests of the class. Although his personal claim is not large enough to warrant individual litigation, he has enough at stake to ensure that he will vigorously litigate this matter. He wishes to obtain redress of the wrong. To that end, he has retained counsel experienced in handling class actions and actions involving unlawful business practices, including claims under the

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Consumer Class Actions: A Practical Litigation Guide

COMPLAINT INTRODUCTION 1. This action is brought by a consumer to secure redress for unfair, deceptive and unlawful trade practices perpetrated by defendants on plaintiff and, it is believed, numerous other persons, generally poor and unsophisticated. These practices are as follows: a. Defendants Octopus Bank and Octopus Financial Services maintained continuous business relationships with parties, such as Grand Satellite, that provided goods and services relating to home improvements (dealers), and referred their customers to Octopus Bank for financing. Accordingly, under Federal Trade Commission regulations, Octopus Bank is subject to claims and defenses which the customer has against the provider of goods and services. Octopus Bank attempts to deceive and coerce borrowers into making payment to it notwithstanding the nonreceipt of the agreed-upon consideration from the provider of goods and services. b. Octopus Bank entered into a tacit agreement with Grand Satellite and, on information and belief, other dealers, whereby (i) the dealer would sign a contract (home improvement contract) with the consumer which obligated the consumer to pay cash and purported to be a binding obligation; and (ii) more than three business days later (i.e., after the expiration of the statutory threeday rescission period and after the consumer was purportedly bound by the home improvement contract), the dealer would present the consumer with the loan papers from Octopus Bank and Octopus Financial Services (loan agreement), containing terms not previously part of the contractual relationship. In many cases, the home improvement contracts provided (i) that the consumer would receive financing terms more attractive than those ultimately provided by Octopus Bank and Octopus Financial Services, (ii) that the consumer was obligated to sign whatever financing documents were presented by the dealer and that failure to do so was an act of default, and/or (iii) that the consumer would have to pay substantial charges, from 15 to 25% of the contract price, if the consumer attempted to cancel the home improvement contract for any reason after the three-day rescission period expired. Mrs. Howards contract contained the first and third. 2. In this action, plaintiff alleges that defendants practices violated the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. 1961 et seq., and the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stats., ch. 121 1/2, 261 et seq. Plaintiff seeks compensatory and punitive damages on a classwide basis with respect to both practices, and in addition declaratory and injunctive relief with respect to the second practice. JURISDICTION 3. Jurisdiction over this action exists under 28 U.S.C. 1334, in that Mrs. Howard is currently the debtor in a Chapter 13 proceeding in the Northern District of Illinois and this action concerns debts listed in that proceeding. Jurisdiction also ex-

Consumer Leasing Act. Neither Shepherd nor his counsel have any interests which might cause them not to vigorously pursue this action. 62. Certification is appropriate under Fed.R.Civ.P. 23(b)(2), in that defendant has imposed uniform policies with respect to the entire class and injunctive and declaratory relief against the imposition of the policies is necessary. The monetary relief sought, including statutory damages, does not detract from the cohesiveness of the class. 63. Alternatively or in addition, plaintiff requests certification under Fed.R.Civ.P. 23(b)(3). The common questions predominate over any individual issues. A class action is superior for the fair and efficient adjudication of this dispute. Because VFNA is misstating its actual termination charges, most lessees will not realize that they have a claim. A class action is therefore essential to prevent a failure of justice. Furthermore, even if a lessee did realize that VFNA is misstating its actual charges, the size of the claims involved does not warrant individual litigation of the magnitude and complexity necessary to challenge the legality of the charges. WHEREFORE, plaintiffs requests that the Court enter judgment in his favor and in favor of the class and against defendants VFNA and VCFI: a. Enjoining defendants from imposing or collecting early termination and default charges. b. Damages equal to three times all such charges that have been collected, or for which lessees are ostensibly liable. c. Attorneys fees, litigation expenses and costs. d. Such other or further relief as the Court deems appropriate. [Attorney] JURY DEMAND Plaintiff demands trial by jury. [Attorney]

D.6 RICO and Deceptive Practices CaseLenders Failure to Include FTC Holder Notice (Howard)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) OCTOPUS BANK; OCTOPUS ) FINANCIAL SERVICES, INC.; ) and GRAND SATELLITE ) SYSTEMS, INC., ) Defendants. ) ) ROSA HOWARD, on behalf of herself and all others similarly situated Plaintiff,

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ists under 18 U.S.C. 1964 and principles of pendent jurisdiction. Venue in this District is proper, as the claim arose in this District, it involves real property located in this District, and the Chapter 13 is pending in this District. PARTIES 4. Plaintiff, Rosa Howard (Mrs. Howard), is an individual who resides at [address] Chicago, Illinois, in a modest home which she owns. She is an elderly widow of limited sophistication. 5. Defendant Octopus Bank (Octopus Bank) is an Illinois banking corporation with its principal place of business located at [address] Peoria, Illinois. 6. Defendant Octopus Financial Services, Inc. (Octopus Financial) is an Illinois corporation with its principal place of business located at [address] Peoria, Illinois. 7. On information and belief (based on discovery taken in this action), approximately 100% of the stock of Octopus Bank is or was owned by one Ronald Bracket. On information and belief, approximately 70% of the stock of Octopus Financial was owned by the same Ronald Bracket. The other 30% was equally divided between two individuals that Bracket hired to operate Octopus Financial, Dean Chaire and Carl Nayle, pursuant to the terms of the agreement whereby they were so hired. 8. On information and belief (based on discovery taken in this action), Octopus Financial has been given blanket authorization by Octopus Bank to originate loans on behalf of Octopus Bank. Octopus Financial would perform all loan origination functions, including locating the consumer, preparing the documents, and disbursing the funds, on behalf of Octopus Bank. Octopus Financial would also perform loan servicing functions for loans retained by Octopus Bank for some loans sold on the secondary market. 9. On information and belief, Octopus Financial has also been authorized to act on behalf of Octopus Bank in selling the loans originated by Octopus Financial on behalf of Octopus Bank on the secondary mortgage market. To facilitate this, Dean Chaire was made Vice President of Octopus Bank, enabling him to negotiate and sign documents on its behalf. 10. Defendant Grand Satellite Systems, Inc. (Grand Satellite) is an Illinois corporation with its principal place of business at [address] Wheeling, Illinois. It was engaged in the business of selling large satellite dish antennas, which an individual can purportedly use to receive various television programming. Grand Satellite has been the subject of a settlement, and is referred to herein only because proceeds of the settlement have not been distributed. MRS. HOWARDS TRANSACTION WITH GRAND SATELLITE 11. In late 1985, a representative of Grand Satellite, Leonard Krammer, came to Mrs. Howards home and solicited her for the purchase of a satellite dish antenna. 12. On December 4, 1985, Mrs. Howard signed a document entitled cash sales contract with Grand Satellite. This contract provided for the purchase by Mrs. Howard of an eightfoot satellite dish antenna and related equipment at a total

Appx. D.6
price of $4,000, payable on a completion of installation. It did not provide for a mortgage on Mrs. Howards home. 13. The December 4, 1985 contract provided that Customer has option to accept [sic] payments of $73.94 at 120 months. Mrs. Howard did not in fact have $4,000, and so advised Grand Satellite. At all relevant times, it was contemplated by both Mrs. Howard and Grand Satellite that Mrs. Howard would in fact pay for the antenna in more than four installments. 14. The representative of Grand Satellite told Mrs. Howard that Grand Satellite would procure financing for her on the terms stated in the option. 15. The December 4, 1985 contract also provided: In the case of cancellation of this contract for any reason whatsoever, purchaser agrees to pay seller, at sellers option, twenty-five (25%) percent of this contract as liquidating [sic] damages or the sellers salesman commission, etc. Purchaser further agrees to pay all reasonable attorneys fees and costs incurred in the enforcement of any provision of this contract or any judgment entered to enforce this contract. 16. Under 2B of the Illinois Consumer Fraud Act, Ill. Rev. Stats., ch. 121 1/2, k 262B, Mrs. Howard was entitled to three business days in which to cancel the December 4, 1985 transaction, and to be given a written notice of her right to cancel that could be returned to the seller. Ill. Rev. Stats., ch. 121 1/2, k 262B creates a right of rescission with respect to any transaction which includes a sale of merchandise involving $25 or more . . . to a consumer as a result of or in connection with a persons contact with or call on the consumer. Merchandise is defined in Ill. Rev. Stats., ch. 121 1/2, k 261 to include any objects, wares, goods, commodities, intangibles . . . or services. 17. No such notification was furnished to Mrs. Howard by Grand Satellite. 18. Under the Federal Truth in Lending Act, 15 U.S.C. 1601, et seq., Mrs. Howard was entitled to a disclosure statement from Grand Satellite summarizing the material terms of the transaction in the manner prescribed by the Act and implementing Federal Home Loan Bank Board regulations. No such disclosure statement was furnished. MRS. HOWARD IS SWITCHED TO OCTOPUS BANK 19. More than three business days after December 4, 1985, Grand Satellite advised Mrs. Howard that it had found financing for her with Octopus Bank. In fact, Grand Satellite had a written dealer agreement with Octopus Bank and/or Octopus Financial under which Octopus Bank provided financing to persons purchasing equipment from Grand Satellite. This agreement was a standard form arrangement setting forth the terms which governed the relationship between all home improvement dealers doing business with Octopus Bank and Octopus Financial, whether or not a particular dealer executed the form.

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in an action brought by the Attorney General of Illinois; and Rokke Construction, also the subject of action by the Attorney General. 26. The Grand Satellite contracts were all written on the same form as Mrs. Howards. Celebrations contracts provided for a 25% cancellation charge, purportedly enforceable through a confession of judgment clause, and usually promised specific financing terms. The contract form used by Idlers companies, Albert, Idelco, Rokke, and Gray were all substantially identical except for the name and logo of the dealer. All provided for a cancellation charge of 15 to 25%, depending on the time of cancellation, that the consumer would sign whatever financing papers were presented by the dealer, and a confession of judgment clause. The Emerald contracts were very similar to those used by Idlers companies, Albert, Idelco, Rokke, and Gray. 27. On information and belief (based on compilation of the information in the loan files, which is still ongoing), Celebration was the largest single dealer, and accounted for around 25% of the home improvement loans originated by Octopus Financial Services. Dealers engaging in the practice complained of accounted for a majority of such loans. FTC HOLDER RULE 28. A document, purporting to be issued by Octopus Bank and Octopus Financial, and furnished by Grand Satellite to Mrs. Howard in connection with the loan, stated: In accordance with my (our) credit application dated December 19, 1985 I (we) understand that the selection of the dealer and the acceptance of the materials used and the work performed is my (our) responsibility and that the financial institution does not guarantee the material or workmanship or inspect the work performed. 29. In 1976, the Federal Trade Commission promulgated a regulation, having the force and effect of law, intended to address the problem of consumer liability for loans used to purchase non-conforming goods and services. In its Holder Rule, 16 C.F.R. part 433, the FTC provided that any creditor who makes a cash advance to a consumer which the consumer applies, in whole or substantial part, to a purchase of goods or services from a seller who (1) refers consumers to the creditor or (2) is affiliated with the creditor by common control, contract, or business arrangement (16 C.F.R. 433.1(d)) is subject to all claims and defenses which the debtor could assert against the seller of goods and services obtained with the proceeds, up to the amounts paid by the consumer to the creditor. (16 C.F.R. 433.2) 30. The FTC Holder Rule defines contract to include [a]ny oral or written agreement, formal or informal, between a creditor and a seller, which contemplates or provides for cooperative or concerted activity in connection with the sale of goods or services to consumers or the financing thereof. (16 C.F.R. 433.1(f)) Business arrangement is defined to include any understanding, procedure, course of dealing, or arrangement, formal or informal, between a creditor and a seller, in connection with the sale of goods or services to con-

20. Grand Satellites representative brought the loan papers to Mrs. Howard on December 19, 1985. These papers provided for a loan from Octopus Bank on the following terms: a. An amount financed of $4643.00; b. A finance charge of $4690.60; c. An annual percentage rate of 16%; d. Monthly payments of $77.78 for 10 years, to commence January 20, 1986, irrespective of whether the installation of the antenna was completed at that time; e. Credit insurance; f. A second mortgage on Mrs. Howards home; and g. Payment of $4000 to Grand Satellite. 21. Since Mrs. Howard believed that she was obligated to pay $4,000 to Grand Satellite, she signed the loan papers. 22. Octopus Bank did provide Mrs. Howard with a form stating that she had three days in which to cancel the loan transaction. However, this was of no benefit or value to Mrs. Howard because she was already obligated to Grand Satellite. 23. Octopus Financial serviced the loan for Octopus Bank. Mrs. Howard was directed to make payments to Octopus Financial. 24. Prior to the transaction with Mrs. Howard, Octopus Bank entered into a tacit agreement with Grand Satellite and, on information and belief, other dealers, whereby: a. The dealers enter into purportedly binding contracts with consumers requiring them to pay amounts which they do not have available in cash. In many cases, the home improvement contracts provided (i) that the consumer would receive financing terms more attractive than those ultimately provided by Octopus Bank and Octopus Financial Services, (ii) that the consumer was obligated to sign whatever financing documents were presented by the dealer and that failure to do so was an act of default, and/or (iii) that the consumer would have to pay substantial charges, from 15 to 25% of the contract price, if the consumer attempted to cancel the home improvement contract. b. The dealers undertake to provide or find financing for the consumers on relatively favorable terms. c. The dealers wait until expiration of the three-day period in which the consumers may cancel their contracts with the dealers without liability. d. The dealers then steer the consumers to Octopus Bank. e. Octopus Bank attempts to deceive and/or coerce the consumers into paying, notwithstanding the fact that they did not receive the work they bargained for. 25. The principal dealers involved were Grand Satellite Systems, now defunct; Celebration Builders, Inc., ultimately enjoined from doing business in this state in an action brought by the Attorney General of Illinois; Albert Home Improvements Corporation; Gray Construction Corporation; Steven Idler, trading as City Lumber & Construction and All Aluminum Construction, and the subject of a pending Attorney General action; Idelco Construction; Alex Turner, trading as First County Builders, among others, and ultimately enjoined from doing business in this state in an action brought by the Attorney General of Illinois; Emerald Remodeling, Lumber & Supply Co., ultimately enjoined from doing business in this state

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sumers or the financing thereof. (16 C.F.R. 433.1(g)) A creditor is defined as any person who, in the ordinary course of business, lends purchase money or finances the sale of goods or services to consumers on a deferred payment basis. (16 C.F.R. 433.1) 31. The financing of dealer transactions by Octopus Bank and Octopus Financial, including those with Grand Satellite, was subject to the FTC Holder Rule. In all cases, the arrangement between Octopus Bank/Octopus Financial and the dealer was that the dealer would refer consumers to Octopus Bank/ Octopus Financial on a regular basis, and that the dealer would act as the agent of Octopus Bank/Octopus Financial for the purpose of obtaining the execution of loan documents. In all cases, there existed the type of understandings and arrangements that trigger applicability of the FTC rule. 32. Octopus Bank and Octopus Financial attempts to deceive and/or coerce unsophisticated borrowers into making payment to it notwithstanding the nonreceipt of what they paid for. The preparation and dissemination of the document described in paragraph 28, above, is part of this effort. 33. After Celebration and some of the other contractors were put out of business by the Attorney General, Octopus Bank hired an expert to examine the work done for a number of its borrowers. The expert inspected the borrowers properties, verified that the work had not been done properly by the dealers, and calculated the amount required to redo or repair the work. Even though its own expert had thus determined, in effect, that Octopus Bank had some liability under the FTC rule, Octopus Bank insisted that the borrowers repay their existing loans in full. It instead offered to make additional loans to cover the cost of repairing the work. This demand and offer were acts in furtherance of the unlawful practice complained of. MRS. HOWARD ATTEMPTS TO REFUSE TO PAY FOR DEFECTIVE GOODS 34. The satellite dish antenna purchased by Mrs. Howard proved to be defective and useless. In addition, the representatives of Grand Satellite damaged Mrs. Howards roof while installing it. 35. After making some payments, Mrs. Howard notified Octopus Bank and Octopus Financial of these problems and refused to make further payments for a defective antenna. Octopus Bank and Octopus Financial insisted that Mrs. Howard pay, threatening to foreclose on her home unless she refinanced the arrearage. GENERAL PRACTICE 36. Plaintiff is informed, on the basis of investigation of Octopus Bank/Octopus Financial transactions with other borrowers, that the events described above are part of the general practice involving Octopus Bank/Octopus Financial and certain dealers. The essence of the practice is as follows: a. The dealers enter into purportedly binding contracts with consumers requiring them to pay amounts which they do not have available in cash. In many cases, the home improvement contracts provided (i) that the consumer would receive financing terms more attractive than those ultimately provided by Octopus Bank and Octopus Finan-

Appx. D.6
cial Services, (ii) that the consumer was obligated to sign whatever financing documents were presented by the dealer and that failure to do so was an act of default, and/or (iii) that the consumer would have to pay substantial charges, from 15 to 25% of the contract price, if the consumer attempted to cancel the home improvement contract. b. The dealers undertake to provide or find financing for the consumers on relatively favorable terms. c. The dealers wait until expiration of the three-day period in which the consumers may cancel their contracts with the dealers without liability. d. The dealers then steer the consumers to Octopus Bank. e. Octopus Bank attempts to deceive and/or coerce the consumers into paying, notwithstanding the fact that they did not receive the work they bargained for. 37. The United States mails were used on multiple occasions in connection with both the practice generally and Mrs. Howards transaction in particular. Specifically: a. Mrs. Howard alleges on information and belief that the mails were used in connection with the transmission of the documents described in paragraphs 20 and 28 to Grand Satellite. b. Mrs. Howard and other borrowers were told to remit their payments to Octopus Bank, care of Octopus Financial, by mail. Few if any borrowers paid in person. c. Demands for payment were transmitted by mail to all borrowers. COUNT I RICO VIOLATIONUNLAWFUL INDUCEMENT 38. Mrs. Howard incorporates paragraphs 137 by reference. 39. Each of the following is an enterprise within the meaning of 18 U.S.C. 1961(4): (a) Octopus Bank; (b) Octopus Financial; (c) Octopus Bank and Octopus Financial, as a corporate group; (d) Grand Satellite; (e) each of the other home improvement dealers whose transactions were financed by Octopus. These enterprises affect interstate commerce. Among the ways in which interstate commerce is affected are: a. some of the loans originated by Octopus Financial in the name of Octopus Bank were resold to purchasers located in other states; b. the funds used to make the loans were obtained by Octopus Bank in other states; and c. the materials used in making home improvements generally come from other states (very few raw materials used in building are indigenous to Illinois). 40. Octopus Bank, Octopus Financial and dealers financed by Octopus Bank and Octopus Financial devised and implemented the scheme described in paragraph 24. This scheme constitutes a scheme or artifice to defraud, within the meaning of 18 U.S.C. 1341. 41. As described above, the mails were used for the purpose of executing this scheme and artifice. 42. Octopus Bank and Octopus Financial each participated as a principal in this scheme and then used the proceeds of the scheme in the operation of their respective businesses, in violation of 18 U.S.C. 1962(a). The transactions induced in

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Consumer Class Actions: A Practical Litigation Guide

RELIEF 51. Mrs. Howard requests that the Court grant the following relief against Octopus Bank and Octopus Financial: a. Treble damages; b. Attorneys fees, litigation expenses and costs; c. Such other or further relief as the Court deems appropriate. COUNT II CONSUMER FRAUD ACT VIOLATIONUNLAWFUL INDUCEMENT 52. Mrs. Howard incorporates paragraphs 137 by reference. 53. At all relevant times, 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stats., ch. 121 1/2, k 262, provided: [U]nfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact . . . in the conduct of any trade or commerce are hereby declared unlawful. . . . 54. Octopus Bank and Octopus Financial violated 2 by devising and implementing the scheme described in paragraph 24, above. This unfair and deceptive practice was committed in connection with the conduct of trade and commerce in (a) the goods and services financed by Octopus Bank and Octopus Financial and (b) the provision of financing. 55. Mrs. Howard and each member of the class described below suffered pecuniary injury as a result of these violations. 56. Pursuant to 10a of the Consumer Fraud Act, Ill. Rev. Stats., ch. 121 1/2, 270a, Mrs. Howard and each class member is entitled to actual and punitive damages, attorneys fees and costs, and other appropriate relief. CLASS ALLEGATIONS 57. This claim is brought on behalf of a class. The class consists of all persons who satisfy the following criteria: a. they signed a contract with a provider of goods and services; b. the provider of goods and services referred them to Octopus Bank; c. they signed a loan agreement with Octopus Bank, the proceeds of which were used to pay for the goods or services; and d. they did not receive notice of their right to cancel the contract with the dealer at the time they signed the loan agreement with Octopus Bank. 58. Plaintiff alleges on information and belief that the class is so numerous that joinder of all members is impractical. 59. There are questions of law and fact common to the class. The principal issues raised are: a. Whether Octopus Bank and Octopus Financial engaged in the scheme alleged in this Count; and

this manner comprised at least 50% of the home repair financing transactions that Octopus Financial procured for Octopus Bank. Octopus Financial had little business other than home improvement financing, and the loans procured for Octopus Bank by Octopus Financial were a large portion of Octopus Banks business. 43. Octopus Bank and Octopus Financial also conducted and participated in the conduct of the affairs of an enterprise consisting of Octopus Bank and Octopus Financial through the scheme described above, in violation of 18 U.S.C. 1962(c). 44. Mrs. Howard and each member of the class and subclass described below suffered pecuniary injury as a result of these violations. CLASS ALLEGATIONS 45. This claim is brought on behalf of a class. The class consists of all persons who satisfy the following criteria: a. they signed a contract with a provider of goods and services; b. the provider of goods and services referred them to Octopus Bank; c. they signed a loan agreement with Octopus Bank, the proceeds of which were used to pay for the goods or services; and d. they did not receive notice of their right to cancel the contract with the dealer at the time they signed the loan agreement with Octopus Bank. 46. Plaintiff alleges on information and belief that the class is so numerous that joinder of all members is impractical. 47. There are questions of law and fact common to the class. The principal issues raised are: a. Whether Octopus Bank and Octopus Financial engaged in the scheme alleged in this Count; and b. Whether such a scheme constitutes a violation of the federal mail fraud statute, 18 U.S.C. 1341. 48. Plaintiffs claim is typical of the claims of the class members. All are based on the same legal and remedial theory. 49. Plaintiff will fairly and adequately protect the interests of the class. She feels that she has been gouged, wishes to obtain redress of the wrong, and wants defendants stopped from perpetrating similar wrongs on others. To that end, she has retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither plaintiff nor her counsel have any interests which might cause them not to vigorously pursue this action. 50. Certification of the class under Rule 23(b)(3) is appropriate. The questions of law and fact common to the members of the class predominate over any questions affecting only individual members. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, in that: a. The poor and unsophisticated individuals targeted by defendants are not readily capable of individually controlling the prosecution or defense of separate actions; b. Concentration of the litigation concerning this matter in this Court is desirable; and c. The class is of moderate size and the difficulties likely to be encountered in the management of a class action are not great.

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b. Whether such a scheme constitutes a violation of 2 of the Consumer Fraud Act. 60. Plaintiffs claim is typical of the claims of the class members. All are based on the same legal and remedial theory. 61. Plaintiff will fairly and adequately protect the interests of the class. She feels that she has been gouged, wishes to obtain redress of the wrong, and wants defendants stopped from perpetrating similar wrongs on others. To that end, she has retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither plaintiff nor her counsel have any interests which might cause them not to vigorously pursue this action. 62. Certification of the class under Rule 23(b)(3) is appropriate. The questions of law and fact common to the members of the class predominate over any questions affecting only individual members. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, in that: a. The poor and unsophisticated individuals targeted by defendants are not readily capable of individually controlling the prosecution or defense of separate actions; b. Concentration of the litigation concerning this matter in this Court is desirable; and c. The class is of moderate size and the difficulties likely to be encountered in the management of a class action are not great. RELIEF 63. Mrs. Howard requests that the Court grant the following relief against Octopus Bank and Octopus Financial: a. Appropriate compensatory and punitive damages; b. Attorneys fees, litigation expenses and costs; and c. Such other or further relief as the Court deems appropriate. COUNT III CONSUMER FRAUD ACT VIOLATION EVASION OF FTC HOLDER RULE 64. Mrs. Howard incorporates paragraphs 137 by reference. 65. At all relevant times, 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stats., ch. 121 1/2, 262, provided: [U]nfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that other rely upon the concealment, suppression or omission of such material fact . . . in the conduct of any trade or commerce are hereby declared unlawful. . . . 66. Octopus Bank and Octopus Financial violated 2 by agreeing to and carrying out a scheme calculated to evade the Federal Trade Commission Holder Rule, thereby inducing multiple consumers to pay Octopus Bank and Octopus Financial even though they did not receive the agreed upon consideration from the dealers financed by Octopus Bank and Octopus Financial. This unfair and deceptive practice was commit-

Appx. D.6
ted in connection with the conduct of trade and commerce in (a) the goods and services financed by Octopus Bank and Octopus Financial and (b) the provision of financing. 67. Mrs. Howard and each member of the class described below suffered pecuniary injury as a result of these violations. 68. Pursuant to 10a of the Consumer Fraud Act, Ill. Rev. Stats., ch. 121 1/2, k 270a, Mrs. Howard and each class member is entitled to actual and punitive damages, attorneys fees and costs, and other appropriate relief. Other appropriate relief includes a declaratory judgment invalidating the language quoted in paragraph 28, and an injunction preventing Octopus Bank and Octopus Financial from attempting to enforce that provision. CLASS ALLEGATIONS 69. This claim is brought on behalf of a class. The class consists of all persons who satisfy the following criteria: (a) they were referred to Octopus Bank by a provider of goods or services; (b) they obtained a loan from Octopus Bank, the proceeds of which were used to pay for the goods or services; and (c) they received the document described in paragraph 28, above. 70. Plaintiff alleges on information and belief that the class is so numerous that joinder of all members is impractical. 71. There are questions of law and fact common to the class. The principal issues raised are: a. Whether Octopus Bank and Octopus Financial devised a scheme calculated to evade the Federal Trade Commission Holder Rule; and b. Whether the use of the document described in paragraph 28 is an unfair and deceptive practice. 72. Plaintiffs claim is typical of the claims of the class members. All are based on the same legal and remedial theory. 73. Plaintiff will fairly and adequately protect the interests of the class. She feels that she has been gouged, wishes to obtain redress of the wrong, and wants defendants stopped from perpetrating similar wrongs on others. To that end, she has retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither plaintiff nor her counsel have any interests which might cause them not to vigorously pursue this action. 74. Certification of the class under Rule 23(b)(2) is appropriate insofar as plaintiff seek injunctive and declaratory relief invalidating the language quoted in paragraph 28. Octopus Bank and Octopus Financial acted in the same manner toward the entire class, by causing each class member to sign a form document, the provisions of which are challenged. 75. Certification of the class under Rule 23(b)(3) is appropriate insofar as damages are sought. The questions of law and fact common to the members of the class predominate over any questions affecting only individual members. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, in that: a. The poor and unsophisticated individuals targeted by defendants are not really capable of individually controlling the prosecution or defense of separate actions; b. Concentration of the litigation concerning this matter in this Court is desirable; and

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Consumer Class Actions: A Practical Litigation Guide

PARTIES 2. The named plaintiff, Carmen Ortiz, is a resident of Cook County, Illinois. 3. The plaintiff brings this action on her own behalf and on behalf of all other persons similarly situated pursuant to 2-801 of the Illinois Code of Civil Procedure, Ill. Rev. Stat., ch. 110, 2-801. The class is composed of all persons who: a. financed purchases of motor vehicles for their own personal and/or household use through General Motors Acceptance Corporation (hereafter GMAC); b. purchased the vehicle from an automobile dealer located within the state of Illinois; c. had single interest physical damage insurance purchased for them by GMAC through Motors Insurance Corporation (hereafter MIC) after December 2, 1980. There is a subclass of plaintiffs who also: d. had the motor vehicle damaged while the MIC policy was in force and either received no payment or credit from the MIC insurance policy or were required to surrender the automobile to GMAC in order to receive the payment or credit. 4. The class and subclass are so numerous that joinder of all members is impracticable. There are questions of fact or law common to the class and subclass which common questions predominate over any questions that affect only individual members. The representative party will fairly and adequately protect the interest of the class and subclass. The class action is an appropriate method for the fair and efficient adjudication of the controversy. 5. Defendant GMAC is a New York corporation and maintains an office or transacts business within Cook County, Illinois and is licensed as a sales finance agency. 6. Defendant MIC is a New York corporation and maintains an office or transacts business within Cook County, Illinois. 7. MIC is a wholly owned subsidiary of GMAC. STATEMENT OF FACTS 8. On or about September 18, 1981, the plaintiff entered into a motor vehicle retail installment sales contract with an automobile dealer Fenci-Tufo, for the purchase of a 1981 Chevrolet. The contract, signed by both the plaintiff and FenciTufo, is made a part of the complaint and is attached as Exhibit A [not attached herein]. 9. GMAC prepared the printed form Retail Installment Contract used in the above transactions. 10. GMAC is the purchaser, assignee or transferee of the consumer credit sales transaction and also extended credit to plaintiff herein by financing the contract. 11. The retail installment contract for the transaction contained the following provisions on the front of the contract: Required Physical Damage Insurance Insurance Company Term: Months: $ Deductible collisionand also select one of the following: Full Comprehensive includingFire-Theft and Combined Additional Coverage. $ Deductible Comprehensive including Fire-Theft and

c. The class is of moderate size and the difficulties likely to be encountered in the management of a class action are not great. 76. Mrs. Howard requests that the Court grant the following relief against Octopus Bank and Octopus Financial: a. Appropriate compensatory and punitive damages; b. Attorneys fees, litigation expenses and costs; c. A declaratory judgment in favor of Mrs. Howard and all class members, providing that the contractual language quoted in paragraph 28 is null and void; d. An injunction restraining Octopus Bank and Octopus Financial from attempting to enforce that provision against Mrs. Howard or class members; and e. Such other or further relief as the Court deems appropriate. [Attorney] JURY DEMAND Plaintiff demands trial by jury. [Attorney]

D.7 Deceptive Practices Case Vendors Single Interest Insurance (Ortiz)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) ) ) ) ) v. ) ) GENERAL MOTORS ) ACCEPTANCE ) CORPORATION, INC. and ) MOTORS INSURANCE ) CORPORATION, INC. ) Defendants. ) ) CARMEN ORTIZ, individually and on behalf of all others similarly situated, Plaintiffs, CLASS ACTION COMPLAINT COUNT 1 PRELIMINARY STATEMENT 1. Count I is brought as a class action pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat., ch. 121 1/2, 261 et seq. to recover damages from defendants in the sale and purchase for plaintiffs of single interest physical damage insurance policies and their failure to pay benefits due under the policies.

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Combined Additional Coverage. Fire-Theft and Combined Additional Coverage. 12. Paragraph 3(a) on the reverse side of the retail installment contract under the heading Additional Terms which makes reference to the required physical damage insurance, states: . . . Buyer shall furnish satisfactory evidence that the property continues to be effectively and adequately covered by such insurance at all times during the term of this contract. Upon failure of the buyer to do so for any reason, seller may . . . (b) Proceeds of the aforesaid required physical damage insurance, by whomsoever procured, shall be applied toward replacement of the property or payment of this obligation at the option of the seller . . . (d) In the event that . . . such insurance is procured by the . . . buyer but subsequent to the issuance thereof and during the term of this contract such insurance is cancelled, the buyer agrees that the seller may procure insurance covering solely the interest of the seller hereunder. 13. At the time the plaintiff purchased the car, she had it insured against theft, collision and other loss by Allstate Insurance Company. 14. Allstate Insurance Company subsequently notified the plaintiff and GMAC that it was cancelling its coverage of plaintiffs car. 15. On or above November 11, 1981, GMAC purchased an insurance policy from MIC insuring the plaintiffs automobile. GMAC sent the plaintiff two letters, both dated November 11, 1981, notifying her they had done so. The letters are made a part of this complaint and attached as Exhibits B and C [not attached herein]. 16. GMAC was required to send plaintiffs a copy of the policy pursuant to the Motor Vehicle Retail Installment Sales Act, Ill. Rev. Stat., ch. 121 1/2 569 (hereinafter MVRISA) which provides in part: The holder of a contract which includes an amount for insurance purchased by the seller or holder must, within 30 days after the date of the contract cause to be sent to the buyer the policies or certificates of insurance clearly setting forth the amount of the premium, the types of insurance, the coverages and all the terms exceptions, limitations, restrictions and conditions of the insurance. 17. GMAC was required to send plaintiffs a copy of the policy and explain clearly the type, cost, benefits, and limitations of the policy pursuant to Rules and Regulations of the Department of Financial Institutions governing sales finance agencies 17(c)(4) and (5) which provides: It shall be the licensees responsibility to explain clearly to the obligor the type, cost, benefits and limitations of any insurance requested by licensee after acquisition of the account. The licensee shall also deliver or cause to be

Appx. D.7
delivered to the obligor a copy of the policy or policies, certificate, or other evidence thereof acquired by the license in connection with the indebtedness. 18. Plaintiff did not receive a copy of the insurance policy for which she was charged. The only written explanations regarding the policy and its coverage and the period of time it would be in effect were disclosed in the contract (Exhibit A) and the letters of November 11, 1983 (Exhibits B and C). 19. Plaintiffs subsequently learned that said policy was not the required physical damage insurance described on the front of the contract, but was single interest coverage with a maximum benefit equal to the amount still owed on the contract minus a pro rata share of the finance charge. 20. Single interest coverage insurance may not be required under a retail installment contract pursuant to MVRISA 568, which provides, in part: A seller under a retail installment contract may require insurance against substantial risk of loss of or damage to the motor vehicle protecting the seller or holder as well as the buyer. 21. In purchasing said insurance and charging the cost thereof to the plaintiffs account, GMAC acted as the agent of the plaintiff. 22. GMAC purchased the insurance from MIC, a wholly owned subsidiary of GMAC. 23. The cost of the single interest coverage was $914.00. 24. Upon information and belief the premium charges for the insurance was excessive for the actual coverage. 25. Upon information and belief, GMAC received a substantial rebate on the purchase of the insurance from MIC. 26. Upon information and belief, GMAC profited on the purchase of the insurance as the insurance was obtained from its subsidiary. 27. On January 28, 1982, plaintiffs car was involved in an accident and $1,900 damage was done to her car. 28. Shortly after January 28, 1982, the plaintiff spoke with Mr. Sylvester, an employee of GMAC. She told him the car had been in an accident and she wanted to have the MIC policy pay to repair it. Mr. Sylvester told her that if she desired, GMAC could consider that her car had been totally destroyed and she could then (a) return her contract, and (b) she would then have to pay the balance of the amount owed on the contract. He also told her that unless she gave up the car, she would receive nothing from the insurance policy to have her car repaired or to apply to her debt. 29. On June 23, 1982, the plaintiff informed GMAC she would obtain her own insurance, and wanted the insurance they had purchased from MIC cancelled. She then obtained other insurance. 30. Both GMAC and MIC were requested to provide the plaintiff with a copy of the insurance policy with MIC for which she had paid. Both defendants refused to honor her request. The letter from MIC refusing to provide the policy is made a part of the complaint and is attached as Exhibit D. 31. Contrary to the representations of GMACs employee the MIC policy does cover physical damage to the vehicle

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coverage of the insurance purchased, plaintiff and the class have been damaged in the sum of the cost of the policy and the interest charged. 41. As the result of the unfair and deceptive acts and practices of the defendants, in concealing the rebate paid to GMAC, the plaintiff and class are entitled to damages in the amount of the rebate and interest attributable to the portion of the premium that was rebated. 42. As the result of the unfair and deceptive acts and practices of the defendants, in purchasing insurance at an excessive rate, plaintiff and the class have been damaged in the amount of the excessive rate charged for the insurance and the interest charged that is attributable to the excess charge. 43. As the result of the unfair and deceptive acts and practices of the defendants in concealing the fact that the insurance was purchased through a wholly owned subsidiary, plaintiff and the class are entitled to recover the sum that GMAC and MIC profited on the sale of the insurance. 44. As the result of the unfair and deceptive acts and practices of the defendants in falsely representing to plaintiff and the subclass that physical damage to their vehicles was not covered by the insurance unless the vehicles were totally destroyed or turned over to GMAC, plaintiff and the subclass were damaged: (a) in the amount of the repairs to their vehicles if they kept the cars or (b) the value of their vehicles at the time they turned them over to GMAC if they gave the cars to GMAC to get the insurance. 45. As the result of defendants willful and wanton conduct plaintiff and the class are entitled to a punitive damage award against defendants. WHEREFORE, plaintiffs pray that the court: a. Enter judgment against the defendant and for plaintiff and the class and subclass in an amount equal to the damages set forth in paragraphs 39 through 45. b. Award plaintiff and the class $2,000,000.00 in punitive damages to be shared equally. c. Award plaintiffs costs and attorneys fees. d. Grant such additional relief as the Court finds proper. COUNT II PRELIMINARY STATEMENT 1. Count II is brought as a class action to recover damages from defendants arising out of the breach of the physical damage insurance agreements covering the vehicles of plaintiff and the class members. 2. Plaintiff Carmen Ortiz is a resident of Cook County, Illinois. 3. The plaintiff brings this action on her own behalf and on behalf of all other persons similarly situated pursuant to 2-801 of the Illinois Code of Civil Procedure, Ill. Rev. Stat. ch. 110, 2-801. The class is composed of all persons who: a. financed purchases of motor vehicles for their own personal and/or household use through General Motors Acceptance Corporation (hereafter GMAC); b. purchased the vehicle from an automobile dealer located within the state of Illinois; c. has single interest physical damage insurance purchased for them by GMAC through Motors Insurance Corporation (hereafter MIC) after October 11, 1980; and

while it is in the possession of the purchaser. A copy of the MIC single interest policy is made a part of this complaint and attached as Exhibit E. 32. MIC knew or should have known that GMAC was failing to provide plaintiffs with a copy of the policy and the other information required by law and also concealed and suppressed that material fact from the plaintiff. 33. MIC knew or should have known that excessive premiums were being charged for the insurance. 34. MIC knew or should have known that GMAC was requiring surrender of the automobile before processing claims although such surrender was not required by the policy. 35. On information and belief, defendants concealed information regarding the MIC policy from class members and/or misrepresented to class members that the policy did not cover damage to their vehicles unless plaintiffs surrendered possession of their cars, in which case the amount necessary to repair damages would be credited to their accounts. 36. On information and belief defendants concealed GMACs ownership and financial relationship with MIC and that GMAC received a rebate on the policies bought from MIC. CAUSE OF ACTION 37. The defendants have engaged in a pattern and practice of violating the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat., ch. 121 1/2, 262 as to the plaintiff and all class members as follows: a. by deceptively concealing and misrepresenting the actual coverage of the physical damage insurance that would be purchased if the purchaser failed to keep their own insurance in force; b. by deceptively concealing the name of the insurance company as well as the actual coverage of the physical damage insurance, and by failing to send a copy of the insurance policy thereby concealing the terms exceptions, limitations, restrictions and conditions of the policy; c. by concealing the fact that a rebate on the policy was received by GMAC; d. by charging an excessive rate for the insurance purchased; and e. by concealing the fact that the insurance was purchased through a wholly owned subsidiary of GMAC and thereby profited GMAC. 38. The defendants have engaged in a pattern and practice of violating the Illinois Consumers Fraud and Deceptive Business Practices Act, Ill. Rev. Stat., ch. 121 1/2, 262 as to plaintiff and the subclass as follows: a. by falsely representing to plaintiffs that physical damage to their vehicles was not covered by the insurance policy unless the car was totally destroyed or turned over to GMAC to be considered repossessed; b. by failing to pay for repairs to the vehicles of class members although such damage was within the coverage of the insurance policy. 39. Defendants unfair and deceptive acts and practices as set forth in paragraphs 37 and 38 above were done willfully, wantonly and maliciously. 40. As the result of the unfair and deceptive acts and practices of the defendants, in concealing and misrepresenting the

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d. had that motor vehicle damaged while the MIC policy was in force and received no payment on the MIC insurance policy. 4. The class is so numerous that joinder of all members is impracticable. There are questions of fact or law common to the class which common questions predominate over any questions that affect only individual members. The representative party will fairly and adequately protect the interest of the class. The class action is an appropriate method for the fair and efficient adjudication of the controversy. 536. Plaintiff realleges paragraphs 536 of Count I as paragraphs 536 of Count II. CAUSE OF ACTION 37. The insurance policy provided at page 2; the company will pay for loss to automobile occurring while it is in the possession of retail purchasers and under coverage. 38. Plaintiff and the class members are retail purchasers as described in the policy. 39. Plaintiff and the class members are entitled to recover for loss to their automobiles while in their possession under the terms of the policy. 40. Defendants acted in concert in refusing to pay valid claims of plaintiff and the class members. 41. Defendants refusal to pay such claims was vexatious and unreasonable within the meaning of the Illinois Insurance Code provision allowing attorneys fees and other damages. Ill. Rev. Stat., ch. 73, 767. WHEREFORE plaintiffs pray that court: a. Enter judgment against the defendants and for plaintiff in the sum of $1,900.00 for repair of her automobile. b. Enter judgment against defendants and for all class members in the sums which should have been paid under the MIC policy. c. Award plaintiff $5,000.00 based on defendants vexatious and unreasonable refusal to pay policy benefits. d. Award each class member the greater of 25% of the amount they were entitled to recover under the policy of $5,000.00 whichever is greater. e. Award plaintiffs their costs and attorneys fees. f. Grant such additional relief as the Court finds proper. COUNT III PRELIMINARY STATEMENT 1. Count III is brought as a class action against GMAC based on GMACs breach of its fiduciary duty as agent in the purchase of physical damage insurance. PARTIES 236. Plaintiffs reallege paragraphs 236 of Count I as paragraphs 236 of Count III. CAUSE OF ACTION 37. In making the purchase of the physical damage insurance for plaintiffs, GMAC was acting as an agent of plaintiffs and owed plaintiffs a duty to act as a fiduciary in the purchase of the insurance and all matters relating to its coverage.

Appx. D.7
38. GMAC breached its fiduciary duty to plaintiffs by: a. receiving a rebate from MIC in the purchase of the insurance; b. purchasing insurance at an excessively high premium; c. making a profit on the sale of the insurance through its subsidiary, MIC; d. concealing the actual coverage of the policy; e. failing to obtain the insurance from an independent insurance company rather than a subsidiary; and f. effectively not obtaining a policy but instead serving as a self-insurer. 39. As the result of GMACs breach of fiduciary duty plaintiff and the class are entitled to recover the entire premium, and interest thereon paid to GMAC. 40. As the result of GMACs breach of its fiduciary duty, plaintiff and the subclass have been damaged in the sum of the cost of repairs to their vehicles or the loss of those vehicles (if turned over to GMAC to get insurance coverage). WHEREFORE, plaintiffs pray that the court: a. Enter judgment against GMAC and in favor of plaintiff and subclass members in the amount of the premium, and interest thereon, paid to GMAC. b. Enter judgment against GMAC on behalf of plaintiff and the subclass in the sum of the cost of repairs to their vehicles or the value of the vehicles. c. Grant plaintiff and the class such additional relief as the Court finds proper. COUNT IV PRELIMINARY STATEMENT 1. Count IV is brought as a class action against GMAC pursuant to the Illinois Sales Finance Agency Act, Ill. Rev. Stat., ch. 17, 5201 et seq., (hereinafter SFA) to recover damages and other relief from GMAC for its violations of the SFA. 2. The named plaintiff, Carmen Ortiz, is a resident of Cook County, Illinois. 3. The plaintiff brings this action on her own behalf and on behalf of all other persons similarly situated pursuant to 2-801 of the Illinois Code of Civil Procedure, Ill. Rev. Stat., ch. 110, 2-801. The class is composed of all persons who: a. financed purchases of motor vehicles for their own personal and/or household use through General Motors Acceptance Corporation (hereafter GMAC); b. purchased the vehicle from an automobile dealer located within the state of Illinois; c. has single interest physical damage insurance purchased for them by GMAC through Motors Insurance Corporation (hereafter MIC) after October 11, 1980. 436. Plaintiff realleges paragraphs 436 of Count I as paragraphs 436 of Count IV. CAUSE OF ACTION 37. GMAC has violated SFA 4210 by willfully violating the SFA and the rules and regulations promulgated by the Director of Financial Institutions by fraudulently misrepresenting, circumventing and concealing by subterfuge and device

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the terms, conditions, benefits and limitations of the single interest policy and failing to provide plaintiff and class members with copies of said policy. 38. GMAC has violated SFA 5215 by the use of printed forms which are misleading or deceptive with regard to the type of insurance that will be purchased upon cancellation of the buyers prior insurance. 39. GMAC has violated SFA 5217 by fraudulently misrepresenting, circumventing, concealing by subterfuge and device the type, cost, benefits and limitations of the single interest insurance purchased by GMAC for the buyer. 40. GMAC has violated MVRISA 568-569 by purchasing single interest insurance and failing to send to the buyer the policies or certificates of insurance setting forth the amount of the premium, the types of insurance, the coverages and all the terms, exceptions, limitations, restrictions and conditions of the insurance. 41. Pursuant to MVRISA 584, as a result of GMAC violations of MVRISA, it is not entitled to recover any finance charge, any delinquency or collection charge or any refinance charge in connection with the retail installment contract. 42. GMAC has charged and collected from plaintiff and class members finance charges, delinquency and collection charges and refinance charges. 43. As a result of GMACs collection of the finance charges and the other violations set forth above, plaintiff and class members have sustained loss as a result of GMACs actions and violations of SFA. 44. Pursuant to SFA 5234, plaintiff and each class member may recover any finance charge, collection charge or refinance charge paid to GMAC and an additional amount equal to 25% of the principal amount of the retail contract. WHEREFORE, plaintiff prays that this court: a. Enter judgment against the defendant GMAC and in favor of the plaintiffs and each member of the class in an amount equal to the amount of all finance charges, collection or late charges and refinance charges paid by the plaintiff and each individual class member, plus 25% of the principal amount of the retail contract of the plaintiff and each class member. b. Award plaintiffs cost and attorneys fees. c. Grant plaintiffs such additional relief as the Court deems proper. [Attorney]

D.8 State Usury Case (Adams)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION ) ) ) ) ) ) v. ) ) RECKLESS SAVINGS & ) LOAN ASSOCIATION and ) PREDATORY FINANCE ) COMPANY, ) Defendants. ) ) PATRICIA ADAMS, on behalf of herself and all others similarly situated, Plaintiff, COMPLAINT Plaintiff, Patricia Adams (Mrs. Adams), suing on behalf of herself and all others similarly situated, complains as follows against defendants Reckless Savings & Loan Association (Reckless) and Predatory Finance Company (Predatory Finance): PARTIES 1. At all relevant times, Mrs. Adams resided in a singlefamily home which she owns at [address] Chicago, Illinois. 2. Reckless is a corporation engaged in the business of extending consumer credit. Its principal place of business is located at [address] Chicago, Illinois. 3. Predatory Finance is a corporation engaged in the business of extending consumer credit. Its principal place of business is located at [address] Illinois. FACTS RELATING TO MRS. ADAMS 4. In 1988, Mrs. Adams contracted with Fix-It Remodeling for home improvement goods and services. Fix-It arranged for financing with Predatory Finance. 5. On or about May 16, 1988, Mrs. Adams signed a contract with Predatory Finance for a loan of $2,418.75 at an annual percentage rate of not less than 26.29%. Exhibit A [not attached herein] is a true and accurate copy of the contract. 6. At the same time, Mrs. Adams signed a mortgage on her home in favor of Predatory Finance to secure payment of the contract. Exhibit B [not attached herein] is a true and accurate copy of the mortgage. 7. Shortly after Mrs. Adams signed the contract and mortgage, Predatory Finance assigned them to Reckless. Exhibit C [not attached herein] is a true and accurate copy of the assignment. PRACTICES ALLEGED 8. Both Predatory Finance and Reckless extend credit to consumers using standard form contracts. Many or all of these

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standard form contracts contain a promise by the consumer to pay an amount consisting of all principal and interest. The contracts further provide that upon prepayment or acceleration (involuntary prepayment) of the indebtedness, the borrower will receive a rebate of the interest under the Rule of 78s. 9. For example, the contract signed by Mrs. Adams (Exhibit A) [not attached herein] provides: REBATE FOR PREPAYMENT: Undersigned may prepay the loan in full at any time before maturity and shall receive a rebate of unearned interest calculated in accordance with the Rule of 78s, except if the amount of the rebate is less than $1 no rebate will be made. 10. Mrs. Adams alleges, on information and belief, that the consumer credit contracts entered into by both Predatory Finance and Reckless are generally secured by mortgages on residential property in Illinois. 11. Use of the Rule of 78s in computing the amount due upon prepayment or acceleration of a mortgage will result in the borrower owing substantially more than use of the actuarial method of computing interest, under which the amount of interest due is proportionate to the amount of time the loan was outstanding. 12. On information and belief, Reckless utilized the Rule of 78s in computing the amount claimed from Mrs. Adams upon acceleration of her indebtedness. 13. The use of the Rule of 78s with respect to residential mortgages in Illinois is illegal. At all times since January 1, 1986, Ill. Rev. Stat., ch. 17, k 6404(b)(3) provided, in pertinent part: In any contract or loan which is secured by a mortgage, deed of trust, or conveyance in the nature of a mortgage, on residential real estate, the interest which is computed, calculated, charged, or collected pursuant to such contract or loan, or pursuant to any regulation or rule promulgated pursuant to this Act, may not be computed, calculated, charged, or collected for any period of time occurring after the date on which the total indebtedness, with the exception of late payment penalties, is paid in full. . . . 14. Liability for violation of k 6404(b)(3) is prescribed by Ill. Rev. Stat., ch. 17, k 6413. 15. The provision in the standard form Predatory Finance and Reckless consumer credit contracts, including that signed by Mrs. Adams, requiring the borrower to promise to repay all principal and interest, and providing for a rebate of interest under the Rule of 78s, is unlawful under k 6404(b)(3), subjecting both Predatory Finance and Reckless to the liability prescribed by k 6413. KNOWLEDGE 16. The actions of Reckless and Predatory Finance in imposing and collecting interest on residential mortgages using the Rule of 78s were knowing within the meaning of k 6413. CLASS ALLEGATIONS

Appx. D.8

17. Pursuant to 2-801 et seq. of the Illinois Code of Civil Procedure, Mrs. Adams brings this claim on behalf of a class consisting of all other persons injured by the conduct complained of. The class consists of all persons (a) who entered into credit contracts (b) which were secured by mortgages on residential real estate in Illinois and (c) which provided for the calculation of interest or finance charges upon prepayment using the Rule of 78s, and (d) which were held at any time by Reckless or Predatory Finance. 18. Mrs. Adams alleges on information and belief that the class is so numerous that joinder of all members is impractical. This belief is based on (a) the fact that Predatory Finance and Reckless used/purchased standard form contracts providing for calculation of interest using the Rule of 78s, (b) an examination of court files showing that Reckless brought suit to enforce numerous such contracts, and (c) an examination of Recklesss filings with the Savings & Loan Commissioner of Illinois. For example, during 1986 alone, Predatory Finance made more than 300 home improvement loans in Illinois. 19. There are questions of law and fact common to the class, which predominate over any questions affecting only individual members. The principal issue raised by this action is whether the provisions in the standard form contracts used by Reckless and Predatory Finance are unlawful under k 6404(a)(3). 20. The only individual questions concern (a) whether the transaction is secured by residential property and (b) the amount of liability under k 6413. This can be determined by a ministerial examination of loan files. 21. Mrs. Adams will fairly and adequately protect the interests of the class. She has retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither Mrs. Adams nor her counsel have any interests which might cause them not to vigorously pursue this action. 22. A class action is an appropriate method for the fair and efficient adjudication of this controversy. WHEREFORE, Mrs. Adams requests that the Court enter judgment in her favor and in favor of the class members: a. For the amounts provided by k 6413; b. To the extent that the amounts provided by k 6413 exceed the remaining amounts due, canceling the class members mortgages; c. For attorneys fees, litigation expenses and costs; and d. For such other or further relief as the Court deems appropriate. [Attorney]

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SEVENTH CLAIM FOR RELIEF COMMON LAW FRAUD AND CONSPIRACY JURY DEMAND INTRODUCTORY STATEMENT 1. This case is brought against a finance company arising out of a revolving repossession or churning scheme whereby used cars were sold to the public by Charlie Falks Auto Wholesale, Inc. (CFAW) and financed by defendant, TranSouth Financial Corp. (TranSouth). Charlie Falks Auto Wholesale, Inc. sold the cars at extravagantly high prices, and frequently set the interest rates as high as 36%. For the period in question, over ninety-five percent (95%) of CFAWs sales were financed and one hundred percent (100%) of those were financed by TranSouth. Moreover, TranSouth often force placed collision insurance on more than the value of the car, and at unconscionably high rates, which placement was accompanied by kickbacks of the insurance premiums. Under the terms of a repurchase agreement, CFAW was obligated to buy back the loan and the car from TranSouth upon default by a customer. CFAW then assigned the loans to its own subsidiary collection agency, JB Collection Corporation (JB), for collection. 2. After default by a customer, TranSouth initiated repossession of the car and sent a false and misleading notice of private sale to the customer. In fact, the announced sale was a complete sham, and was not a commercially reasonable private sale under the law of Virginia. Instead, the car and note were merely transferred to CFAW under the terms of the repurchase agreement. In a bogus transaction, an artificially low price was then set for the car by inventing the private sale. Charles Falk, Jr., John Doe, or another Falk executive would meet or telephone Linwood Harrison, L. Smith, or another TranSouth executive and bid a low price for the car (typically $750 to $1,500), which bid would be accepted by the TranSouth executive. No check or reimbursement was ever sent from TranSouth to CFAW as a consequence of the dollar figures supposedly agreed upon during these sales, because CFAW had already paid TranSouth for the cars pursuant to the repurchase agreement. Accordingly, the dollar figures agreed upon had no economic purpose, and were entirely bogus. TranSouth and CFAW ceased holding these meetings and bogus sales immediately after this lawsuit was filed, demonstrating their understanding that the meetings were illegal and improper. No other purchaser ever attended these sales. 3. JB Collection then used that fraudulently established price as the basis for an additional fraudulent notice to the defaulting customer that a legal sale had taken place and also as the basis for a demand that the customer pay the difference between what the customer owed at the time of the default and the fraudulent price set at the non-transaction between CFAW and TranSouth. Further, when, as always happened, the customer was unable to pay the fraudulently established debt, JB used the fraudulent debt as the basis for a deficiency action against the customer. 4. Most of the cars were then resold by CFAW to new customers at prices which far exceeded the amount used as the bases for the deficiencies. Since the resale price of these cars exceeded the customers loan amount, TranSouth was obligated by law to pay a surplus to the customer; however,

D.9 RICO, Deceptive Practices and Fraud CaseRevolving Repossessions (Carr)

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA ) ) ) ) ) ) ) ) CASE NO. Plaintiffs, ) ) v. ) ) TRANSOUTH FINANCIAL ) CORPORATION ) Defendant. ) ) NELL CARR and TERRY WOOD and LOIS LEWIS and SALLY SHORE FIFTH AMENDED CLASS ACTION COMPLAINT AND JURY DEMAND Plaintiffs Nell Carr, Terry Wood, Lois Lewis and Sally Shore through their attorneys, make the following complaint against defendant TranSouth Financial Corporation. TABLE OF CONTENTS INTRODUCTORY STATEMENT THE PARTIES CO-CONSPIRATORS JURISDICTION VENUE FACTS APPLICABLE TO ALL COUNTS FACTS APPLICABLE TO NAMED PLAINTIFFS NELL CARR TERRY WOOD LOIS LEWIS SALLY SHORE CLASS ACTION ALLEGATIONS CIVIL RICO SUMMARY FIRST CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(a) SECOND CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(c) THIRD CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(d) FOURTH CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(d) FIFTH CLAIM FOR RELIEF VIOLATION OF THE VIRGINIA UNIFORM COMMERCIAL CODE SIXTH CLAIM FOR RELIEF VIOLATION OF THE VIRGINIA CONSUMER PROTECTION ACT

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TranSouth paid no surpluses to the class members. TranSouth then financed these new customers who also were highly likely to default. THE PARTIES 5. Plaintiff Nell Carr is an individual who resides at [Address]. 6. Plaintiff Terry Wood is an individual who resides at [Address]. 7. Plaintiff Lois Lewis is an individual who resides at [Address]. 8. Plaintiff Sally Shore is an individual who resides at [Address]. 9. Defendant TranSouth is a South Carolina corporation with a principal place of business at 250 Carpenter Freeway, Irving, Texas with offices, at times pertinent hereto, at 3420 Holland Road, Virginia Beach, Virginia. At all times pertinent herein, TranSouth engaged in the acquisition of loans assigned to it by CFAW and, upon default by a customer transferred those loans and collateral back to CFAW, pursuant to the terms of a repurchase agreement with CFAW. CO-CONSPIRATORS 10. Conspirator CFAW is a Virginia corporation with a principal place of business at 536 West 21st Street, Norfolk, Virginia. At all times pertinent herein, CFAW was engaged, inter alia, in the sale of high mileage used cars to individuals with poor credit ratings and the arranging of financing for such sales through TranSouth. 11. Conspirator JB is a Virginia corporation with its principal place of business at 536 West 21st Street, Norfolk, Virginia. At all times pertinent herein, JB was a subsidiary of CFAW and was engaged in the business of collecting on defaulted loans for CFAW. 12. The defendant and the conspirators participated as coconspirators with each other and various other persons, firms and entities in the offenses charged, and have performed acts and made statements in furtherance thereof. JURISDICTION 13. This Court has subject matter jurisdiction over this action pursuant to 18 U.S.C. 1964(c) (RICO), 28 U.S.C. 1331 (Federal Question), and 28 U.S.C. 1367 (Supplemental Jurisdiction). VENUE 14. Venue is proper in this District because, under 28 U.S.C. 1391(b), a substantial part of the events giving rise to claims herein occurred within this District. FACTS APPLICABLE TO ALL COUNTS 15. CFAW sold high mileage used automobiles at extravagant prices in the Tidewater area of Virginia from eight locations to people with poor credit. 16. CFAW arranged financing for its customers with TranSouth and frequently set the interest rates on the loans as high as 36%, dramatically reducing the likelihood that the purchaser could pay off the loan.

Appx. D.9
17. These security agreements were set forth on forms provided to CFAW by TranSouth. 18. Under a Repurchase Agreement, CFAW agreed with TranSouth to repurchase the loans, and pay off remaining principal to TranSouth in the event of a default by a customer. 19. TranSouth, when notified that a class member failed to place or keep collision insurance, force placed collision insurance through National Underwriters, Inc., for more than the value of the car, at unconscionably high rates, and received kickbacks from the insurer or broker. These excessive premiums were separately billed to the class member and made it even more likely that the class member would default. 20. In the event of default by a customer, TranSouth began the process of repossessing the automobiles from the purchasers. In most cases TranSouth hired a wholly owned subsidiary of CFAW to repossess the cars. 21. Upon repossession of a car, TranSouth sent a notice of private sale to the cars owner, with a cc to CFAW. The notice ostensibly provided an opportunity to the cars owner to redeem the car by payment of any deficiency. In the event the owner failed to do so, the notice announced that the repossessed car would be sold at a private sale. The letter was designed to give the defaulting customer assurances that the customers collateral was being liquidated legally and legitimately and to thus lull the customer into a false sense of legitimacy preventing the customer from taking action such as retaining an attorney. The letter succeeded in this respect. 22. The reason that TranSouth sent these notices of private sale was that CFAW insisted that TranSouth do so, and it was a precondition of doing business with CFAW. See Memo from Lance to Neil, January 22, 1992, HW 439, attached as Exhibit 1 hereto [not reprinted herein]. Doing business with CFAW was highly profitable for TranSouth, and TranSouth was willing to engage in the bogus transactions as a means of continuing that profit. 23. The notice also represented to the defaulting customer that he or she had until a date certain to redeem the repossessed car, a fact which Transamerica knew was false under Virginia law. 8.9-506, Code of Virginia. 24. TranSouth also utilized the scheme to give itself the opportunity to issue force placed insurance to a number of class members valued at more than the value of the car and at unconscionably high rates which in part were kicked back to TranSouth. TranSouth was intimately aware of nearly every aspect of CFAWs business. CFAWs employees provided a good deal of information to TranSouth, at TranSouths request. See Letter from Stewart to Falk, February 2, 1993, HW 282, attached as Exhibit 2 hereto [not reprinted herein]. TranSouth employees met with CFAW accountants and attorneys, toured CFAWs headquarters, and the like. See letter from Cole to Falk, March 18, 1992, attached as Exhibit 3 hereto [not reprinted herein]. TranSouth had access to audits of CFAWs business. See Memo from Stewart to Neil, November 24, 1992, HW 468, attached as Exhibit 4 hereto [not reprinted herein]. TranSouth advised CFAW on its various obligations under the U.C.C. See, e.g., Memo from Lance to Neil, January 22, 1992, HW 439, attached as Exhibit 1 hereto. Transouth made a great deal of money from the scheme. See internal TranSouth memo from B. D. Davis to J. J. Abbott on December 11, 1989, at-

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fraudulent and fictitious price. In some cases, the subsequent sales price of the car paid to CFAW by the next consumer was greater than the original price paid by the consumer who defaulted. By law, if the actual sales price exceeded the amount of the customers loan, TranSouth was obligated to pay this surplus back to the customer. In fact, no surplus sums were paid to plaintiffs or the Class and the defaulting customer was never advised of the amount of the subsequent actual sale. FACTS APPLICABLE TO NAMED PLAINTIFFS A. NELL CARR 34. Plaintiff Nell Carr bought a used 1988 Pontiac LeMans from CFAW on May 16, 1992. The cash price was $6,525. 35. TranSouth financed the loan. 36. After the sale, Ms. Carr defaulted on the loan. The car was repossessed by TranSouth and CFAW. 37. On June 16, 1992, TranSouth issued, through the use of the U.S. mails, a knowingly fraudulent notice of private sale to Ms. Carr. That notice is attached hereto as Exhibit 10 [not reprinted herein]. Ms. Carr received the notice, and read the notice. Ms. Carr did not learn from the notice the fact that TranSouths operation was not proceeding according to law. Ms. Carr did not redeem the car. 38. Instead of holding a legally sufficient sale of the collateral as set forth in the TranSouth notice, TranSouth merely transferred the car back to CFAW. Separately, TranSouth and CFAW agreed to set a fictitious and fraudulent sales price at only $1,000. 39. After transfer of the car and the loan from TranSouth to CFAW, the establishment of the fraudulent sales price, and assignment of the loan by CFAW to JB for collection, JB, through the use of the U.S. mails, issued a fraudulent demand letter to Ms. Carr on August 17, 1992. The letter, using the fraudulent $1,000 figure as the basis for setting an alleged deficiency at $3,661.96 is attached as Exhibit 11 [not reprinted herein]. 40. On July 6, 1992, JB brought suit against Ms. Carr, through the use of the U.S. mails, in the General District Court of the City of Virginia Beach, Virginia, seeking a judgment for this fraudulently calculated deficiency, plus a 25% attorneys fee (although JB did not file suit using an attorney). The suit is attached as Exhibit 12 [not reprinted herein]. 41. On July 29, 1992, the car which had been repossessed from Ms. Carr was sold off the lot by CFAW to a new customer Susan Lord, for $6,900; this was $375 more than Ms. Carr had originally paid for it. No surplus was paid by CFAW, TranSouth, or JB to Ms. Carr, and Ms. Carr was never told the sum for which collateral was sold. 42. Plaintiff further reasonably relied to her detriment upon the statement in Exhibit 11 [not reprinted herein] that her car had been sold for a particular figure in concluding that the sale of her collateral had proceeded legally and legitimately. Ms. Carr did not seek the assistance of counsel to protect her interest and secure her rights under the law. 43. If Ms. Carr had then suspected that TranSouths operation was illegal and illegitimate, she would have sought the assistance of counsel to protect her interests and secure her rights under the law.

tached as Exhibit 5 hereto [not reprinted herein], stating that CFAW repurchases TranSouths repossessions and has paid us over $140,000 in repos in November alone. 25. In particular, TranSouth was intimately aware that an extraordinarily high volume of repossessions was a centerpiece of CFAWs business. See, e.g., Memo from Newman to Abbott, November 22, 1989, attached as Exhibit 6 hereto [not reprinted herein] (TranSouth aware of role of repossessions a large part of CFAWs business); Memo from Cole to Credit Committee, April 11, 1990, and attachments, attached as Exhibit 7 hereto [not reprinted herein] (CFAW sent TranSouth a Wall Street Journal article about a used car dealer with very high repossessions; TranSouth understood it to be an indication of CFAWs hopes for its own business). TranSouth employees praised CFAW for properly handling and understanding repossessions. See Memo from Davis to Abbott, December 11, 1989, attached as Exhibit 8 hereto [not reprinted herein]. Finally, and most seriously, TranSouth actually wanted CFAW to have more repossessions, and communicated that hope to CFAW, in a November 19, 1992 letter from Dennis Cole (TranSouth) to Charles Falk, Sr. (Exhibit 9 hereto) stating that TranSouths repossessions are not yet large and [o]f course, to have more repossessions we must book more loans and we will need your help to achieve this. (Emphasis added). 26. TranSouth never sold these repossessed cars at commercially reasonable private sales. Instead, TranSouth transferred the cars back to CFAW pursuant to its repurchase agreement with CFAW. CFAW then eventually again sold the cars off its lot, often at or above the price charged to the original defaulting customer. 27. The transfer of a repossessed automobile back to CFAW under the terms of a repurchase agreement is not a legal sale of the collateral. The sale of the collateral announced by TranSouths fraudulent letter in fact did not take place as suggested by the letter. Instead, CFAW and TranSouth merely set bogus prices, in transactions described above, which were grossly undervalued in relation to the original price of the car paid by the customer, and in relation to the subsequent sales price which CFAW obtained from the next consumer in this scheme. 28. JB then used the fictional and fraudulent sales price cooked up between TranSouth and CFAW as the basis for a fraudulent demand letter, calculating the deficiency allegedly owed by the defaulting customer and threatening suit if the fraudulently calculated deficiency was not paid. 29. CFAW and JB thereafter used the false and artificially low private sale price which was set between CFAW and TranSouth as a basis for a subsequent collection action filed against the customer in a district court in Virginia. 30. After the transfer of repossessed cars from TranSouth to CFAW pursuant to their contractual arrangement, CFAW assigned the loans to JB for collection. 31. JB shared common officers and directors with CFAW and pursued collection actions only for CFAW. 32. In every action brought by JB against every class member, the amount of the alleged deficiency was based upon the false and fraudulent price for the car agreed upon between CFAW and TranSouth. 33. CFAW then sold the car to the next customer in this churning scheme at a price which was much greater than the

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B. TERRY WOOD 44. Plaintiff Terry Wood bought a used 1987 Pontiac Sunbird from CFAW on September 9, 1991. The cash price was $6,000. 45. TranSouth financed the loan. 46. Ms. Wood defaulted on the loan. The car was repossessed by TranSouth and CFAW. 47. Shortly thereafter, in or about November 1991, TranSouth issued, through the use of the U.S. mails, a knowingly fraudulent notice of private sale to Ms. Wood. That notice is attached hereto as Exhibit 13 [not reprinted herein]. Ms. Wood received the notice, and read the notice. Ms. Wood did not learn from the notice the fact that TranSouths operation was not proceeding according to law. Ms. Wood did not redeem the car. 48. Instead of holding a legally sufficient sale of the collateral, as set forth in the TranSouth notice, TranSouth merely transferred the car back to CFAW. Separately, TranSouth and CFAW agreed to set a fictitious and fraudulent sales price. 49. After transfer of the car and the loan from TranSouth to CFAW, the establishment of the fraudulent sales price, and assignment of the loan by CFAW to JB for collection, JB issued a fraudulent demand letter in or about December 1991, through the use of the U.S. mails, to Ms. Wood. The letter used the fictitious sales figure as the basis for setting an alleged deficiency. 50. On January 14, 1992, the same car which had been repossessed from Ms. Wood was sold by CFAW for $6,300 to Roger Thorpe. This was $300 more than Ms. Wood had originally paid for it. No surplus was paid by CFAW, TranSouth, or JB to Ms. Wood, nor was she ever advised of the sale or the amount of the sale of her collateral. 51. On May 20, 1992, four months after selling the car for $6,300, JB sued Ms. Wood, through the U.S. mails, in the General District Court of the City of Virginia Beach, Virginia seeking a fraudulent deficiency judgment in the amount of $3,586.22, plus attorneys fees (although JB did not file suit using an attorney). That lawsuit is attached as Exhibit 14 [not reprinted herein]. 52. Plaintiff further reasonably relied to her detriment upon the statement that her car had been sold for a particular figure in concluding that the sale of her collateral had proceeded legally and legitimately. 53. If Ms. Wood had then suspected that TranSouths operation was illegal and illegitimate, she would have sought the assistance of counsel to protect her interests and secure her rights under the law. Ms. Wood did not seek the assistance of counsel to protect her interest and secure her rights under the law. C. LOIS LEWIS 54. Plaintiff Lois Lewis bought a used 1988 Chevrolet Corsica from CFAW on May 7, 1991. The cash price was $7,475. 55. TranSouth financed the loan. 56. On April 14, 21, 22 and 23, 1992, TranSouth wrote to Ms. Lewis about the serious past due nature of [her] account, threatening her credit standing and her collateral.

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57. Ms. Lewis defaulted on the loan. The car was repossessed by TranSouth and CFAW. 58. On June 4, 1992, TranSouth issued, through the use of the U.S. mails, a knowingly fraudulent notice of private sale to Ms. Lewis. That notice is attached hereto as Exhibit 15 [not reprinted herein]. Ms. Lewis received the notice, and read the notice. Ms. Lewis did not learn from the notice the fact that TranSouths operation was not proceeding according to law. Ms. Lewis did not redeem the car. 59. Instead of holding a legally sufficient sale of the collateral, as set forth in the TranSouth notice, TranSouth merely transferred the car back to CFAW on May 21, 1992. Separately, TranSouth and CFAW agreed to set a fictitious and fraudulent sales price of $1,100. 60. On September 9, 1992, the car which had been repossessed from Ms. Lewis was sold off the lot by CFAW to new customers, A. Douglas and Tina North, for $7,350. This was only $125 less than Ms. Lewis had originally paid for it. No surplus was paid by CFAW, TranSouth, or JB to Ms. Carr, nor was she ever advised of the sale or the amount of the sale of her collateral. 61. After transfer of the car and the loan from TranSouth to CFAW, the establishment of the fraudulent sales price, and assignment of the loan by CFAW to JB for collection, JB issued a fraudulent demand letter to Ms. Lewis on November 2, 1992, through the use of the U.S. mails. The letter, using the fictitious $1,100 figure as the basis for setting an alleged deficiency at $3,647.33, is attached hereto as Exhibit 16 [not reprinted herein]. 62. On November 27, 1992, two months after selling the car for $7,350, JB brought suit against Ms. Lewis, through the use of the U.S. mails, in the general District Court of the City of Virginia Beach, Virginia, seeking a judgment for this fraudulent alleged deficiency, plus a 25% attorneys fee (although JB did not file suit using an attorney). That lawsuit is attached as Exhibit 17 [not reprinted herein]. 63. Plaintiff further reasonably relied to her detriment upon the statement in Exhibit 16 [not reprinted herein] that her car had been sold for a particular figure in concluding that the sale of her collateral had proceeded legally and legitimately and in failing to seek the assistance of counsel to protect her interest and secure her rights under the law. 64. If Ms. Lewis had then suspected that TranSouths operation was illegal and illegitimate, she would have sought the assistance of counsel to protect her interests and secure her rights under the law. D. SALLY SHORE 65. Plaintiff Sally Shore bought a used 1984 Dodge Aries from CFAW on August 21, 1987. The cash price was $6,492.00. 66. TranSouth financed the loan. 67. Ms. Shore defaulted on the loan. The car was repossessed by TranSouth and CFAW. 68. On October 28, 1988 TranSouth issued, through the use of the U.S. mails, a knowingly fraudulent notice of private sale to Ms. Shore. Ms. Shore received the notice, and read the notice. Ms. Shore did not learn from the notice the fact that TranSouths operation was not proceeding according

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78. There are numerous questions of law and fact common to the Class. Such common questions include, but are not limited to: (a) the acts and practices of conspirators in the scheme described in paragraphs 15 through 74 above; (b) the fraudulent and illegal nature of the conspirators practices; (c) the contractual, conspiratorial and illegal relationships among conspirators; (d) the applicability of Public Law 91-452 to the activities of the conspirators; (e) the existence of an enterprise and a pattern of unlawful activity with respect to conspirators under that law; (f) the commission by conspirators of numerous acts of mail fraud in furtherance of their scheme; (g) the violation of state common law and state statutory provisions by all conspirators in a uniform and fraudulent scheme; (h) whether the repossessed vehicles were sold in a commercially reasonable manner; (i) whether TranSouth sent or directed the sending of knowingly false letters through the mail. 79. Plaintiffs are members of the Class, and their claims are typical of other class members claims in that, like all class members, each named plaintiff purchased a car from CFAW, financed the purchase of that car through TranSouth, defaulted on the loan, received improper, fraudulent and deceptive notices of private sale from TranSouth, were sued or threatened with suits for deficiencies by JB, using fraudulent and fictitious figures to calculate an alleged deficiency, and were denied a credit or surplus of the sums actually resulting from subsequent sales. In many cases, their repossessed cars were subsequently sold by CFAW at prices which far exceeded the prices used to set the alleged deficiencies, and far exceeded the amount owed by the defaulting purchaser at the time of the default, but no surplus sums were paid to them. 80. Plaintiffs are adequate representatives of the Class interests in that they will and have vigorously pursued this action on behalf of the entire Class, have no conflicts with the Class, have interests completely coincident with the Class interests, and have retained experienced Class counsel to represent them. 81. Questions of law and fact common to the Class, including the legal and factual issues relating to operation of the scheme described herein by defendant, and the liability and the nature of the relationships among the conspirators, predominate over any questions affecting only individual members. 82. A class action is superior to other available methods for the fair and efficient adjudication of this controversy: the Class is readily definable, and can be easily identified by examination of defendants records; prosecution of this case as a class action will eliminate the possibility of repetitious litigation and will provide redress for claims which otherwise may be too small to support the expense of individual, complex litigation against the defendants; there are no problems which would make this case difficult to manage as a class action.

to law. That notice is attached hereto as Exhibit 18 [not reprinted herein]. Ms. Shore did not redeem the car. 69. Instead of holding a legally sufficient sale of the collateral, as set forth in the TranSouth notice, TranSouth merely transferred the car back to CFAW. Separately, TranSouth and CFAW agreed to set a fictitious and fraudulent sales price of only $1,500. 70. After transfer of the car and the loan from TranSouth to CFAW, the establishment of the fraudulent sales price, and assignment of the loan by CFAW to JB for collection, JB, through the use of the U.S. mails, issued a fraudulent demand letter to Ms. Shore on December 27, 1988. The letter, using the fictitious $1,500 figure as the basis for setting an alleged deficiency at $2,743.85, is attached hereto as Exhibit 19 [not reprinted herein]. 71. On February 16, 1989, JB brought suit against Ms. Shore, through the use of the U.S. mails, in the General District Court of the City of Virginia Beach, Virginia, seeking a fraudulent deficiency judgment in the amount of $2,743.85, plus interest and costs. That lawsuit is attached as Exhibit 20 [not reprinted herein]. 72. On May 20, 1989, the car which had been repossessed from Ms. Shore was sold off the lot by CFAW to a new customer for $6,300; this was only $192 less than Ms. Shore had originally paid for it. No surplus was paid by CFAW, TranSouth, or JB to Ms. Shore, nor was she ever advised of the sale or the amount of the sale of her collateral. 73. Plaintiff further reasonably relied to her detriment upon the statement in Exhibit 19 [not reprinted herein] that her car had been sold for a particular figure in concluding that the sale of her collateral had proceeded legally and legitimately and in failing to seek the assistance of counsel to protect her interest and secure her rights under the law. 74. If Ms. Shore had then suspected that TranSouths operation was illegal and illegitimate, she would have sought the assistance of counsel to protect her interests and secure her rights under the law. CLASS ACTION ALLEGATIONS 75. Plaintiffs bring this action on behalf of themselves and on behalf of a class of similarly situated persons pursuant to Fed. R. Civ. P. 23. The Class is defined as follows: All persons who purchased cars from Charlie Falks Auto Wholesale, Inc., entered into Security Agreements with Charlie Falks Auto Wholesale, Inc. to finance such purchases, whose loans were assigned by Charlie Falks Auto Wholesale, Inc. to TranSouth Financial Corporation, and who defaulted on their loans and did not redeem their cars after repossession by TranSouth and/or Charlie Falks Auto Wholesale, Inc. 76. Members of the class number above two thousand, five hundred. The exact identity of each class member in this case is on file in this Court. 77. Members of the Class are so numerous that joinder of all of them is impracticable.

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CIVIL RICO SUMMARY 83. In connection with the activities giving rise to this action, the defendant acted with malice, intent, and knowledge, and with a wanton disregard of the rights of named plaintiffs and the Class herein. 84. During relevant times herein, the enterprise described below was engaged in interstate commerce in that inter alia, the used cars which are the subject of the scheme to defraud were used and transported in interstate commerce. 85. During relevant times herein, in connection with the activities giving rise to this action, the defendant conspired with each of the other conspirators to engage in the various activities set forth herein, agreed to participate in the operation of the conspiracy to defraud the named plaintiffs and Class members herein, and aided and abetted one another in these activities, all as proscribed as set forth further herein below. 86. As set forth herein, during the relevant times, and in furtherance of and for the purpose of executing the scheme and artifice to defraud, the defendant and conspirators on numerous occasions used and caused to be used mail depositories of the United States Postal Service by both placing and causing to be placed mailable matters in said depositories and by removing and causing to be removed mailable matter from said depositories. Each such use of the U.S. mails in connection with the scheme and artifice to defraud constituted the offense of mail fraud as proscribed and prohibited by 18 U.S.C. 2, 1341. These instances of mail fraud were a substantial factor in the sequence of responsible causation; and the injuries to plaintiffs and the class were reasonably foreseeable or anticipated as a natural consequence of the mail fraud; and plaintiffs and the class suffered damages by reason of the mail fraud. FIRST CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(a) 87. The allegations of paragraphs 1 through 86 are incorporated herein by reference as if fully set forth. 88. Each Plaintiff and each class member is a person within the meaning of 18 U.S.C. 1961(3) and 1964(c). 89. The Defendant and each of the other conspirators is a person within the meaning of 18 U.S.C. 1961 (3) and 1962 (a). 90. Through the repurchase agreement and other agreements between TranSouth and CFAW, and through the contractual arrangement and joint management activity between CFAW and JB, defendant formed an association-in-fact with the other conspirators which constitutes an enterprise engaged in illegal activities affecting interstate commerce pursuant to 18 U.S.C. 1961(4) and 1962(a). 91. Each of the conspirators was associated with this enterprise and did use or invest income derived from a pattern of unlawful activity under 18 U.S.C. 1961(1) and (5) to operate, maintain control of, and maintain an interest in the enterprise. 92. These unlawful activities included multiple instances of mail fraud in the issuance of false and deceptive notices of private sale, multiple instances of mail fraud in the issuance of false and deceptive demand letters, multiple instances of

Appx. D.9
mail fraud in the issuance and collection of unconscionably and fraudulently high premiums on force placed insurance, multiple instances of mail fraud in the receipt of sums representing kickbacks of premiums from the insurer or broker, and multiple instances of mail fraud in the issuance of service of process and pleadings on named plaintiffs and Class members herein in improper deficiency suits filed against them in General District Courts in Virginia, all in violation of 18 U.S.C. 2, 1341. 93. The purpose of the defendants and conspirators association-in-fact was to sell cars, to sell fraudulently high force placed insurance, and to give effect to the revolving repossession and churning scheme described above. This association-in-fact by defendant and the other conspirators enabled them to sell cars and force placed insurance and to defraud the public by selling and reselling used cars at very high prices and exorbitant interest rates; defendant and the other conspirators were then able to create improperly calculated deficiencies after default, and to collect deficiencies which were not properly due while CFAW actually resold the used cars to new customers, thereby starting the churning cycle once again. 94. The association-in-fact had a common or shared purpose, that is to sell cars, to sell force placed insurance, to defraud members of the public, to give effect to the revolving repossession and churning scheme described above, and had a distinct division of labor. It continued as a unit, with a core membership, over a substantial period of time and was an ongoing organization established for an economic motive. The association-in-fact remained viable and active at the time this action was filed. 95. In this association-in-fact, CFAW made the initial contact with the consumer through advertising in commercial media. CFAW set the initial price for the car, and, with TranSouth, the initial interest rate on loans and terms of repayment. 96. CFAW actively participated in and negotiated the terms of its repurchase agreement(s) with TranSouth. The improper use of repurchase agreements permitted CFAW and TranSouth to create artificially low bid or transfer prices for repossessed cars, and these bid prices were then used to calculate improperly inflated deficiency amounts upon default by customers. 97. CFAW also participated in repossession of the vehicles by contracting with TranSouth to repossess cars and to hold them on CFAW lots pending formal transfer of title from TranSouth back to CFAW. 98. CFAW and TranSouth played a substantial role in initiating collection actions and in the issuance of false and fraudulent demand letters by JB to customers who had defaulted in that CFAW and TranSouth set the fraudulent price which was used as the basis of the amount sought as a deficiency. 99. Surplus monies received over and above actual deficiencies in subsequent sales of repossessed cars to the general public off CFAW used car lots should have been refunded to the previous consumer in this scheme, but were not. These improperly retained funds were then reinvested in the enterprise alleged herein and used in its operation. 100. TranSouth utilized this scheme to generate a large volume of very high interest loans with little or no appreciable

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chaser, or in much smaller actual deficiencies which were never revealed or credited to the defaulting purchaser. TranSouth again financed the high interest rate subsequent loans, at no risk, for a huge profit. 106. All of these activities of the association-in-fact form a pattern, continuous in nature, which consists of numerous unlawful individual acts directed to each named plaintiff and to each class member. The illegal activities of defendants persisted over an extended period of time. Each fraudulent letter and notice by TranSouth, each fraudulently high force placed insurance premium invoice, each receipt of a kickback from the broker or insurer, and each fraudulent letter and pleading by JB were acts in furtherance of the conspiracy for which the defendant is liable. The reliance of the plaintiff and the members of the class on the falsehoods contained in such documents, and on the omissions of information such as the subsequent sales price of the repossessed vehicles, was reasonable and justified because such documents would and did cause persons of ordinary experience to be convinced of the legality and regularity of the process and to refrain from defending what appeared to be a justifiable lawsuit. 107. These activities of the defendant and other conspirators entailed multiple instances of mail fraud consisting of intentional mail fraud intended to induce, and inducing, plaintiffs and the class to part with property and/or to surrender legal rights in violation of 18 U.S.C. 2, 1341. 108. Through the use of this illegal and fraudulent scheme, and through its efforts to operate and maintain the enterprise described herein and to maintain the conspiracy to churn vehicles, and to create illegal profits, the defendant and other conspirators have been able to retain money which is rightfully payable to plaintiffs and Class members, and to collect money not properly due from plaintiffs or Class members. 109. Defendant and the other conspirators retained these illegally gained funds and reinvested and used those funds in their operations in violation of 18 U.S.C. 2, 1962(a). 110. Plaintiffs and all class members have been injured in their property by reason of the operation of the enterprise in this unlawful manner. WHEREFORE, plaintiffs seek judgment against the defendant, on behalf of themselves and the Class herein, consisting of their actual damages suffered as a result of the illegal acts set forth herein, including amounts improperly collected from them pursuant to deficiency judgments obtained by JB Collection, amounts improperly collected through payment of force placed insurance premiums, and surplus amounts received by CFAW on the resale of cars transferred to CFAW by TranSouth, plus treble damages, plus reasonable costs and attorneys fees, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. SECOND CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(c) 111. The allegations of paragraphs 1110 are incorporated herein by reference as if fully set forth. 112. Each Plaintiff and each class member is a person within the meaning of 18 U.S.C. 1961(3) and 1964(c).

risk. To further the scheme, TranSouth issued false and deceptive notices of private sale which were intended to and which did mislead the public about its repossession and redemption rights. 101. Each member of the class was sent TranSouths notices. 102. TranSouths notices (which contained fraudulent and false statements made to plaintiffs and members of the class) and private sales were intended to and did assure the plaintiffs herein and the class that the repossession and liquidation of their collateral was proceeding legitimately and legally, and influenced the plaintiffs and the class to accept the process without question, thus depriving plaintiffs and the class of the opportunity to assert a meritorious defense to JBs deficiency suit or seek other available legal remedies. The plaintiffs and members of the class received the impression from the TranSouth notice of sale letter that the liquidation of their collateral was proceeding legally and legitimately. Plaintiffs and the class members did not learn from the notices the fact that TranSouths operation was not proceeding according to law. If plaintiffs and the class members had then suspected that TranSouths operation was illegal and illegitimate, they would have sought the assistance of counsel to protect their interests and secure their rights under the law. None of plaintiffs or class members did seek the assistance of counsel, however, because of their reasonable reliance upon the deceptive notices of sale. No member of the class redeemed his or her automobile. Plaintiffs and the Class reasonable reliance on the notices of private sales (by not asserting a meritorious defense or seeking other remedies) enabled the scheme to continue, and thus was one proximate cause of the damages suffered by plaintiffs and the class. 103. TranSouths false and fraudulent notices of private sale furthered the purposes of the enterprise described herein, that is, to generate subsequent sales of the same cars for CFAW at inflated prices, to generate a high rate of force placed insurance, to create improper deficiency amounts which CFAW attempted to collect through JB, and to permit CFAW to retain and reinvest surplus funds otherwise owed to class members as a result of post-repossession sales. TranSouth participated in a massive fraud, an illegal and profitable scam, which took advantage of the plaintiffs, and the class reasonable reliance on the apparent legitimacy of the operation. 104. JBs role in this scheme was to issue deceptive, threatening demand letters, and to pursue collection actions against consumers who have defaulted. The dunning letters, threats, and collection actions had as their bases the improperly calculated deficiency amounts based on the repurchase transaction and the contractual, conspiratorial, and fraudulent transfer of collateral between TranSouth and CFAW. The class relied upon the JB dunning letter as establishing that the liquidation of their collateral announced by the earlier fraudulent TranSouth notice of sale letter had proceeded legally and legitimately. 105. JB then proceeded to collect or attempt to collect sums from consumers which were not properly due under the law. These sums were then invested in the enterprise described herein and used in its operation. CFAW actually sold the repossessed cars on the open market at prices which either resulted in surpluses which were never paid the defaulting pur-

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113. Defendant and each of the other co-conspirators are persons within the meaning of 18 U.S.C. 1961(3) and 1962 (c). 114. The association-in-fact described in the First Claim for Relief above was an enterprise within the meaning of 18 U.S.C. 1961(4) and 1962(c), which enterprise was engaged in, and the activities of which affect, interstate commerce. 115. Defendant was associated with the enterprise through its repurchase agreement, and its fraudulent force placed insurance and kickback scheme, and participated in its management and operation by directing its affairs and by executing the repurchase agreement and assisting in the car churning scheme. The defendant participated, directly and indirectly, in the conduct of the enterprises affairs through a pattern of unlawful activity under 18 U.S.C. 1961 (1), consisting of multiple acts of mail fraud, in violation of 18 U.S.C. 3, 1341. 116. The unlawful activity described in the foregoing paragraphs consists of multiple instances of mail fraud in violation of 18 U.S.C. 2, 1341, including, inter alia, issuance of illegal, deceptive and fraudulent notices of private sale by TranSouth to customers of CFAW, the issuance of multiple illegal, deceptive and fraudulent invoices for force placed insurance, the receipt of multiple illegal and fraudulent kickbacks, and the issuance of illegal, deceptive and fraudulent demand letters, pleadings and process by JB with respect to collection actions against defaulted CFAW customers. WHEREFORE, plaintiffs seek judgment against TranSouth on behalf of themselves and the Class herein, consisting of their actual damages suffered as a result of the illegal acts set forth herein, including amounts improperly collected from them pursuant to deficiency judgments obtained by JB, amounts improperly collected through payment of force placed insurance premiums, and surplus amounts received by CFAW on the resale of cars transferred to CFAW by TranSouth, plus treble damages, plus reasonable costs and attorneys fees, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. THIRD CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(d) 117. The allegations of paragraphs 1116 are incorporated herein by reference as if fully set forth. 118. Plaintiffs and each member of the Class are persons within the meaning of 18 U.S.C. 1961(3) and 1964(c). 119. The defendant and the other conspirators are persons within the meaning of 18 U.S.C. 1961(3) and 1962(d). 120. The association-in-fact described in the First Claim for Relief above was an enterprise within the meaning of 18 U.S.C. 1961(4) and 1962(a), which enterprise was engaged in, and the activities of which affect interstate commerce. 121. The defendant and each of the other conspirators were associated with the enterprise described herein, and conspired within the meaning of 18 U.S.C. 1962(d) to violate 1962(a). 122. Defendant and the other conspirators conspired to use or invest income derived from a pattern of unlawful activ-

Appx. D.9
ity under 18 U.S.C. 1961 (1) to operate, maintain control of, and maintain an interest in the enterprise and have done so through a pattern of unlawful activity including under 18 U.S.C. 1961(1), inter alia, multiple instances of mail fraud in violation of 18 U.S.C. 2, 1341. 123. Each named plaintiff and each Class member has suffered injury to his property within the meaning of 18 U.S.C. 1964(c) by reason of the commission of overt acts constituting illegal activity in violation of 18 U.S.C. 1961(1), 1962(d). WHEREFORE, plaintiffs seek judgment against defendant TranSouth, on behalf of themselves and the Class herein, consisting of their actual damages suffered as a result of the illegal acts set forth herein, including amounts improperly collected from them pursuant to deficiency judgments obtained by JB, amounts improperly collected through payment of force placed insurance premiums, and surplus amounts received by CFAW on the resale of cars transferred to CFAW by TranSouth, plus treble damages, plus reasonable costs and attorneys fees, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. FOURTH CLAIM FOR RELIEF VIOLATION OF FEDERAL LAW18 U.S.C. 1962(d) 124. The allegations in paragraphs 1-123 are incorporated herein by reference as if fully set forth. 125. Plaintiffs and each class member are persons within the meaning of 18 U.S.C. 1961(3) and 1964(c). 126. Defendant and each other conspirator are persons within the meaning of 18 U.S.C. 1961(3) and 1962(d). 127. The association-in-fact described in the First Claim for Relief above was an enterprise within the meaning of 18 U.S.C. 1961(4) and 1962(c), which enterprise was engaged in, and the activities of which affect, interstate commerce. 128. Defendant was associated with and participated in the operation of the enterprise and conspired within the meaning of 18 U.S.C. 1962(d) to violate 18 U.S.C. 1962(c). Defendant conspired with the other conspirators to conduct or participate, directly or indirectly, in the conduct of the affairs of the enterprise in relationship to the Class and to named plaintiffs, through a pattern of unlawful activity, including under 18 U.S.C. 1961(1), inter alia, multiple instances of mail fraud in violation of 18 U.S.C. 2, 1341. 129. Each named plaintiff and each Class member has suffered injury to his property within the meaning of 18 U.S.C. 1964(c) by reason of the commission of overt acts constituting illegal activity in violation of 18 U.S.C. 1961(1), 1962(d). WHEREFORE, plaintiffs seek judgment against TranSouth on behalf of themselves and the Class herein, consisting of their actual damages suffered as a result of the illegal acts set forth herein, including amounts improperly collected from them pursuant to deficiency judgments obtained by JB Collection, amounts improperly collected through payment of force placed insurance premiums, and surplus amounts received by CFAW on the resale of cars transferred to CFAW by TranSouth, plus treble damages, plus reasonable costs and attorneys fees, plus pre and post judgment interest, plus such further relief as this Court deems appropriate.

247

Appx. D.9

Consumer Class Actions: A Practical Litigation Guide

139. These violations caused plaintiffs to suffer actual damages. WHEREFORE plaintiffs seek judgment against defendant TranSouth, on behalf of themselves and the Class herein, for all sums due them after the sales of their repossessed cars by CFAW pursuant to the terms of the Virginia Uniform Commercial Code, including any surplus sums received by CFAW on resale of repossessed cars, plus a sum equal to the credit service charge imposed on each of them, plus 10% of the principal pursuant to 8.9-507 of the Code of Virginia, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. SIXTH CLAIM FOR RELIEF VIOLATION OF THE VIRGINIA CONSUMER PROTECTION ACT 140. The allegations of paragraphs 1 through 139 are incorporated herein by reference as if fully set forth. 141. The sales and subsequent repossessions of the vehicles described herein were consumer transactions as defined in 59.1-198(A) of the Code of Virginia, otherwise known as the Virginia Consumer Protection Act of 1977. 142. The defendant engaged and conspired to engage in deceptive and fraudulent practices under that Act by, inter alia: a. misrepresenting to the named plaintiffs and to Class members, or failing to inform named plaintiffs or class members of the time, place and nature of proper repossession sales with respect to their consumer goods; b. misleading the named plaintiffs and Class members herein regarding their rights of redemption; c. failing to account for surplus achieved by defendants in actual private sales after repossession of the cars purchased by named plaintiffs and Class members herein; d. failing to deal with the named plaintiffs and Class members in good faith; e. failing to hold a commercially reasonable sale of repossessed collateral with respect to each named plaintiff and each Class member herein; f. insuring the automobiles for more than they were worth, which is a consumer fraud and violates Virginia Insurance Law (38.2-124). 143. This wrongful behavior was conducted intentionally, for the sole benefit of defendant and the conspirators, with malice and with reckless disregard for plaintiffs and the class statutory and common law rights. WHEREFORE plaintiffs seek judgment against TranSouth, on behalf of themselves and the Class herein, for all sums due them after the sales of their repossessed cars by CFAW pursuant to the terms of the Virginia Uniform Commercial Code, as well as attorneys fees pursuant to 59.1-204 of the Code of Virginia, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. SEVENTH CLAIM FOR RELIEF COMMON LAW FRAUD AND CONSPIRACY 144. The allegations of paragraphs 1 through 143 are incorporated herein by reference as if fully set forth.

FIFTH CLAIM FOR RELIEF VIOLATION OF THE VIRGINIA UNIFORM COMMERCIAL CODE 130. The allegations of paragraphs 1 through 129 are incorporated herein by reference as if fully set forth. 131. All of the cars purchased by the named plaintiffs and by Class members herein from CFAW were consumer goods as set forth in 8.9-109 of the Code of Virginia. 132. All of the used car purchases by named plaintiffs and Class members herein were financed under security agreements prepared by CFAW on forms provided by or approved by TranSouth and assigned by CFAW to TranSouth. 133. Under the alleged authority of the terms of the financing and security agreements executed between the named plaintiffs and CFAW, and between each Class member and CFAW, the consumer goods of each named plaintiff and of each class member were repossessed by TranSouth, with the assistance and/or participation of CFAW, upon the plaintiffs and Class members default on their loans. 134. Pursuant to the terms of repurchase agreements between CFAW and TranSouth, CFAW paid the outstanding balance on each named plaintiffs and each class members loan and received from TranSouth a transfer of the repossessed collateral. 135. In each of the named plaintiffs cases, and in the case of each Class member, the transfer of collateral was wrongfully treated by defendant and the conspirators as a commercially reasonable sale pursuant to the Virginia Uniform Commercial Code. In fact, the sales were not commercially reasonable and could not properly be treated as such by CFAW, TranSouth or JB, which pursued collection actions against named plaintiffs and against each Class member herein. 136. In the course of each transaction described above, defendant TranSouth sent a misleading, deceptive and fraudulent notice of private sale to each named plaintiff and to each Class member stating that a bona fide private sale was to be held (which violates 8.9-504(5) of the Code of Virginia) and stating falsely that plaintiffs had until a particular date to redeem their collateral (which violates 8.9-506 of the Code of Virginia). 137. In the course of each transaction described above, defendant JB sent a misleading, deceptive and fraudulent demand letter to each named plaintiff and each Class member. 138. Defendant and the conspirators have violated and conspired to violate the provisions of Sections 8.9-101 et seq. of the code of Virginia by, inter alia: a. failing to give proper notice to each named plaintiff and each Class member of private/public sales of repossessed collateral; b. misleading each named plaintiff and each Class member regarding their rights of redemption; c. failing to account properly for any surplus which was obtained by defendants in actual private sales of collateral by CFAW to third parties; d. failing to deal with named plaintiffs and each Class member in good faith; e. failing to hold a commercially reasonable sale of repossessed collateral with respect to each named plaintiff and each Class member.

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Sample Complaints
145. The defendant and other conspirators knowingly, maliciously and intentionally conspired to induce or coerce the named plaintiffs and the Class members herein to fail to assert meritorious defenses to the deficiency claims and actions, or to seek other available legal remedies, and/or to pay deficiency amounts to them, when the deficiencies had been intentionally miscalculated by defendant, and when no commercially reasonable sale of repossessed vehicles occurred as required under the law of Virginia. 146. Plaintiffs and Class members herein reasonably relied to their detriment upon fraudulent misrepresentations of and omissions by the defendant and the other conspirators as set forth, inter alia, in notices of private sale, demand letters, JB demand letters and pleadings and summonses sent to each of them. 147. Defendant and the other conspirators deliberately concealed from plaintiffs, and from all Class members, the fact that the amount of the deficiency as to each repossessed vehicle was calculated upon artificially low transfer prices set be-

Appx. D.9
tween TranSouth and CFAW under the terms of a repurchase agreement between TranSouth and CFAW. 148. The acts of defendant described herein were done with malice and reckless disregard for the rights of the named plaintiffs and Class members herein. WHEREFORE plaintiffs seek judgment against TranSouth for themselves and for all class members, consisting of all sums received by CFAW in the sales of cars which had been repossessed from plaintiffs and Class members herein, as well as fifteen percent (15%) of the net worth of Defendant TranSouth in punitive damages, plus pre and post judgment interest, plus such further relief as this Court deems appropriate. JURY DEMAND Plaintiffs request that their claims be tried before a jury. By: TRIAL LAWYERS FOR PUBLIC JUSTICE Exhibit List [not reprinted herein]

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Appendix E

Sample Discovery

The following are sample interrogatories, requests for the production of documents and requests for admissions. While the appendix separates, for ease of retrieval, each type of discovery into a different subsection, a plaintiffs first set of interrogatories and production of documents are often sent together as a First Discovery Request. Sometimes the first discovery request also includes a first request for admissions. Most discovery is accompanied by instructions and definitions. In general, this appendix sets out instructions only in Appx. E.1.1 for interrogatories and E.1.2 for requests for production of documents and sets out definitions only at Appx. E.1.1. Other discovery in this appendix merely refers to the instructions and definitions found at those subsections. Note the slight differences in instructions between E.1.1 (for interrogatories) and E.1.2 (for requests for production of documents). Always refer only to the appropriate cross-referenced instructions, i.e. E.1.1 or E.1.2. A 1993 amendment to Fed. R. Civ. P. 33 limits the number of interrogatories to 25 without leave of the court. The advisory committee notes that: Parties cannot evade this presumptive limitation by the device of joining as subparts questions that seek information about discrete separate subjects. However, a question asking about communications of a particular type should be treated as a single interrogatory even though it requests that the time, place, persons present, and contents be stated separately for each such communication. Fed. R. Civ. P. 33 Advisory Committees Note. Certain of the documents in this appendix were created before this amendment was in effect, and may not be consistent with this requirement. Additional examples of class action discovery (in print and on a WordPerfect disk) are included in National Consumer Law Center, Consumer Law Pleadings With Disk, Numbers One through Five. These sample examples will be listed below by volume number, such as CLP#1 or CLP#2: 1 Case involving car dealers race discrimination against customers and rebate theft, CLP#3 9.2.29.2.6; 1 Creditors illegal practices in force placing automobile insurance, CLP#5 5.2; 1 Used car sales financing, CLP#1 4.5; 1 Automobile leasing, CLP#1 9.2; 1 Automobile pawn case, CLP#3 4.3.24.3.4; 1 Rent-to-own case, CLP#4 11.1.2; 1 Home improvement financing scheme, CLP#4 1.2, 1.3; 1 Uninhabitable mobile home park conditions, CLP#2 2.1.4, 2.1.5 1 Membership campground fraud case, CLP#1 6.26.5;

Land installment sale case, CLP#3 10.2; Nursing home quality of care case, CLP#4 3.1.3; Infertility clinic misrepresentation, CLP#4 13.1; Collection agency litigation abuse case, CLP#2 11.2.2; Student loan collection abuse, CLP#2 14.2; Department of Educations failure to provide false certification discharges, CLP#5 9.1.2; and 1 Tax agency filing baseless proof of claims in chapter 13 bankruptcies, CLP#3 7.2.2, 7.2.3.

1 1 1 1 1 1

E.1 Federal Fair Debt Collection Case (Boddie)

E.1.1 Interrogatories
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) Plaintiff, ) ) v. ) ) LARRY CARSON; ) NATIONWIDE CASSEL, L.P.; ) and N.A.C. MANAGEMENT ) CORPORATION, ) Defendant. ) ) BRIAN BODDIE, PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests that each defendant respond to the following interrogatories. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1992 to the present. Throughout this request: a. Nationwide means Nationwide Cassel, L.P. b. NAC means N.A.C. Management Corporation. Other instructions and definitions to be used in making your response are attached hereto as Exhibit 1. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem.

251

Appx. E.1.1

Consumer Class Actions: A Practical Litigation Guide

INTERROGATORIES if the office is in the same premises used by defendants Nationwide and NAC there is any physical division between the office space used by Carson and the offices of Nationwide and NAC. 13. Describe all signs that identify Carsons office at [address], Chicago, Illinois. 14. Identify the party or parties a. to which the telephone company has issued the number [number], b. who pay the telephone bills for the number [number]. 15. State the full name and home address and telephone number of the Mr. Stone whose name appears on Exhibit A to the complaint in this action. 16. State whether anyone other than Mr. Stone signed (manually or by facsimile) letters similar to Exhibit A to the complaint in this action. 17. If Mr. Stone did not personally place a handwritten original signature on each demand letter similar to Exhibit A to the complaint that bears his name, describe the process by which his signature is placed thereon and identify the persons authorized to place his signature on such letters. 18. Identify all persons who answer the telephone number [number]. State the full name of the entity that issues a paycheck to each such person. 19. Identify all persons who respond to communications from consumers who have been sent letters similar to Exhibit A and who dispute their alleged obligations. 20. Identify all documents relating to plaintiffs alleged debt that Carson reviewed or was furnished prior to the sending to plaintiff of Exhibit A to the complaint in this action. 21. State what steps were taken and by whom to review the plaintiffs account before the transmission to plaintiff of Exhibit A to the complaint in this action. 22. If you are declining to produce any document or respond to any paragraph in whole or in part because of a claim of privilege, please: a. identify the subject matter, type (e.g., letter, memorandum), date, and author of the privileged communication or information, all persons that prepared or sent it, and all recipients or addressees; b. identify each person to whom the contents of each such communication or item of information have heretofore been disclosed, orally or in writing; c. state what privilege is claimed; and d. state the basis upon which the privilege is claimed. 23. State the net worth of each defendant. 24. If any document requested was, but no longer is, in your possession or subject to your control, please state: a. the date of its disposition; b. the manner of its disposition (e.g., lost, destroyed, transferred to a third party); and c. an explanation of the circumstances surrounding the disposition of the document. [Attorney]

1. Describe in detail the financial and business relationship(s) between defendant Carson and the other defendants. Include in your answer the billing method, rate, frequency and media; expenses billed; funds remittance method, rate, frequency and media; the nature and extent of services rendered (e.g., letter only, letter followed by suit in what circumstances); fee arrangement for each identified type of service. 2. Describe in detail the financial and business relationship(s) between defendant Nationwide Cassell and defendant N.A.C. Management. 3. State the location (address including floor or suite) and owner of the copier, printer or other mechanical device which printed collection letters in the form represented by Exhibit A [not attached herein] to the complaint in this action. 4. Identify the person(s) who operate the mechanical device to produce collection letters in the form represented by Exhibit A to the complaint in this action. 5. Identify by code name or number and date sent all documents transmitted to plaintiff by any defendant in effort to collect a debt allegedly owed by plaintiff to any of the defendants. 6. State the number of collection letters in the form represented by Exhibit A to the complaint in this action that were sent to consumers within the year prior to the filing of the complaint in this action. 7. Were any such letters sent to persons outside of Illinois? If so, state the number. 8. Provide the name and address of each consumer to whom a collection letter in the form represented by Exhibit A to the complaint in this action was sent within the year prior to the filing of the complaint in this action. 9. Describe, step-by-step, the process which resulted in Exhibit A to the complaint in this action being transmitted to plaintiff, beginning with the date and method of transmission of debtor information to Carson, e.g., computer tapes or other media delivered (when, by whom, where and to whom); content of computer tape or media; data input (where and by whom); computer entry or other means of directing transmission letters (where and by whom entry made), letter with debtor information printed (from where and by whom); letter with debtor information mailed (from where and by whom), computer tapes or media returned (on what occasion, when, by whom and to whom). 10. State the full name and home address and telephone number of each person employed by Carson at any time during the last three years a. at an office located at [address], Chicago, Illinois, and b. at an office located at [address], Chicago, Illinois. 11. State whether any employees of Carson are paid directly or indirectly by Nationwide, NAC, or anyone other than Carson. 12. Describe in detail the office maintained by Carson at [address], Chicago, Illinois, and the financial arrangements for the maintenance of that office. Include in your answer: the size of the office; whether there is or was a written lease; the full name and address of the lessor; the monthly rent; who uses or works in the office; whether the office is in the same premises used by defendants Nationwide and NAC; whether

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Sample Discovery
EXHIBIT 1 INSTRUCTIONS A. All answers are to be furnished in writing and under oath within [30] days of the date of the filing of these Interrogatories. B. Identify the person responding to each interrogatory, including the length of time the respondent has held his/her position with [adverse party], and the duties performed for [adverse party]. If more than one person responds or participates in the preparation of the answer to an interrogatory, each person responding or participating in preparation of the answers to each shall be similarly identified. The person under whose control or supervision these responses were prepared, shall be similarly identified and you shall state whether or not such person(s) will offer supporting or directly related testimony. C. For each interrogatory the following further information shall be given: a. The administrative unit of [adverse party] which maintains the information used in preparing the response; b. The name of the witness(es) most likely to testify concerning the material or information contained in the response; c. The date on which the response was prepared; and d. The [adverse partys] response to the requested item. D. In order to minimize duplication of time and effort in the discovery process, it is specifically requested that each and every page of [adverse partys] response to requests made herein be proofread by a responsible employee of [adverse party] to insure that all text, figures, etc. are clearly legible and that all abbreviations and any symbols are intelligible to any person who may have occasion to read the responding documents. E. Each interrogatory shall be answered upon your entire knowledge from all sources and all information in [adverse partys] possession or otherwise available from [adverse party], including information from [adverse partys] officers, employees, agents, representatives, attorneys, investigators, or consultants and information which is known by each of them. An incomplete or evasive answer is a failure to answer. F. Where an individual interrogatory calls for an answer which involves more than one part, each part of the answer should be clearly explained so that it is understandable. G. If you cannot answer any or all of the following interrogatories in full, after exercising due diligence to do so, state your inability and answer to the extent possible, state reasons for your inability to answer the remainder (including a list of sources which were consulted for a response), and state whatever information or knowledge you have concerning the unanswered portions. H. Each interrogatory is considered continuing, and if [adverse party] obtains information which renders its response to one of them incomplete or inaccurate, [adverse party] is obligated to serve amended answers on the undersigned. I. If any interrogatory may be answered fully by a document, the document may be attached in lieu of an answer if the document is marked to refer to the interrogatory to which it responds. J. If [adverse party] feels that any of the interrogatories is ambiguous or unclear in any way, it should notify [plaintiffs]

Appx. E.1.1
attorney so that the item(s) may be properly clarified prior to the preparation of the written response(s). K. When asked to identify, attach, describe or produce any documents, provide the following information: (a) the type of document (e.g., installment contract, letter, etc.); (b) the date the document bears; (c) the date on which it was prepared; (d) identities of the person(s) who prepared the same; (e) the identity of each signatory thereto; (f) the person(s) for whom the document was prepared, and each recipient; (g) the title of the document, or some other means of identifying it; (h) its present location and the identity of its present custodian; and, (i) if the original document has been destroyed, the date and reason for or circumstances under which it was destroyed. L. If any document which is required to be produced or identified is claimed to be privileged or to constitute work product or to be otherwise confidential, state the grounds upon which such privilege, work product or confidentiality is being asserted, and include a brief description of the document, identifying its author and persons receiving copies thereof. DEFINITIONS For the purpose of this request the following definitions apply: A. The terms document or documents shall refer to all writings and recorded materials, of any kind, that are or have been in the possession, control or custody of [adverse party] of which [adverse party] has knowledge, whether originals or copies. Such writings or recordings include but are not limited to: contracts, bills of sale, agreements, promissory notes, documents, applications, file memoranda, correspondence, telegrams, forms, bank statements, tax invoices, files, books, pamphlets, circulars, transcripts, orders, bulletins, periodicals, letters, reports, advertisements, graphs, charts, plans, records, studies, logs, manuals, minutes, photographs or microfilm, diagrams, drawings or other visual materials, lists, working papers, rough drafts, research material, notes, papers, ledgers, journals or other books of account, computer print-outs or discs or tapes, computer programs, intra- and inter-office memoranda, notebooks, desk calendars, diaries, statistical computations, confirmations, reports and/or summaries of interviews or conversations, reports and/or summaries of investigations, opinions or reports of consultants, statements or expressions of policy, appraisals, forecasts, of all natures and kinds whether handwritten, typed, printed, mimeographed, photocopied or otherwise reproduced, all tape recordings (whether for computer, audio or visual replay), models, or other manner of tangible things on which words, phrases, symbols, information or other matter are written, printed or recorded. If any document asked to be identified, described, or produced is not in your possession or subject to your control, give the reason therefor and its present location and the identity of the present custodian of the document and of any copy or summary thereof. B. Person shall mean natural persons, groups of natural persons acting in a collegial capacity (e.g., a committee or board of directors), corporation, partnerships, associations, joint ventures, labor unions, and any other incorporated or unincorporated business, governmental, public or social entity. C. Communication shall mean any or all transmittals of information, whether oral or reduced to writing, whether hand-

253

Appx. E.1.2

Consumer Class Actions: A Practical Litigation Guide

burdensome, please contact the undersigned and an effort will be made to remedy the problem. REQUESTS FOR PRODUCTION OF DOCUMENTS Please produce: 1. All form letters in use by Carson during 1992 or 1993 with respect to matters involving Nationwide, NAC or any related entity. 2. All documents transmitted to Carson by Nationwide or NAC with respect to the alleged debt of plaintiff. 3. All documents, or the form thereof if copies are not available, transmitted by Carson to plaintiff or to any other person (including NAC or Nationwide) with respect to the alleged debt of plaintiff. 4. All documents in which Carson was authorized to represent Nationwide, NAC or any other creditor with respect to plaintiffs alleged debt. 5. All agreements between Carson and either or both of the other defendants. 6. All documents, logs, and correspondence relating to plaintiffs alleged debt. 7. Copies of all policy manuals and instructions provided by any defendant to employees regarding collection practices or procedures. 8. All bills for professional services rendered by Carson to the other defendants. 9. All periodic reports made by Carson to the other defendants. 10. The most recent financial statement issued, or given to any third party, by each defendant. 11. Any insurance policy which provides coverage with respect to the matters complained of, or which may provide such coverage, or with respect to which a claim has been or will be filed in connection with this action. 12. All documents relating to the plaintiff, or which are indexed, filed or retrievable under his name or any number, symbol, designation or code (such as a loan number or Social Security number) assigned to him or his transaction or automobile. [Attorney] EXHIBIT 1 INSTRUCTIONS A. All documents are to be furnished in writing and under oath within [30] days of the date of the filing of these Requests. B. Identify the person responding to each Request, including the length of time the respondent has held his/her position with [adverse party], and the duties performed for [adverse party]. If more than one person responds or participates in the preparation of the response to a request, each person responding or participating in preparation of the answers to each shall be similarly identified. The person under whose control or supervision these responses were prepared, shall be similarly identified and you shall state whether or not such person(s) will offer supporting or directly related testimony. C. For each request the following further information shall be given:

written, typewritten, tape-recorded, or produced by electronic data processing, irrespective of how conveyed (e.g., telephone, telegram, telegraph, United States mail, private mail or courier service, facsimile transmittal, face-to-face contact), including but not limited to: inquiries, discussions, conversations, negotiations, agreements, understandings, meetings, telephone conversations, letters, notes, telegrams, advertisements, or other forms of verbal intercourse, whether oral or written. D. Relating to and regarding shall mean relating to, regarding, consisting of, referring to, reflecting, manifesting, prepared in connection with, describing, containing, attesting to, or being in any way legally, logically, or factually connected with the matter discussed, whether directly or indirectly. E. When requested to identify or provide information as to the identity of a person, state his/her full name, occupation, position or business relationship to [adverse party], currently and at the relevant period, and current or last known home and work addresses and telephone numbers, current or last known employment address, and social security number. F. The relevant period shall mean the period from the time [plaintiff] first came to [adverse partys] place of business [or: other significant event or date] up to and including the time when [relevant event or date]. G. When used without qualification, the transaction or the subject transaction means the transaction consummated by [plaintiff] on or about [date], involving [describe the substance of the transaction].

E.1.2 Requests for Production of Documents

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) Plaintiff, ) ) v. ) ) LARRY CARSON; ) NATIONWIDE CASSEL, L.P.; ) and N.A.C. MANAGEMENT ) CORPORATION, ) Defendants. ) ) BRIAN BODDIE, PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests that each defendant respond to the following Requests for Production of Documents. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1992 to the present. Throughout this request: a. Nationwide means Nationwide Cassel, L.P. b. NAC means N.A.C. Management Corporation. Other instructions and definitions to be used in making your response are attached hereto as Exhibit 1. If any paragraph of this request is believed to be ambiguous or unduly

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Sample Discovery
a. The administrative unit of [adverse party] which maintains the documents provided; b. The name of the witness(es) most likely to testify concerning the material or information contained in the response; c. The date on which the response was prepared; and d. A designation of which documents are provided in response to that request. You may wish to number each document so that you can refer to it by number. D. In order to minimize duplication of time and effort in the discovery process, it is specifically requested that each and every document in response to the requests be proofread by a responsible employee of [adverse party] to insure that all text, figures, etc. on copies are clearly legible and that all abbreviations and any symbols are intelligible to any person who may have occasion to read the responding documents. E. You shall respond to each request from all sources and all information in [adverse partys] possession or otherwise available from [adverse party], including information from [adverse partys] officers, employees, agents, representatives, attorneys, investigators, or consultants and information which is known by each of them. F. Where an individual request calls for a response which involves more than one part, documents produced in response to each part of the request should be clearly designated so that it is clear to which part of the request it is responsive. G. If you cannot provide any or all of the documents requested, after exercising due diligence to do so, state your inability and provide any documents available, state reasons for your inability to provide the documents or the remainder of them (including a list of sources which were consulted for a response), and state whatever information or knowledge you have concerning the present location of the document(s) and the identity of its present custodian. H. Each document request is considered continuing, and if [adverse party] obtains information which renders its response to one of them incomplete or inaccurate, [adverse party] is obligated to serve amended responses on the undersigned. I. If [adverse party] feels that any of the document requests is ambiguous or unclear in any way, it should notify [plaintiffs] attorney so that the item(s) may be properly clarified prior to production of the documents. J. When asked to produce, identify, attach, or describe any documents, provide the following information: (a) the type of document (e.g., installment contract, letter, etc.); (b) the date the document bears; (c) the date on which it was prepared; (d) identities of the person(s) who prepared the same; (e) the identity of each signatory thereto; (f) the person(s) for whom the document was prepared, and each recipient; (g) the title of the document, or some other means of identifying it; (h) its present location and the identity of its present custodian; and, (i) if the original document has been destroyed, the date and reason for or circumstances under which it was destroyed. K. If any document which is required to be produced or identified is claimed to be privileged or to constitute work product or to be otherwise confidential, state the grounds upon which such privilege, work product or confidentiality is being asserted, and include a brief description of the document, identifying its author and persons receiving copies thereof. DEFINITIONS

Appx. E.1.3

[Not reprinted herein, but identical to definitions found at E.1.1, Exhibit 1, supra.]

E.1.3 Requests for Admissions

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) Plaintiff, ) ) v. ) ) LARRY CARSON; ) NATIONWIDE CASSEL, L.P.; ) and N.A.C. MANAGEMENT ) CORPORATION, ) Defendants. ) ) BRIAN BODDIE, PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests that each defendant respond to the following Requests for Admissions. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1992 to the present. Throughout this request: a. Nationwide means Nationwide Cassel, L.P. b. NAC means N.A.C. Management Corporation. Other instructions and definitions to be used in making your response are attached hereto as Exhibit 1 [not attached herein, but see sample instructions and definitions at Exhibit 1 at end of E.1.1, supra]. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. REQUESTS FOR ADMISSIONS 1. Defendant Carson is an attorney. 2. Carson is engaged in the business of collecting consumer debts and regularly collects consumer debts. 3. Carson is listed in Sullivans Law Directory as having an office located at [address], Chicago, Illinois. 4. Carson is not listed in any telephone, legal or business directory as having an office located at [address], Chicago, Illinois. 5. Defendant Nationwide is a limited partnership which has its principal place of business at [address], Chicago, Illinois. 6. Nationwide is engaged in the business of a sales finance agency. Nationwide purchases motor vehicle retail installment contracts from car dealers and enforces the contracts against consumers. 7. NAC is an Illinois corporation with its principal place of business located at [address], Chicago, Illinois. 8. NAC is a general partner of Nationwide. 9. NAC owns 1% of Nationwide. 10. On or about May 5, 1993, Nationwide sent to Boddie, via the United States Mails, the letter attached as Exhibit A [not attached herein] to the complaint filed in this action.

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PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests, pursuant to Rule 33 of the Federal Rules of Civil Procedure, that defendant respond to the following Interrogatories. Throughout this request: a. VFNA means Volvo Finance of North America, Inc. b. VCFI means Volvo Car Finance, Inc. Other instructions and definitions are attached as Exhibit 1 [not attached herein, but see sample instructions and definitions at Exhibit 1 at end of E.1.1, supra]. INTERROGATORIES 1. Describe in detail how VFNA and VCFI determine the amount of a lessees liability for (i) voluntary early termination and (ii) default. 2. State the number of persons who satisfy the following criteria: (i) they signed contracts with VFNA using printed VFNA form VFNA-82-0888, any revision, (ii) the contract has a scheduled duration in excess of four months, (iii) the contract called for total payments of $25,000 or less, (iv) the contract had the box marked for personal use checked, and (v) the contract was in effect at any time within one year prior to the filing of this action, or is presently in effect. 3. State the name and address of each such person. 4. State which of these persons actually paid early termination or default charges. 5. State the number of persons who satisfy the following criteria: (i) they signed contracts with VFNA using the printed VFNA form, VFNA-82-0888, any revision, (ii) they had early termination or default charges assessed against them at any time within four years prior to the filing of this action, or have leases that are still in effect. 6. State the name and address of each such person. 7. State which of these persons actually paid early termination or default charges. 8. State whether any efforts were made, prior to or after the issuance of the form of contract of which Exhibit A [not attached herein] to the complaint in this action is an example, to estimate or quantify the financial impact of the early termination or default of a consumer automobile lease. If so, describe the efforts and provide the following information for each individual involved in the efforts: full name; present or last known home and business addresses and telephone numbers; whether presently employed by VFNA; all job title(s) at VFNA and dates during which each job was held; if not presently employed by VFNA, Social Security number and exact date of birth. 9. State whether VFNA made or purchased any automobile leases written on forms other than that of which Exhibit A to the complaint in this action is an example. 10. State whether any decision was made to cease using or modify the form of contract of which Exhibit A to the complaint in this action is an example. If so, state when such decision was made, the reasons for such decision, whether it was implemented, and provide the following information for each person who was involved in the decision: full name; present or last known home and business addresses and telephone numbers; whether presently employed by VFNA; all job ti-

11. Exhibit A is a printed form letter which has been sent to more than 100 persons who have accounts with Nationwide. 12. Neither Carson nor his administrative assistant Mr. Stone personally signed the letter attached as Exhibit A to the complaint in this action. 13. Neither defendant Carson nor anyone employed by him personally prepared, signed or mailed the preprinted form letters in the form exemplified by Exhibit A to the complaint in this action. 14. The address and telephone number on Exhibit A to the complaint in this action is that of Nationwide and/or NAC. 15. The number [number] is issued by Illinois Bell Telephone Company to Nationwide and/or NAC. 16. The number [number] is not issued by Illinois Bell Telephone Company to Carson. 17. Calls placed to Carson at [number] are not answered by Carson. 18. Exhibit A to the complaint contains the number of Nationwides file relating to Boddie, above his name. 19. Employees of Nationwide prepare and mail letters in the form represented by Exhibit A to the complaint bearing a rubber-stamp signature of Larry Carsons administrative assistant, purportedly named Mr. Stone. 20. Carson approved the preprinted form letter and authorized Nationwide and NAC to imprint the rubber-stamp signature of his administrative assistant, purportedly named Mr. Stone, on Exhibit A to the complaint. 21. Carson did not personally review the file of Boddie before he was sent the letter attached as Exhibit A to the complaint in this action. 22. Nationwide receives any payments sent by a consumer in response to a letter in the form represented by Exhibit A to the complaint in this action. [Attorney]

E.2 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
E.2.1 Interrogatories
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD,

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tle(s) at VFNA and dates during which each job was held; if not presently employed by VFNA, Social Security number and exact date of birth. 11. Describe in detail all items or elements of loss which VFNA suffers when a lease is terminated early and the amounts thereof, either as an absolute number or in relation to other items (such as the price of the car). 12. Identify all communications concerning early termination or default charges on automobile leases between any of the VFNA and any regulatory or law enforcement or consumer protection agency (including any state Attorney Generals office), the Federal Trade Commission, the Better Business Bureau, or other public or private agency which receives consumer complaints. 13. Identify all complaints (including claims in lawsuits) from lessees or other persons concerning early termination charges on automobile leases. 14. State whether a computer is used to perform any functions relating to the administration of automobile leases or to communications with lessees under such leases. If so, describe each such function and how a computer is used to perform it. State when a computer was first used to perform each such function and how that function was performed previously. 15. State, broken down by state or zip code, the number of automobile leases VFNA entered into and/or purchased that (i) indicate on their face that they were entered into for personal, family or household purposes, (ii) were entered into with natural persons. (iii) were for a period of time exceeding four months, (iv) were for a total contractual obligation not exceeding $25,000, and (v) were written on the printed form of which Exhibit A to the complaint in this action is an example. State how many such leases are still outstanding. State how many such leases had early termination charges assessed. 16. State whether VFNA ever agreed to the voluntary early termination of a lease written on the printed form attached as Exhibit A to the complaint in this action. If the answer is in the affirmative, describe how any charge imposed on the lessee was computed. 17. Provide the following information for each person who was involved in the decision to adopt the form of contract of which Exhibit A to the complaint in this action is an example: full name; present or last known home and business addresses and telephone numbers; whether presently employed by VFNA; all job title(s) at VFNA and dates during which each job was held; if not presently employed by VFNA, Social Security number and exact date of birth. 18. State, broken down by year, the total amount that was (i) assessed and (ii) collected on account of early termination and default charges. Explain in detail the reasons for the difference between the two figures, including a statement of any amounts assessed on account of early termination or default charges that were compromised. 19. If your response to any of the requests for admissions is anything other than an unqualified admission, please explain the basis for your denial. 20. If you are declining to produce any document or respond to any paragraph in whole or in part because of a claim of privilege, please: identify the subject matter, type (e.g., letter, memorandum), date, and author of the privileged communication or information, all persons that prepared or sent it,

Appx. E.2.2
and all recipients or addressees; identify each person to whom the contents of each such communication or item of information have heretofore been disclosed, orally or in writing; state what privilege is claimed; and state the basis upon which the privilege is claimed. 21. If any document requested was, but no longer is, in your possession or subject to your control, please state: the date of its disposition; the manner of its disposition (e.g., lost, destroyed, transferred to a third party); and an explanation of the circumstances surrounding the disposition of the document. 22. With respect to each expert whom you will or may call upon to give evidence in connection with this case, please state: his name, address, telephone number, occupation, and current employment; the subject matter of his expertise; his educational background, academic degrees, employment history, employment experience, and any other matters which you contend qualify him as an expert; the substance of all facts and opinions to which he could testify if called as a witness; a summary of the grounds for each such opinion; the identification of all documents provided to or obtained by the expert in connection with this case; the identification of all documents relied upon by the expert as a basis for each of his opinions; the contractual arrangements for his retention, including the amount of his compensation, whether that compensation has already been paid, and whether any compensation is contingent on the outcome of this litigation; the name and docket number of each judicial, administrative, or legislative proceeding in which he has testified or otherwise (as by deposition or affidavit) given evidence within the last ten years, plus the name of the court or other body before which the evidence was given; and the identification of each book, article, paper, or public statement by the expert that relates to the subject matter of his expertise. [Attorney]

E.2.2 Requests for the Production of Documents

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests, pursuant to Rules 34 of the Federal Rules of Civil Procedure, that defendant respond to the following Requests for Production of Documents. Throughout this request:

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14. All documents relating to any judicial or administrative proceeding in which VFNA was accused of any illegal or improper conduct relating to automobile leases, or in which allegations were made that any provision in a VFNA lease form was not enforceable. 15. All communications concerning early termination or default charges on automobile leases between any of the defendants and any regulatory or law enforcement or consumer protection agency (including any state Attorney Generals office), Better Business Bureau, or other public or private agency which receives consumer complaints. 16. All documents summarizing information on automobile leases that VFNA entered into and/or purchased. Include only documents containing information relating to two or more leases. 17. One copy of each different advertisement and piece of promotional literature, including literature disseminated through automobile dealers, concerning leasing motor vehicles through VFNA. In the case of print advertising, provide one copy of the advertisement and a list of the newspapers or other media in which it appeared. In the case of radio advertising, provide a script and a description of when and where it was broadcast. In the case of television advertising, provide a script and the story boards and a description of when and where it was broadcast. 18. All documents summarizing information concerning the amounts VFNA (i) assessed and (ii) collected on account of early termination or default charges on automobile leases. Include only documents containing information relating to two or more leases. 19. All insurance policies that may afford coverage with respect to the matters complained of. (Alternatively, you may state the name and address of the insurer, the policy limits per claim, occurrence and aggregate, and the policy language relevant to how a claim or occurrence is defined in the event of a class action or other multiple person claim.) 20. All budgets, forecasts, projections and other planning documents which describe, discuss, mention, or otherwise relate to early termination or default charges on automobile leases. 21. All documents that discuss, describe, refer to and/or relate to formula(s) and/or method(s) for determining the amount or method of determining the amount of any penalty or other charge for delinquency, default, or late payments on an automobile lease. 22. One example of each form of automobile lease that VFNA made or purchased, other than that of which Exhibit A [not attached herein] to the complaint in this action is an example. 23. All documents which describe or discuss the ability of consumers to understand the disclosures made in VFNAs automobile lease forms, or lease forms generally. 24. All documents relating to any Lease-Trak study. 25. All manuals and other documents that VFNA provided to other companies (including automobile dealers) to inform, instruct or advise them how to fill out automobile lease forms or how to determine the amounts to be inserted in such forms. 26. All documents relating to the plaintiff, or which are indexed, filed or retrievable under his name or any number, symbol, designation or code (such as a transaction number or Social Security number) assigned to him or his transaction.

a. VFNA means Volvo Finance of North America, Inc. b. VCFI means Volvo Car Finance, Inc. Other instructions and definitions are attached as Exhibit 1 [not attached herein, but see sample instructions at Exhibit 1 at end of E.1.2, supra and sample definitions at end of E.1.1, supra]. REQUESTS FOR PRODUCTION OF DOCUMENTS Please produce: 1. All documents describing practices or policies or procedures relating to the computation or enforcement of the lessees liability upon voluntary early termination. 2. All documents describing practices or policies or procedures relating to the computation or enforcement of the lessees liability upon early termination by default. 3. All documents containing summary or statistical information relating to termination or default by lessees. 4. All documents describing practices or policies or procedures relating to the origination or purchase of leases or the making of disclosures in connection with leases. 5. All documents describing practices or policies or procedures relating to the circumstances under which VFNA or VCFI agrees to the early termination of a vehicle lease, including the consideration to be paid for such early termination. 6. The complete file for each person who satisfies the following criteria: (i) they signed contracts with VFNA using printed VFNA form VFNA-82-0888, any revision, (ii) the contract has a scheduled duration in excess of four months, (iii) the contract called for total payments of $25,000 or less, (iv) the contract had the box marked for personal use checked, and (v) the contract was in effect at any time within one year prior to the filing of this action, or is presently in effect. 7. The complete file for each person who satisfies the following criteria: (i) they signed contracts with VFNA using the printed VFNA form, VFNA-82-0888, any revision, (ii) they had early termination or default charges assessed against them at any time within four years prior to the filing of this action, or have leases that are still in effect. 8. All documents compiling or summarizing information relating to early termination or default charges on automobile leases. 9. All documents compiling or summarizing information relating to the financial impact on VFNA of the early termination or default of automobile leases. 10. All documents describing practices or policies or procedures relating to the compromise of amounts demanded by VFNA on account of early termination or default charges on automobile leases. 11. All documents relating to any complaint, criticism or inquiry, by any person, concerning VFNAs computation or method of computation of automobile lease early termination or default charges, including the pleadings in any other litigation involving that subject. 12. All documents relating to any complaint, criticism or inquiry, by any person, concerning VFNAs disclosures of the terms of automobile leases, including the pleadings in any other litigation involving that subject. 13. VFNAs annual financial statements, annual reports and semiannual and quarterly financial statements.

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27. All documents discussing the early termination or default charges, or formulas for determining early termination or default charges, in the automobile lease forms of companies other than the VFNA. [Attorney]

Appx. E.2.3
8. All forms of leases which VFNA used or purchased between August 1, 1984 and the present had a space provided for indicating whether the lease was made for personal, family or household purposes. 9. On May 11, 1992, Shepherd entered into a lease with VFNA covering the lease of a 1992 Volvo 740 series automobile. Exhibit A [not attached herein] to the complaint filed in this action is an accurate copy of the lease. 10. In February 1993, Shepherd requested information from VFNA regarding the cost of terminating his lease early. A copy of his correspondence is attached as Exhibit B [not attached herein] to the complaint in this action. 11. In March 1993, Shepherd received a response from VCFI. A copy of the response is attached as Exhibit C [not attached herein] to the complaint in this action. 12. Contemporaneous with the filing of the complaint in this action, Shepherd returned the leased car to VFNAs agent and notified VFNA that he was terminating the lease. 13. VFNA and VCFI in fact require a lessee to pay in accordance with the calculations set forth in Exhibit C. 14. VFNA disseminated the form of which Exhibit A to the complaint in this action is an example. 15. Exhibit A to the complaint in this action is a standard form that was promulgated by VFNA in June 1990. 16. There are more than 100 persons who satisfy the following criteria: (i) they signed contracts with VFNA using printed VFNA form VFNA-82-0888, any revision, (ii) the contract has a scheduled duration in excess of four months, (iii) the contract called for total payments of $25,000 or less, (iv) the contract had the box marked for personal use checked, and (v) the contract was in effect at any time within one year prior to the filing of this action, or is presently in effect. 17. There are more than 1000 persons who satisfy the following criteria: (i) they signed contracts with VFNA using printed VFNA form VFNA-82-0888, any revision, (ii) the contract has a scheduled duration in excess of four months, (iii) the contract called for total payments of $25,000 or less, (iv) the contract had the box marked for personal use checked, and (v) the contract was in effect at any time within one year prior to the filing of this action, or is presently in effect. 18. There are more than 100 persons who satisfy the following criteria: (i) they signed contracts with VFNA using the printed VFNA form, VFNA-82-0888, any revision, (ii) they had early termination or default charges assessed against them at any time within four years prior to the filing of this action, or have leases that are still in effect. 19. There are more than 1000 persons who satisfy the following criteria: (i) they signed contracts with VFNA using the printed VFNA form, VFNA-82-0888, any revision, (ii) they had early termination or default charges assessed against them at any time within four years prior to the filing of this action, or have leases that are still in effect. [Attorney]

E.2.3 Requests for Admissions

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, PLAINTIFFS FIRST DISCOVERY REQUEST Plaintiff hereby requests, pursuant to Rule 36 of the Federal Rules of Civil Procedure, that defendant respond to the following Requests for Admissions. Throughout this request: a. VFNA means Volvo Finance of North America, Inc. b. VCFI means Volvo Car Finance, Inc. Other instructions and definitions are attached as Exhibit 1 [not attached herein, but see sample instructions and definitions at Exhibit 1 at end of E.1.1, supra]. REQUESTS FOR ADMISSIONS 1. Plaintiff, Ian Shepherd (Shepherd), is an individual who resides at [address] Athens, Georgia. 2. Defendant, Volvo Finance of North America, Inc. (VFNA), is a Delaware corporation which does business in Georgia. Its principal place of business is located at [address] Montvale, NJ. Its registered agent is CT Corporation System, [address] Atlanta, GA. 3. Defendant, Volvo Car Finance, Inc. (VCFI), is a Delaware corporation which does business in Georgia. Its principal place of business at [address], Montvale, NJ. Its registered agent is United States Corporation Company, [address], Atlanta, GA. 4. VFNAs regular business activities include leasing and offering to lease motor vehicles and purchasing leases of motor vehicles. 5. Many of VFNAs leases are made with natural persons who lease vehicles for personal, family or household purposes. 6. The scheduled term of most or all VFNA vehicle leases exceeds four months. 7. VCFIs regular business activities include servicing motor vehicle leases held by VFNA.

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E.2.4 Second Request for Production of Documents

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) IAN SHEPHERD, ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) PLAINTIFFS SECOND DISCOVERY REQUEST Plaintiff hereby requests, pursuant to Rule 34 of the Federal Rules of Civil Procedure, that defendants respond to the following Requests for Production of Documents. a. VFNA means Volvo Finance of North America, Inc. b. VCFI means Volvo Car Finance, Inc. Other instructions and definitions are attached as Exhibit 1 [not attached herein, but see sample instructions at Exhibit 1 at end of E.1.2, supra and sample definitions at Exhibit 1 at end of E.1.1, supra]. REQUESTS FOR PRODUCTION OF DOCUMENTS Please produce: 1. All manuals or similar documents which explain the meaning of the entries on document VS000000015. 2. All documents which discuss when the various forms identified as documents VS000000025 through 52 were used or to be used. 3. All manuals or similar documents which explain or list form codes. 4. All documents which comprise the manual referred to on document VS000000071. 5. All manuals or similar documents which explain the meaning of the entries on document VS000000071. 6. All manuals or similar documents which explain the meaning of the entries on document VS000000078. 7. All manuals or similar documents which explain the meaning of the entries on document VS000000081. 8. All manuals or similar documents which explain the meaning of the entries on document VS000000082. 9. The Monroney stickers for the vehicles leased to plaintiff, or if not available, the appropriate price lists necessary to compute the sticker price for the vehicles and all equipment thereon. 10. All manuals or similar documents which explain the meaning of the entries on document VS000000077. [Attorney]

E.3 Deceptive Practices Case Vendors Single Interest Insurance (Ortiz)

E.3.1 Interrogatories
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) Plaintiff, ) ) v. ) ) GMAC, GENERAL ) MOTORS ACCEPTANCE ) CORPORATION ) Defendant. ) ) CARMEN ORTIZ, FIRST SET OF INTERROGATORIES TO DEFENDANT GMAC The plaintiffs, pursuant to Rule 213 of the Supreme Court Rules, propound the following interrogatories to be answered by defendant General Motors Acceptance Corporation (GMAC), fully, separately and in writing within twenty-eight days of service hereof. INSTRUCTIONS [Not attached herein, but see sample instructions at Exhibit 1 at end of E.1.1, supra.] DEFINITIONS [Sample Definitions AG are not reprinted herein, but are found at Exhibit 1 at end of E.1.1, supra.] H. As used herein the term single interest physical damages insurance (SII) means the insurance sold by defendant MIC which insured the vehicles purchased by plaintiff Ortiz and the putative class members. I. As used herein putative class members and putative subclass members are the persons defined as the class members and subclass members in plaintiffs complaint at paragraph 3. INTERROGATORIES 1. State the name, title and business address of the person answering these interrogatories. 2. State the name, title and business address of all persons who participated in preparing the answers to these interrogatories and which interrogatory answers each person assisted in preparing. 3. How many persons are putative class members in this litigation?

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a. For each putative class member, state their name, address, and SII premium charge and the finance charge each was assessed on the SII policy. 4. How many persons are putative subclass members in this litigation. a. For each putative subclass members whose car was damaged or stolen while the MIC policy was in force, but who received no payment or credit from the policy, state their name, address, and any information known about the damage or theft. b. For each putative subclass member whose car was damaged or stolen while the SII policy was in force and who surrendered their vehicle to GMAC, state their name, address, the make and model and year of their insured vehicle, the cash value of the vehicle at the time of loss, the cost of repairs to the vehicle, the outstanding balance on their retail installment contract and amount of payment received by GMAC from MIC due to the loss. 5. Does the automobile dealer who sold the car receive any economic or other benefit when the retail purchaser has SII purchased by GMAC. If the answer is yes, what is the economic benefit? 6. Does GMAC receive any economic benefit when a retail purchaser has SII purchased by GMAC? If the answer is yes, what is the economic benefit? 7. Using the actual numbers, how was the premium computed for plaintiff Ortiz SII policy? 8. Using the actual numbers, how was the finance charge calculated on the SII premium for plaintiff Ortiz? 9. State the name, title, job description and current business address of persons employed by G.M.A.C. who have responsibility for SII claims, sales or any other matter regarding SII and for each person indicate what aspect(s) of SII they have responsibility for. 10. In years 19801984, in each year, what were the dollar amount of profits to GMAC generated by the sale of SII in Illinois? Indicate the actual calculation and accounting method used to calculate the profit figure for each years profit. 11. Does GMAC purchase SII from anyone other than MIC? If the answer is yes, state from what company the SII is purchased. 12. What was the term of the SII policy purchased for plaintiff Ortiz? 13. Could plaintiff Ortiz have purchased the SII policy directly from MIC? [Attorney]

Appx. E.3.2

E.3.2 Requests for Production of Documents

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) Plaintiff, ) ) v. ) ) GMAC, GENERAL ) MOTORS ACCEPTANCE ) CORPORATION ) Defendant. ) ) CARMEN ORTIZ, FIRST SET OF REQUESTS FOR PRODUCTION OF DOCUMENTS TO DEFENDANT GMAC The plaintiffs, through their attorneys, and pursuant to Illinois Supreme Court Rule 214 direct defendants General Motors Acceptance Corporation (GMAC) to produce within twenty-eight days for inspection and photocopying the documents listed below. INSTRUCTIONS [Not reprinted herein, but see Instructions at Appx. E.1.2, Exhibit 1, supra.] DEFINITIONS [Not reprinted herein, but see Definitions at Appx. E.1.1, Exhibit 1, supra.] DOCUMENTS REQUESTED 1. All documents concerning the sale, financing, SII insurance, or any other matter relating to the 1981 Chevrolet Monte Carlo (hereafter car) purchased by plaintiff Carmen Ortiz on September 19, 1981. 2. The SII policy which insured Carmen Ortiz car. 3. All documents regarding GMACs policies and procedures, for the sale or financing of SII policies sold in Illinois which were in effect from December 2, 1980 to the present. 4. All documents regarding GMACs policies and procedures for the application for payment of claims made on SII policies sold in Illinois which were in effect from December 2, 1980 to the present. 5. All documents, regarding SII, sent to or received from the: Illinois Department of Insurance; Illinois Attorney General; Department of Financial Institutions; or Federal Trade Commission. 6. All documents sent to or received from MIC concerning SII. 7. All form letters used, from December 2, 1980 to the present, to communicate with persons whose motor vehicles were purchased from Illinois automobile dealerships and financed by GMAC, regarding SII.

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Appx. E.4

Consumer Class Actions: A Practical Litigation Guide

less) respond to the following interrogatories. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1986 to the present. Other instructions and definitions to be used in making your response are attached at Exhibit 1. [Not attached herein, but see sample instructions and definitions at Exhibit 1 at end of E.1.1, supra]. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. Throughout this request, credit agreement includes any note, loan agreement, or retail installment contract. INTERROGATORIES 1. Provide the following information for all notes and loan agreements purchased by Reckless which (a) have dates after December 31, 1985, (b) are secured by a mortgage or trust deed on real estate, the address of which is the same as that used as a mailing address by the obligor (at any time), and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method: a. Total number; b. Full name and address of each payee; c. Number of notes and loan agreements payable to each payee; and principal amount of each; d. If different from (b), full name and address of each party from which Reckless purchased notes and loan agreements; e. Number of notes and loan agreements purchased from each party identified in response to (d) and principal amount of each; f. With respect to each party identified in response to (b) and (d), whether you have any reason to believe that the party was licensed under any law regulating the extension of credit to consumers and if so, under what law; g. Whether any of the notes or loan agreements were executed in connection with retail installment contracts, and if so, the number of such notes and loan agreements, the principal amounts of each, the names of the payees of each, and the identities of the parties from which each was purchased; h. Number and principal amount of the notes and loan agreements which have been voluntarily prepaid; i. Number of the notes and loan agreements upon which Reckless accelerated the balance due (whether or not such acceleration was later rescinded or modified) and principal amount of each; and j. Whether any of the notes or loan agreements were sold by Reckless and if so, the full name and address of each purchaser, the number of the notes or loan agreements sold to each such party and principal amount of each, and the date of each sale. 2. Provide the following information for all notes and loan agreements entered into by Reckless which (a) have dates after December 31, 1985, (b) are secured by a mortgage or trust deed on real estate, the address of which is the same as that used as a mailing address by the obligor (at any time), and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method:

8. All documents received from putative class members, regarding complaints or requests for policy benefits to have automobiles repaired under SII policies and all documents recording phone calls from or meetings with putative class members regarding complaints or requests for SII policy benefits. 9. All advertising materials, concerning SII, directed to Illinois automobile dealers for the dealers use or to be provided to retail automobile purchasers by the dealers. 10. All documents sent to Illinois automobile dealers who sell, assign or transfer consumer credit sales contracts to GMAC, regarding SII. 11. All documents regarding the number of SII policies sold to putative class members and the premium and interest charges for each SII policy. 12. All documents regarding: (a) the number of SII claims paid by MIC to repair the cars of putative class members; and (b) the amount of each claim paid. 13. All documents regarding putative class members who turned their cars over to GMAC to be treated as repossessions after damage or loss to the vehicle, the respective amounts collected or paid by way of a deficiency by each putative class member, and the outstanding balance on each contract. 14. All documents provided to shareholders concerning GMAC for fiscal or calendar years 1980 to present. 15. A list of the GMAC offices located in Illinois. 16. All advertising materials, concerning SII, provided to GMAC or Illinois automobile dealers who finance retail sales through GMAC. [Attorney]

E.4 State Usury Case (Adams)

E.4.1 Interrogatories
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION ) ) ) ) ) ) v. ) ) RECKLESS SAVINGS AND ) LOAN, ASSOCIATION, and ) PREDATORY FINANCE ) COMPANY, ) Defendants. ) ) PATRICIA ADAMS, on behalf of herself and all others similarly situated, Plaintiff, PLAINTIFFS FIRST SET OF INTERROGATORIES TO DEFENDANT Plaintiff Patricia Adams (Mrs. Adams) hereby requests that defendant Reckless Savings & Loan Association (Reck-

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Sample Discovery
a. Total number; b. Whether any of the notes or loan agreements were executed in connection with retail installment contracts, and if so, the number of such notes and loan agreements, the principal amounts of each, the names of the payees of each, and the identities of the parties from which each was purchased; c. Number and principal amount of the notes and loan agreements which have been voluntarily prepaid; d. Number of the notes and loan agreements upon which Reckless accelerated the balance due (whether or not such acceleration was later rescinded or modified) and principal amount of each; e. Whether any of the notes or loan agreements were sold by Reckless and if so, the full name and address of each purchaser, the number of the notes or loan agreements sold to each such party and principal amount of each, and the date of each sale; 3. Name all Illinois counties where Reckless has filed collection or foreclosure actions since January 1, 1986; 4. Provide the full name and address of each attorney or law firm through which Reckless has filed collection or foreclosure actions since January 1, 1986, in Illinois; 5. If your response to any of the requests for admissions is anything other than an unqualified admission, please explain the basis for your denial; 6. If you are declining to produce any document or respond to any paragraph in whole or in part because of a claim of privilege or otherwise, please: a. identify the subject matter, type (e.g., letter, memorandum), date, and author of the privileged communication or information, all persons who prepared or sent it, and all recipients or addresses; b. identify each person to whom the contents of each such communication or item of information have heretofore been disclosed, orally or in writing; c. state what privilege or other reason for nonproduction is claimed; and d. state the basis upon which the privilege is claimed. 7. If any document requested was, but no longer is, in your possession or subject to your control, please state: a. the date of its disposition; b. the manner of its disposition (e.g., lost, destroyed, transferred to a third party); and c. an explanation of the circumstances surrounding the disposition of the document. 8. With respect to each expert whom you will or may call as a witness at the trial of this case, please: a. state the experts name, address, telephone number, occupation, and current employment; b. state the subject matter of the experts expertise; c. state the experts educational background, academic degrees, employment history, employment experience, and any other matters which you contend qualify the witness as an expert; d. state the substance of all facts and opinions to which the expert could testify if called as a witness; e. state a summary of the grounds for each such opinion; f. identify all documents provided to or obtained by the expert in connection with this case;

Appx. E.4.1
g. identify all documents relied upon by the expert as a basis for each opinion; h. state the contractual arrangements for the experts retention, including the amount of compensation, whether that compensation has already been paid, and whether any compensation is contingent on the outcome of this litigation; i. state the name and docket number of each judicial, administrative, or legislative proceeding in which the expert has testified or otherwise (as by deposition or affidavit) given evidence within the last ten years, plus the name of the court or other body before which the evidence was given; and j. identify each book, article, paper, or public statement by the expert which relates to the subject matter of the witnesss expertise. 9. Identify all insurance policies which may afford coverage with respect to the matters complained of. State the insurer, nature of policy, deductible, limits per occurrence and in the aggregate, and any provisions relating to the computation of the limits in the case of a class action or where multiple claims are involved. 10. Provide the following information for all credit agreements entered into by Reckless between January 1, 1986 and the present which (a) were secured by residential property in Illinois and (b) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method: the full name, home and business addresses, and telephone number of each obligor. 11. Provide the following information for all credit agreements purchased by Reckless which (a) bear dates between January 1, 1986 and the present, (b) were secured by residential property in Illinois and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method: the full name, home and business addresses, and telephone number of each obligor. 12. Provide the following information for all credit agreements dated after January 1, 1986 with respect to which Reckless has used the Rule of 78s in computing the amount due upon voluntary prepayment or acceleration: a. full name, home and business addresses, and telephone number of each obligor; b. amount of finance charge due on each agreement as computed by Reckless; c. amount of finance charge which would have been due on each agreement had the actuarial method been utilized. 13. Identify all other judicial or administrative proceedings (not involving the undersigned counsel) in which Reckless was accused of fraud, unlawful or deceptive trade practices, violation of laws regulating the terms of credit transactions, consumer fraud or consumer protection violations, and/or violation of laws requiring disclosures to consumers, or in which the court declined to enforce any portion of the amount claimed to be due to Reckless on the grounds that it was unlawful or unconscionable. State (a) the full name and docket number of the proceeding, (b) the court or other tribunal before which it was pending, (c) the nature of the proceeding, and (d) its outcome.

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Consumer Class Actions: A Practical Litigation Guide

14. Identify and provide the following information for each person who was an officer or director of Reckless during any portion of the period from January 1, 1986 to the present: a. full name; b. home and business addresses and telephone number; c. whether currently an officer or director; d. positions held; e. if not currently an officer or director, social security number and exact date of birth. 15. Identify and provide the following information for each employee of Reckless who participated in originating credit agreements, purchasing credit agreements, or computing amounts due upon prepayment or acceleration of credit agreements, during any portion of the period from January 1, 1986 to the present: a. full name; b. home and business addresses and telephone number; c. job titles; d. whether currently employed by Reckless; e. if not currently employed, social security number and exact date of birth. 16. Identify and provide the following information for each attorney or law firm that advised Reckless during any portion of the period from January 1, 1986 to present with respect to the terms of the credit agreements it entered into or purchased: a. full name; b. home and business addresses and telephone number; c. whether Reckless is claiming reliance on the advice of such attorney in connection with this litigation; and d. if so, precisely when the advice in question was given and what it was. 17. State whether any person referred to in any of the preceding interrogatories or identified in response to any of the preceding interrogatories has been convicted of any criminal offense punishable by imprisonment in excess of one year or involving dishonesty, deception or false statement. If your answer is in the affirmative, name the person(s) involved and state the full name and docket number of the proceeding, the court before which it was pending, the nature of the charges, and the judgment or sentence imposed. 18. State whether Reckless has any policy or regular practice concerning the destruction, disposal and/or retention of any documents requested herein. If so, describe such policy or practice in detail, stating the time period(s) for which documents are to be kept. [Attorney]

E.4.2 Requests for Production of Documents

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION PATRICIA ADAMS, on behalf of herself and all others similarly situated, Plaintiff, v. ) ) ) ) ) ) ) ) )

RECKLESS SAVINGS AND LOAN, ASSOCIATION, and PREDATORY ) FINANCE COMPANY ) Defendants. ) )

PLAINTIFFS FIRST REQUEST FOR PRODUCTION OF DOCUMENTS Plaintiff Patricia Adams (Mrs. Adams) hereby requests that defendant Reckless Savings & Loan Association (Reckless) respond to the following document requests. Documents are to be produced at the office of plaintiffs counsel, where they will be copied and promptly returned. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1986 to the present. Other instructions and definitions to be used in making your response are attached as Exhibit 1 [not attached herein, but see sample instructions at Exhibit 1 at end of E.1.2, supra and sample definitions at Exhibit 1 at end of E.1.1, supra]. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. Throughout this request, credit agreement includes any note, loan agreement, or retail installment contract. DOCUMENTS REQUESTED 1. All documents describing, discussing or referring to the use of the Rule of 78s with respect to credit agreements secured by mortgages. 2. All credit agreements entered into or purchased by Reckless which (a) bear dates between January 1, 1986 and the present, (b) were secured by residential property in Illinois and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 3. All credit agreements bearing dates after January 1, 1986 with respect to which Reckless has used the Rule of 78s or sum of the digits method in computing the amount due upon voluntary prepayment or acceleration. 4. All documents relating to the amount of unearned finance charges Reckless has obtained during any portion of the period from January 1, 1986 to the present. 5. All financial statements issued by Reckless at any time between January 1, 1986 and the present.

264

Sample Discovery
6. All insurance agreements and agreements in the nature of insurance (e.g., bonds, indemnification agreements) which may afford coverage with respect to the matters complained of, including all policies of errors and omissions insurance and comprehensive general liability policies in effect at any time between January 1, 1986 and the present. 7. All agreements between Reckless and Fix-It Remodeling Company. 8. All agreements between Reckless and any other party from which Reckless purchased credit agreements which (a) bear dates between January 1, 1986 and the present, (b) were secured by residential property of Illinois and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 9. All filings made by Reckless with any regulatory agency (including the Department of Financial Institutions and the Office of the Savings & Loan Commissioner) between January 1, 1986 and the present. 10. All documents provided to Reckless by any regulatory agency between January 1, 1986 and the present. 11. All documents which refer or relate to Patricia Adams, or which are filed, indexed, stored or retrievable under her name, or under any identifying number, symbol, code or designation assigned to her. [Attorney]

Appx. E.4.3
less) respond to the following requests for admissions. Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1986 to the present. Other instructions and definitions to be used in making your response are attached as Exhibit 1 [not attached herein, but see sample instructions and definitions at Exhibit 1 at end of E.1.1, supra]. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. Throughout this request, credit agreement includes any note, loan agreement, or retail installment contract. REQUESTS FOR ADMISSIONS 1. At all times between May 1, 1988 and July 1, 1989, Mrs. Adams resided in a single-family home which she owns at [address] Chicago, Illinois. 2. Fix-It Remodeling Company is not licensed by the Department of Financial Institutions. 3. During the period from January 1, 1986 to the present, Reckless purchased in excess of 100 notes which (a) were secured by residential property in Illinois and (b) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 4. During the period from January 1, 1986 to the present, Reckless entered into in excess of 100 loan agreements which (a) were secured by residential property in Illinois and (b) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 5. Reckless purchased in excess of 250 notes which (a) were dated after December 31, 1985, (b) were secured by residential property in Illinois and (c) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 6. During the period from January 1, 1986 to the present, Reckless entered into in excess of 250 loan agreements which (a) were secured by residential property in Illinois and (b) provided for the computation of finance charges upon prepayment using the Rule of 78s or sum of the digits method. 7. Reckless has used the Rule of 78s in computing the amount due for voluntary prepayment of credit agreements which provide for the use of the Rule of 78s upon prepayment. 8. Reckless has used the Rule of 78s in computing the amount due upon acceleration of credit agreements which provide for the use of the Rule of 78s upon prepayment. [Attorney]

E.4.3 Requests for Admissions

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION ) ) ) ) ) ) v. ) ) RECKLESS SAVINGS AND ) LOAN, ASSOCIATION, ) and PREDATORY ) FINANCE COMPANY, ) Defendants. ) ) PATRICIA ADAMS, on behalf of herself and all others similarly situated, Plaintiff, PLAINTIFFS FIRST REQUEST FOR ADMISSIONS Plaintiff Patricia Adams (Mrs. Adams) hereby requests that defendant Reckless Savings & Loan Association (Reck-

265

Appendix F

Sample Response to Defendants Motion to Stay Discovery

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) Plaintiff, ) ) v. ) ) LASALLE NORTHWEST ) NATIONAL BANK, ) Defendant. ) ) ALLISON BROWN, PLAINTIFFS RESPONSE TO LASALLES MOTION TO STAY DISCOVERY Plaintiff submits this memorandum in response to the motion to stay discovery filed by LaSalle Northwest National Bank (LaSalle). As demonstrated below, there is no merit to LaSalles motion, which was obviously filed as a post hoc attempt to justify a persistent refusal to provide any meaningful discovery while repeatedly representing and promising to provide discovery. Parts IIV of this response refute each of the assertions in LaSalles motion, point by point. Part V of this response outlines the history of LaSalles refusal to provide discovery. I. BROWN, WITH THE ASSISTANCE OF HER SON MICHAEL ALEXANDER, CAN REPRESENT THE CLASS LaSalles motion substantially misstates the facts and the law. Mrs. Brown is an elderly lady who got through the second grade while working in the fields in rural Mississippi. She is functionally illiterate and has a great deal of difficulty communicating or understanding. She has nevertheless managed to hold the same job for at least 20 years, filling packages on an assembly line and taking home about $7.50 an hour. LaSalle substantially misstates what Ms. Brown said at her deposition. As will become apparent from the transcript if the Court reads it, most of what she said was simply nonresponsive and indicative of a person of limited capacity. Mrs. Browns affairs have always been handled by her adult son, Michael Alexander. They live together and share household expenses. Michael Alexander handled the purchase of the car that gave rise to her claim against LaSalle (Alexander Dcl. [Exhibit A], kk412 [not attached herein]), and all subsequent dealings with LaSalle (Alexander Dcl., k15).

There have been many class actions in which the class representative was incapable of handling their own affairs without assistance. Indeed, classes have been certified in such extreme situations as where the named plaintiffs were certified psychotics, Coley v. Clinton, 635 F.2d 1364, 1379 (8th Cir. 1980) (trial court committed reversible error by failing to certify a class of inmates in the maximum security ward of the Arkansas state hospital for the criminally insane); Johnson v. Brelje, 482 F.Supp. 121 (N.D.Ill. 1979) (certifying class in similar case), persons not sui juris, Beavers v. Sielaff, 400 F.Supp. 595 (N.D.Ill. 1975) (class certified in action complaining that rights of minors had been violated), or convicted felons, Haywood v. Barnes, 109 F.R.D. 568, 579 (E.D.N.C. 1986) (Incarcerated felons have long been certified as class plaintiffs in numerous cases). However, with the assistance of her son, Ms. Brown can nevertheless represent the class. Surowitz v. Hilton Hotels Corp., 383 U.S. 363 (1966), is directly on point. The named plaintiff in that case was a Polish immigrant with a very limited English vocabulary and practically no formal education, who worked as a seamstress in New York where by reason of frugality she saved enough money to buy some thousands of dollars worth of stocks, thereby making herself a potential victim for corporate manipulators and securities fraudsters. (383 U.S. at 368) She was unable to understand anything about the actionMrs. Surowitz demonstrated in her oral testimony that she knew nothing about the content of the suit (383 U.S. at 372)but signed the complaint on the advice of her grown son-in-law, who handled her business affairs and did understand the complaint and the action. The district court and the Seventh Circuit dismissed the complaint. The opinion of the Court of Appeals indicates in several places that a woman like Mrs. Surowitz, who is uneducated generally and illiterate in economic matters could never under any circumstances be a plaintiff in a derivative suit brought in the federal courts to protect her stock interests. (383 U.S. at 372) The Supreme Court reversed and remanded to the District Court for trial on the merits. (383 U.S. at 374) The Supreme Court stated that it would not construe Rule 23 in such a manner as to foreclose bona fide complaints [from being] carried to an adjudication on the merits. (383 U.S. at 373) LaSalle attempts to suggest that Surowitz is not in point because it is a derivative action. LaSalle fails to mention that a derivative action is a species of class action. When Surowitz was decided, under the pre-1966 version of Rule 23, derivative actions were addressed under the same Rule 23 dealing with other class actions. The 1966 revisers of the Federal Rules

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Appx. F

Consumer Class Actions: A Practical Litigation Guide

must be able to communicate fluently in English without the assistance of family members may be issuing a license to wrongdoers who would take advantage of the persons in society least able to protect themselves. Jane B., supra. For this reason, most courts do not impose stringent requirements on class representatives. Hernandez v. United Fire Insurance Co., 79 F.R.D. 419, 426-7 (N.D.Ill. 1978); Aguirre v. Bustos, 89 F.R.D. 645 (D.N.M. 1981); In re Bristol Bay, Alaska, Salmon Fishery Antitrust Litigation, 78 F.R.D. 622 (W.D.Wash. 1979). Carried through to its logical conclusion, Koenig would hold that an investment fraud directed against recent immigrants from a non-English-speaking country is not actionable. If no one spoke fluent English, they could not serve as class representative, and individual actions are not feasible. The same conclusion might apply in cases involving wrongs directed against Hispanic farm workers, Aguirre v. Bustos, supra, or Native Alaskan fishermen, Bristol Bay, supra. Thus, while such persons are theoretically entitled to the equal protection of the laws, their rights are incapable of vindication. The scheme alleged in this case is, although not perhaps obviously so, one directed at disadvantaged persons. Why, and from what group of people, would LaSalle seek to originate loans through a network of insurance agents obtaining business from used car lots? Not from the average white middleclass person who has free access to credit. Most such persons interested in financing would telephone several banks, get their rates and compare what the dealer offers. However, significant segments of society do not have free access to bank credit. If they buy a car, they finance it through the dealer, who normally arranges credit through finance companies. LaSalle sought to tap this marketwhile illegally insulating itself from responsibility for the conduct of the car dealers. The average class member in this case is thus an AfricanAmerican or Hispanic individual with a blue-collar or clerical job. Such persons can ill-afford LaSalles evasion of legal protections intended to protect their automobile investment. The impact is especially pernicious because, by evading a significant operating expense that law-abiding competitors bear (having to inquire into the business conduct of car dealers that refer business and write off paper where the dealer does not deliver as promised), LaSalle could slightly undercut any lawabiding competitor and gain substantial market share. II. MISCELLANEOUS MATTERS RAISED BY LASALLE LaSalle claims that its first knowledge of Michael Alexanders existence and his importance in this case did not occur until the Plaintiffs deposition (LaSalle Mot., p. 6, k13). Nothing is cited for this assertion. In fact, LaSalle had been dealing with Michael Alexander all along. (Alexander Dcl., k15) We believe that LaSalle knew perfectly well that the son was handling his mothers affairs, and that the sole purpose of taking the mothers deposition was to manufacture an excuse for refusing to respond to discovery (see below, for the history of discovery in this case). In any event, LaSalles counsel could have asked plaintiffs counsel, through interrogatories or otherwise, who dealt with his client and the car dealer. He could also have asked his clients personnel whom they had dealt with on the Brown account. He did not do the first. He suggests that he did not do the latter, although it seems rather incredible. In any event, for LaSalle to now claim that its counsels supposed ignorance about who was dealing with LaSalle was the result of a delaying tactic by the Plaintiffs

created a separate rule dealing with derivative actions, Rule 23.1, because A derivative action by a shareholder of a corporation or by a member of an unincorporated association has distinctive aspects which require the special provisions set forth in the new rule. Notes of Advisory Committee on Rules, 1966 comment to Rule 23.1. However, both before and after the 1966 revision, the plaintiff in a derivative action had to, in the words of present rule 23.1, fairly and adequately represent the interests of the shareholders or members similarly situated. . . . The Supreme Court in Surowitz nevertheless mandated that the action proceed to trial on the merits something it clearly would not have done had it believed that Ms. Surowitz could not, as a matter of law, satisfy the adequacy of representation requirement of Rule 23. Numerous subsequent decisionsincluding decisions from this District, which LaSalle does not disclosehave treated Surowitz as precedent with respect to class actions as well as derivative actions. E.g., Schwartz v. System Software Associates, Inc., 138 F.R.D. 105, 107 (N.D.Ill. 1991); Ridings v. Canadian Imperial Bank, 94 F.R.D. 147, 154 (N.D.Ill. 1982); DuraBilt Corp. v. Chase Manhattan Corp., 89 F.R.D. 87, 10203 and n. 18 (S.D.N.Y. 1989); In re Bristol Bay, Alaska, Salmon Fishery Antitrust Litigation, 78 F.R.D. 622 (W.D.Wash. 1979); Landy v. Amsterdam, 96 F.R.D. 19, 21 and n. 2 (E.D.Pa. 1982) (similar requirements have been applied to test the adequacy of representation for stockholder derivative actions under Rule 23.1. . . . Thus I conclude that my reliance upon Surowitz, 383 U.S. at 363, is not misplaced). Many of these decisions, and others as well, note that the cases relied upon by LaSalle are inconsistent with Surowitz, which of course is controlling. Schwartz v. System Software Associates, Inc., supra; Fickinger v. C. I. Planning Corp., 103 F.R.D. 529, 533 and n. 5 (E.D.Pa. 1984); Persky v. Turley, CCH Fed.Sec.L.Rptr. k96,462, at p. 92,046 (D.Ariz. 1991); Landy v. Amsterdam, supra; Dura-Bilt v. Chase Manhattan, supra. LaSalle also miscites Koenig v. Benson, 117 F.R.D. 330 (E. D.N.Y. 1987). The court in Koenig felt that a named plaintiff who only spoke Yiddish might not be able to provide adequate representation in a securities fraud case because he could not respond to unique defenses based on typicality, reliance, and credibility. Koenig has no application here. For one thing, the causes of action asserted do not raise any questions of individual reliance or credibilityif there was a scheme to refer consumers to LaSalle while omitting the FTCmandated notice subjecting LaSalle to claims and defenses, its execution is ascertainable from the existence of a note, the issuance of a check to an auto dealer that referred business to LaSalle, and the omission of the FTC-mandated notice in the note. More importantly, Michael Alexander not only acted on Ms. Browns behalf in connection with the filing of suit, but with the underlying transaction. If any reliance is necessary, it was his reliance. More fundamentally, Koenig is wrongly decided. There are many people in the United States who do not speak English, cannot read, or suffer from mental impairments. They nevertheless are productive members of society, earn money, own property, and have rights that are violated. Indeed, their difficulties may cause them to be especially attractive targets. In many cases, the only practical way to secure redress for such violations is through a class action. Jane B. v. New York City Dept. of Social Services, 117 F.R.D. 64, 71 (S.D.N.Y. 1987). Thus, a court which holds that a class representative

268

Sample Response to Defendants Motion to Stay Discovery

counsel is frivolous. Significantly, LaSalle has now known not only about Michael Alexander but what he would say for several weeks, but has made no effort to ask for his deposition. LaSalle also objects to making Michael Alexander coplaintiff. No one has requested anything of the sort. The legal holder of the claim is Mrs. Brown. If the Court deems it necessary to include his name in the action, it might be appropriate to include Michael Alexanders name in the caption as next friend of his mother. In addition, the entire issue is besides the point. Another victim of the practice complained of, Edward Martin Jr., has moved to intervene as a plaintiff and class representative, thereby cutting short LaSalles attempt to stall the case. LaSalle cannot claim ignorance of Edward Martin Jr.it sued him in state court on a note he executed to pay for a car that had concealed wreck damage and rapidly became inoperable, whereupon he retained plaintiffs counsel to represent him. (Exhibit B, attached,[not attached herein]) LaSalle asserts that the Court should not allow the complaint to be amended, without stating any reasons why the Court should not allow an amendment in a case that is only six months old.1 Mr. Martin could in any event file his own action, which he has authorized if necessary. III. LASALLE IS NOT ENTITLED TO A STAY OF DISCOVERY LaSalle also asks that the Court stay discovery as to any documents or information which exceed the scope of the Plaintiffs individual transaction with LaSalle Northwest until the court rules on class certification. (LaSalle Mot., p. 8, k16) LaSalle conveniently ignores the fact that the nature of the case is such that all discovery pertains equally to class and meritsthe elements of the class and individual claims coalesce. Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989). Plaintiff cannot prove that 16 C.F.R. part 433 applies without proving a pattern of dealer referrals through State Farm agents. Plaintiff also cannot prove a RICO case without proving a pattern. Discovery concerning other victims is also relevant under state law claims to show (i) applicability of 16 C.F.R. part 433, (ii) intent,2 (iii) the appropriateness of punitive damages.3 LaSalle is in effect asking the Court to prevent plaintiff from proving her case. Nothing that LaSalle cites even remotely supports such a stay. This is not a case where a motion will render discovery
1 Courts have frequently allowed intervention to protect the interests of the class from defenses and objections applying solely to the original named plaintiff. Williams v. Frey, 551 F.2d 932 (3d Cir. 1977); Deutschman v. Beneficial Corp., 132 F.R.D. 359, 380 (D.Del. 1990); In re Commonwealth Oil/Tesoro Petroleum Corp. Securities Litigation, 467 F.Supp. 227, 258 (W.D.Tex. 1979); Ex parte Hayes, 579 So.2d 1343 (Ala. 1991). 2 Joseph Taylor Coal Co. v. Dawes, 122 Ill.App. 389 (1905), affd, 220 Ill. 147, 77 N.E. 131 (1906); Eaves v. Penn, 587 F.2d 453, 463-4 (10th Cir. 1978); Edgar v. Fred Jones LincolnMercury, 524 F.2d 162, 167 (10th Cir. 1975). 3 Carter v. Mueller, 120 Ill.App. 3d 314, 457 N.E.2d 1335, 1337 (1st Dist. 1983) (a pattern of deception justifies an award of punitive damages); accord, Tetuan v. A.H. Robins, 738 P.2d. 1210 (Kan. 1987); Eichenseer v. Reserve Life Ins. Co., 934 F.2d 1377 (5th Cir. 1991).

Appx. F

unnecessary. What LaSalle really wants is to prevent Plaintiffs counsels search for a replacement class representative (LaSalle Mot., p. 11, k23), without realizing that it has aggrieved so many consumers, such as Mr. Martin, that no search is required. This is not some sort of Milli Vanilli class action involving a small or trivial loss to class members. Those class members who have need of their rights under 16 C.F.R. part 433 generally have damages of at least several thousand dollars. While the consumers are, in the absence of the required disclosure, ignorant of their rights, and it is not economically feasible to pursue a $5,000 or $10,000 claim that requires the plaintiff to establish a pattern of conduct on the part of a defendant that strains to avoid any meaningful discovery, the loss of $5,000 or $10,000 is a serious blow to the average working man or woman who lives from paycheck to paycheck. The Courts decisions have been reported, at least on the computer services, and are known to anyone likely to receive inquiries from aggrieved consumers (legal services offices, bar association referral services, bankruptcy attorneys,4 etc.), so that the problem is one of efficiently dealing with a large number of aggrieved consumers, not finding a plaintiff willing to lend his or her name to a nonexistent grievance. IV. LASALLES REQUEST THAT PLAINTIFFS COUNSEL BE PREVENTED FROM COMMUNICATING WITH OTHER BORROWERS IS BASELESS As an afterthought, LaSalle asks that the Plaintiffs counsel be precluded from contacting the automobile loan customers identified in the documents already produced by LaSalle Northwest. (LaSalle Mot., p. 8, k16) LaSalle cites no authority for the proposition that a partys counsel can be prevented from contacting persons who are witnesses in the case, as well as potential class members. In a decision which LaSalle does not cite, the Supreme Court has almost completely prohibited such orders. Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981). Furthermore, the identities of LaSalles automobile loan customers are a matter of public record. The only way in which a lien can be perfected on an automobile is by having it placed on the title. Automobile titles are matters of public record. The identities of those customers against which LaSalle commenced legal proceedings, such as Mr. Martin, are also found in public court records. LaSalle cites no authority suggesting that it is appropriate for a court to suppress public record information in the manner it requests. It quite clearly is not. Florida Star v. BJF, 491 U.S. 524, 535 (1989); Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975); Sasu v. Yoshimura, 147 F.R.D. 173, 175 (N.D. Ill. 1993).

4 The difficulty of litigating a $5,000 or $10,000 consumer claim is such that many consumers faced with liability on a note which on its face admits of no defenses, and who have not received what they bargained for, seek to discharge the debt in bankruptcy. If the consumer does not really have a debt problem, but a purported debt which he or she should not have to repay, this result is unconscionable.

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names of borrowers whose names are within the alphabetical range covered by the 50 files, but whose files were omitted, are: Josie Paul Emile; Richard M. Evans; Eduardo and Mercedes Espinoza; Mulugeta Endale. Copies of some of these individuals contracts are attached as Exhibit E [not attached herein]. 7. Obviously, LaSalle selectively produced 50 files that it felt would be relatively innocuous, thereby defeating the entire purpose of requesting the first 50 files of persons whose names began with the letter E. Significantly, Exhibit D does not disclose that the files produced were not those requested i.e., the first 50. 8. While the attempted deception was unavailingplaintiffs counsel had obtained the names of sufficient LaSalle customers from public records to catch any such trickthe fact that it was attempted underscores LaSalles approach toward discovery. LaSalle attempted to avoid producing any information for as long as possible and then tried to pass off records other than the sample requested as being the random sample requested. Clearly, LaSalle would not have done this had it not been convinced that a random sample would support plaintiffs case. 9. Upon discovering the trick, plaintiffs counsel requested access to all of LaSalle customer records, without selection. 10. LaSalle then filed its motion to stay discovery, which seeks to perpetuate the present state of affairsthe case has been pending for six months and LaSalle has produced essentially no meaningful information. CONCLUSION LaSalles motion to stay discovery should be denied. Respectfully Submitted, [Attorney]

V. LASALLE IS SIMPLY ATTEMPTING TO AVOID DISCOVERYA COURSE OF CONDUCT UPON WHICH IT HAS BEEN EMBARKED ALL ALONG We set forth below the history of discovery in this matter. It is a history of delay. LaSalles entire course of conduct confirms that they never intended to provide any discovery: 1. Plaintiff served her first discovery request on LaSalle on February 16, 1993. LaSalles counsel agreed to respond by May 10, 1993. LaSalle did not in fact respond until more than a month later, on June 7, 1993, all the while assuring counsel for plaintiff that the discovery was forthcoming. (Declaration of Cathleen Combs [Exhibit C, attached] [not attached herein]). 2. LaSalles answers to interrogatories referred plaintiff to documents that LaSalle now refuses to produce. For example, instead of responding with the names of witnesses, LaSalle referred plaintiff to the documents. 3. LaSalles counsel then asked the Court to bifurcate discovery. The Court declined. 4. On June 7, 1993, LaSalle drafted a discovery plan calling for the production of documents and information which LaSalle now refuses to produce. See Exhibit D, [not attached herein] showing that the drafts emanated from LaSalle. Plaintiffs counsel agreed to the discovery plan with the understanding that plaintiff would have easy access to the discovery that LaSalle had agreed to produce. The deadlines set by the Court anticipate that plaintiffs would get the discovery. If plaintiff does not get the documents, the deadlines could easily result in plaintiff being prevented from having access to the documents she needs to prove her case. 5. One of the items that LaSalle was to provide was the first 50 files of borrowers beginning with the letter E. See Declaration of Cathleen Combs (Exhibit C, attached) [not attached herein]. The purpose was to determine what entries in the file indicated a referral relationship with the car dealer. 6. While 50 files were provided, they were not the first 50. The list of files provided is attached as Exhibit D. Among the

270

Appendix G

Sample Pleadings to Compel Discovery

G.1 Motion to Compel Answers

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) NO. 97) AMERICAN GENERAL ) CONSUMER DISCOUNT ) COMPANY, ) Defendant. ) ) DINA L. WALSH, on behalf of herself and all others similarly situated, Plaintiff, PLAINTIFFS MOTION TO STRIKE DEFENDANTS OBJECTIONS AND TO COMPEL ANSWERS TO INTERROGATORIES AND REQUEST FOR PRODUCTION OF DOCUMENTS ADDRESSED TO DEFENDANT Plaintiff, by and through her attorneys files this Motion to Strike Defendants Objections to Plaintiffs Interrogatories and Request for Production of Documents and to compel discovery pursuant to Federal Rule of Civil Procedure 37 and in support thereof avers as follows: 1. This is a consumer class action arising out of the Defendants unconscionable lending practices of flipping loans into additional higher rate loans and packing loans with unrequested, extravagantly priced insurance products. Plaintiff sues for violations of the Truth in Lending Act, 15 U.S.C. 1601 et seq., the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. 201-1 et seq. and common law fraud and unconscionability. 2. On August 13, 1997 Plaintiff served Defendant, American General Consumer Discount Company (American General) Interrogatories (First Set) and Request for Production of Documents (First Set). True and correct copies of the discovery requests are attached hereto and made a part hereof respectively as Exhibits A and B [not reprinted herein]. 3. On or about September 12, 1997 Defendant Responded to Plaintiffs Interrogatories and Document Requests. Defendant objected to every single Interrogatory and objected to Document Requests Nos. 911, 15, 19, 20. Defendant advised that documents responsive to Documents Requests 18, 1214, 1618 would be produced. True and correct copies of Defen-

dants responses to the Interrogatories and Document Requests are respectively attached hereto as Exhibits C and D [not reprinted herein]. 4. On October 1, 1997, this Court Ordered that all discovery shall proceed forthwith and continue in such a manner as will assure that all requests for, and responses to, discovery will be served, noticed and completed by August 22, 1998. A true and correct copy of this Courts October 1, 1997 Order is attached hereto as Exhibit E [not reprinted herein]. 5. On or about November 6, 1997, counsel for Plaintiff and counsel for Defendant held an extended telephone conversation in an attempt to resolve the discovery dispute. 6. During the November 6, 1997 telephone conversation, Defendants counsel reaffirmed objections to Interrogatory Nos. 1, 2, 614, 16, 1923, 2941, 4454, 61, 6364. 7. During the November 6, 1997 telephone conversation Defendants counsel agreed to withdraw objections to Interrogatories 4, 5, 15, 18, 42, 43, 55, 5860, 62 and agreed to provide partial responses to Interrogatories 17, 2428, 56 and 57. 8. In addition, during the November 6, 1997 telephone conversation Defendants counsel agreed to produce documents responsive to Document Requests Nos. 118 and reaffirmed objections to Requests Nos. 19 and 20. A true and correct copy of the November 7, 1997 letter memorializing the parties positions is attached hereto as Exhibit F [not reprinted herein]. 9. On November 13, 1997 Plaintiff moved for class certification. 10. On November 13, 1997, Plaintiffs counsel faxed a reminder to Defendants counsel to produce the requested discovery. A true and correct copy of the reminder letter is attached hereto as Exhibit G [not reprinted herein]. 11. By letter, dated November 21, 1997, Defendants counsel confirmed the parties positions. Further, Defendant withdrew its objections to Interrogatories 1923 and 61 and reaffirmed its previous objections. Defendants counsel advised that responsive documents and revised interrogatory answers would be provided on or before December 15, 1997. A true and correct copy of the November 21, 1997 letter is attached as Exhibit H [not reprinted herein]. 12. On January 6, 1998 Defendant submitted un-indexed bate-stamped documents D0001-D0345. Defendants counsel admitted that the production was incomplete and represented that additional documents would be produced. A true and correct copy of the cover letter accompanying the documents is attached hereto as Exhibit I [not reprinted herein]. 13. The documents produced represent some, but not all of Defendants policies and procedures regarding lending and

271

Appx. G.2

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insurance. Review of the documents indicates that there are additional policies and procedures not produced. 14. The documents produced are non responsive as they fail to adequately identify what requests the documents are responding to. 15. On January 29, 1998, Plaintiffs counsel again faxed a reminder letter to Defendants counsel regarding Defendants outstanding discovery responses. A true and correct copy of the January 29, 1998 reminder letter is attached hereto as Exhibit J [not reprinted herein]. No response has been received as of this writing. 16. Despite Defendants agreement to answer all, or in part, Interrogatories Nos. 4, 5, 15, 1728, 4243, 5562 and produce documents responsive to Requests Nos. 118, as of todays date, other than the 345 unidentified pages, no answers have been supplied nor documents produced. 17. As to those interrogatories which Defendant has not agreed to answer, Defendants objections to the discovery are unfounded and should be stricken and Defendant should be ordered to produce complete discovery answers. 18. The parties after reasonable effort are unable to resolve this dispute. See Certification of Counsel, attached hereto as Exhibit K [reprinted as Appx. G.2, infra]. 19. Plaintiff incorporates by reference the accompanying Memorandum of Law as though set forth fully at length herein. The Memorandum describes in detail the discovery requested and the responses received by Plaintiff. WHEREFORE, Plaintiff moves this Court to Strike the objections and compel Defendant to provide full and complete answers to each of the Interrogatories and provide documents requested in the Production of Documents within ten (10) days. Respectfully Submitted: DATE: CARY L. FLITTER, ESQUIRE SCOTT F. WATERMAN, ESQUIRE Lundy, Flitter, Beldecos & Berger, P.C. 450 N. Narberth Avenue Narberth, PA 19072 MICHAEL D. DONOVAN, ESQUIRE Donovan Miller, LLC 1608 Walnut Street, Suite 1400 Philadelphia, PA 19103 Attorneys for Plaintiff

G.2 Certificate of Counsel That Parties Are Unable to Resolve the Dispute [Exhibit K]
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) NO. 97) AMERICAN GENERAL ) CONSUMER DISCOUNT ) COMPANY, ) Defendant. ) ) DINA L. WALSH, on behalf of herself and all others similarly situated, Plaintiff, CERTIFICATION OF COUNSEL CARY L. FLITTER, being of full age, hereby certifies: 1. I am co-counsel for Plaintiff. 2. On or about November 6, 1997, I had telephone conversation with Martin C. Bryce, Jr., Esquire, counsel for Defendant in an attempt to resolve the discovery dispute at issue. 3. During the November 6, 1997 telephone conversation, Defendants counsel reaffirmed objections to Interrogatory Nos. 1, 2, 614, 16, 17, 1923, 29-41, 4454, 61, 6364. 4. During the November 6, 1997 telephone conversation, Defendants counsel agreed to withdraw objections to Interrogatories 15, 18, 42, 43, 55, 5860, 62 and agreed to provide partial responses to Interrogatories 17, 2428, 56 and 57. 5. In addition, during the November 6, 1997 telephone conversation, Defendants counsel agreed to produce documents responsive to Document Requests Nos. 1-18 and reaffirmed objections to Requests Nos. 19 and 20. 6. On November 13, 1997, I faxed a reminder to Defendants counsel to produce the requested discovery. 7. By letter, dated November 21, 1997, Defendants counsel confirmed the parties positions. Further, Defendant withdrew its objections to Interrogatories 1923 and 61 and reaffirmed its previous objections. Defendants counsel advised that responsive documents and revised interrogatory answers would be provided on or before December 15, 1997. 8. On January 6, 1998, Defendant submitted un-indexed date-stamped documents D0001-D0345. These documents represent some, but not all of Defendants policies and procedures regarding lending and insurance. Review of the documents indicates, and Defendant admits, that there are additional policies and procedures not produced. 9. On January 29, 1998, I again faxed a reminder letter to Defendants counsel regarding Defendants outstanding discovery responses. I advised that if we did not receive the requested discovery within ten days, we would file a motion to compel.

272

Sample Pleadings to Compel Discovery

10. To date, the requested discovery materials have not been received. 11. Plaintiffs counsel has attempted to resolve this discovery dispute without court involvement, however, the parties, after reasonable effort, are unable to resolve this dispute. I certify that the foregoing statements made by me are true. I understand that if any of the foregoing statements made by me are wilfully false, I am subject to punishment. DATE: CARY L. FLITTER, ESQUIRE Attorney for Plaintiff

Appx. G.4

G.4 Memorandum in Support of Motion to Compel Answers

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) NO. 97) AMERICAN GENERAL ) CONSUMER DISCOUNT ) COMPANY, ) Defendant. ) ) DINA L. WALSH, on behalf of herself and all others similarly situated, Plaintiff, MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS MOTION TO STRIKE DEFENDANTS OBJECTIONS AND TO COMPEL ANSWERS TO INTERROGATORIES, EXPERT INTERROGATORIES AND REQUEST FOR PRODUCTION OF DOCUMENTS I. INTRODUCTION This is a consumer class action arising out of the Defendants unconscionable lending practices. American General flips lower rate loans into additional high rate loans and packs the loans with unnecessary, extravagantly priced insurance products issued by affiliated insurance companies. Plaintiff sues for violations of the Truth in Lending Act, 15 U.S.C. 1601 et seq., the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. 201-1 et seq. and common law fraud and unconscionability. Initially, Defendant objected to 100% of Plaintiffs interrogatories. After a lengthy telephone conversation, Defendants counsel still objected to over 37 Interrogatories and to date all Interrogatories remain unanswered and the Document Request has been answered insufficiently. II. STATEMENT OF FACTS On August 13, 1997, Plaintiff served Defendant with Interrogatories (First Set) and Request for Production of Documents (First Set). A. Defendants Failure to Produce Any Documents Responsive to Request for Production of Documents (First Set) On or about September 12, 1997, Defendant responded to Plaintiffs Request for Production. During an extended telephone conversation between counsel for Plaintiff and counsel for Defendant, Defendants counsel agreed to produce documents responsive to Document Requests Nos. 118. See, Flitter November 7, 1997 letter and Bryce reply letter of November 21, 1997. On January 6, 1998, Defendant submitted unindexed bate-stamped documents D0001-D0345. Defendant admits that these documents represent some, but obviously not all of Defendants policies and procedures regarding lend-

G.3 Proposed Order Compelling Defendant to Respond to Plaintiffs Requests

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) NO. 97) AMERICAN GENERAL ) CONSUMER DISCOUNT ) COMPANY, ) Defendant. ) ) DINA L. WALSH, on behalf of herself and all others similarly situated, Plaintiff, ORDER AND NOW, this day of , 1998, upon consideration of Plaintiffs Motion to Strike Defendants Objections and to Compel Answers to Interrogatories and Request for Production of Documents, the Motion is GRANTED. It is ORDERED: 1. Defendants objections to Plaintiffs Interrogatories (First Set) are stricken; and Defendant shall provide Plaintiff with formal written complete answers, without objection, to Plaintiffs Interrogatory numbers 12, 464 within ten (10) days; 2. Defendant objections to Document Requests are stricken; and Defendant shall provide Plaintiff with all documents, without objection, responsive to Plaintiffs Request for Production (First Set) within ten (10) days; 3. Plaintiff is awarded counsel fees pursuant to F.R.Civ.P. 37. Plaintiff shall submit an Affidavit documenting reasonable counsel fees. Failure to comply with this Order may subject Defendant to sanctions. BY THE COURT: Judge

273

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Consumer Class Actions: A Practical Litigation Guide

These interrogatories are not premature. Interrogatories seeking the identity of witnesses and other tangible evidence may be sought, even if a case is in its infancy. Fischer and Porter Co. v. Tolson, 143 F.R.D. 93 (E.D. Pa. 1992). Answers are needed to help focus discovery in the case and to prepare to refute Defendants defenses. This case was removed to this Court on August 15, 1997. Defendants objections should be stricken and Defendant ordered to answer the interrogatories. Interrogatory Number 6. Plaintiffs Interrogatory No. 6 asks: Provide the following information for all persons who were involved in any manner in the adoption or drafting of the forms represented by Appendices A and B hereto; full name, present or last known home and business addresses and telephone numbers; whether presently employed by Defendant; all job title(s) and dates during which each job was held; if not presently employed by Defendant, Social Security Number and exact date of birth. Defendant objected claiming: See General Objections. American General further objects on the ground that the information sought is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. General, unspecified objections to interrogatories are insufficient and improper. Josephs v. Harris Corp., 677 F.2d 985 (3rd Cir. 1982); Stabilus, A Div of Fichtel, Baldwin, Johnson and Greaves, 144 F.R.D. 258 (E.D. Pa. 1992). Relevance in the context of discovery is construed more liberally than at trial. Fort Washington Resources, Inc. v. Tannen, 153 F.R.D. 78, 79 (E.D. Pa. 1994). Information which is reasonably likely to lead to other matter which could bear on any issue that is or may be in the case is relevant. Id. (citing Leksi, Inc. v. Federal Ins. Co., 129 F.R.D. 99, 104 (D.N.J. 1989)). The answer to Interrogatory No. 6 is relevant to determine who prepared Defendants documents and whether Defendants employees deliberately attempted to deceive Defendants customers. It may lead to information about the number of such forms in use by Defendant, which is relevant to issues of numerosity and commonality. Interrogatory Numbers 7 to 13. Defendant objected to Interrogatories 713 although they directly address the numerosity and commonalty issues involved in this class action. These Interrogatories were amended during the November 6, 1997 telephone conference, for Defendant to provide the number of borrowers and the state of each in lieu of a full answer at this time. Plaintiffs amended Interrogatory Number 7 asks: Identify by state, the number of all customers of Defendant from July 1991 through the present who obtained additional loans or refinancings and purchased credit insurance from you substantially similar to Appendix C.

ing and insurance. Review of the documents indicates that they refer to additional policies and procedures not produced. As discussed below, all responsive documents must be produced. The unlabelled responses to the Document Requests are non-responsive as they fail to adequately identify the attached documents and the fail to identify which, if any, are responsive to the individual document requests. B. Unanswered Interrogatories During the extended telephone conversation concerning discovery, Defendant, through counsel, agreed to answer Interrogatory Nos. 4, 5, 15, 1728, 4243, 5562. See, Flitter letter of November 7, 1997. By Mr. Bryces letter dated November 21, 1997, Defendant reconsidered and withdrew objections to Interrogatories nos. 1923 and 61. (See Bryce letter, Exhibit H)[not reprinted herein]. Though the Plaintiff allowed an additional month, until December 15th, no supplemental responses have been forthcoming whatever. On January 29, 1998, Plaintiffs counsel sent another reminder letter to Defendant that Defendants Answers to Plaintiffs Interrogatories were outstanding. To date those Answers have not been provided. III. LEGAL ARGUMENT A. Unobjectionable Interrogatories Must be Answered Forthwith As noted, although Defendant originally objected to every Interrogatory on some basis, an extended telephone conference resulted in Defendants agreement to withdraw objections to Interrogatories Nos. 4, 5, 15, 18, 42, 43, 55, 58-60, 62 and agreed to provide partial responses to Interrogatories 17, 2428, 56 and 57. See, Flitter letter of November 7, 1997 and Bryce reply letter of November 21, 1997. Two weeks later Defendant agreed to withdraw other objections, and agreed to answer Interrogatories Nos. 1923 and 61. See, Bryce letter, November 21, 1997. Notwithstanding the withdrawal of objections, Plaintiffs Interrogatories, submitted in August 1997, have still not been answered at all. As to Interrogatories Nos. 4, 5, 15, 1728, 4243, 5562, the Court should Order that they be answered forthwith. Fed.R.Civ.P. 37(a). As to the remaining Interrogatories, for the reasons set forth below, the objections should be stricken. B. Defendants Objections to the Interrogatories Must Be Stricken Interrogatory Numbers 1 and 2. Interrogatory 1 asks: Identify each person Defendant may call as a witness in this case. Interrogatory 2 asks: Identify each document which Defendant may introduce into evidence in this case. Defendant responded: See General Objections. American General further objects on the grounds that this interrogatory is premature.

274

Sample Pleadings to Compel Discovery

Plaintiffs amended Interrogatory Number 8 asks: Identify by state, the number of persons that Defendant sold credit life insurance policies to, from July 1991 until present in a form substantially similar to Appendix B. Plaintiffs amended Interrogatory Number 9 asks: Identify by state, the number of persons that Defendant sold credit disability policies to, from July 1991 until present in a form substantially similar to Appendix C. Plaintiffs amended Interrogatory Number 10 asks: Identify by state, the number of persons that Defendant sold collateral protection policies to, from July 1991 until present in a form substantially similar to Appendix D. Plaintiffs amended Interrogatory Number 11 asks: Identify by state, the number of persons that Defendant sold nonfiling insurance policies to, from July 1991 until present. Plaintiffs amended Interrogatory Number 12 asks: Identify by state, the number of persons who refinanced their loans with you from July 1991 through the present who did not purchase any insurance from you. Plaintiffs amended Interrogatory Number 13 asks: Identify by state, the number of persons that Defendant sold term life insurance policies from July 1991 until present in a form substantially similar to Appendix D. Defendant objected to these interrogatories claiming: See General Objections. American General further objects to [these] interrogator[ies] on the grounds that, since a class has not been certified, the names and addresses of its customers are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence; providing such names and addresses would be unduly burdensome; and providing such names and addresses would invade the privacy of American Generals customers. The information is relevant especially regarding the issue of whether the class action should be certified. Rule 23(a)(1) requires that the proponent of a class action demonstrate that the class is so numerous that joinder is impracticable. Fed. R.Civ.P. 23(a)(1). The answers to these interrogatories are appropriate to prove numerosity. These interrogatories are also relevant and probative on this issue of commonality because the greater number of Defendants customers who un-

Appx. G.4

derwent purchases similar to Plaintiff evidences Defendants concerted effort to pack loans with high priced insurance. Fed.R.Civ.P. 23(a)(2). See Robinson v. Countrywide Credit Industries, No. 97-2747, 1997 U.S. Dist. LEXIS 15712 (E.D. Pa. Oct. 8, 1997)(common issues included whether the Defendant lender purchased unauthorized coverage for the consumer borrowers, inflated the amount of forced placed insurance and improperly inflated commissions). These limited interrogatories only seek the number of customers, not their finances. Such an inquiry is not an invasion of privacy. See Russ Stonier, Inc. v. Droz Wood Co., 52 F.R.D. 232 (E.D. Pa. 1971)(disclosure of customer list allowed). In addition, the request is not too burdensome. The requests are limited in scope and time and it is likely that this information is electronically stored and available. Such statistical data is appropriate and not subject to objection. See Naglak v. Pennsylvania State University, 133 F.R.D. 18, 24 (M.D. Pa. 1990). Finally, as these interrogatories are probative to the class certification issue, the objections must be stricken and Defendant must be ordered to answer them. Interrogatory Number 14. Plaintiffs Interrogatory Number 14 asks: Identify every person who has or who claims to have knowledge or information regarding any facts, circumstances or issues in this lawsuit. With respect to each and every person named, state: (a) Whether this person has given an oral or written statement, and if so, designate which; (b) A summary of the knowledge relevant to this lawsuit that each such person has or claims to have. Defendant objected claiming See General Objections. General, unspecified objections to interrogatories are insufficient and improper. Josephs v. Harris Corp., 677 F.2d 985 (3rd Cir. 1982); Stabilus, A Div of Fichtel, Baldwin, Johnson and Greaves, 144 F.R.D. 258 (E.D. Pa. 1992). The answers are needed to identify those individuals with knowledge of the acts alleged in the Complaint. Seeking the identity of fact witnesses is completely permissible. Fischer and Porter Co. v. Tolson, 143 F.R.D. 93 (E.D. Pa. 1992). Defendants objection must be stricken. Interrogatory Number 16. Plaintiffs Interrogatory Number 16 asks: Prior to the date of filing of this lawsuit, did Defendant have any attorney or any other person advise Defendant as to whether its business practices were in compliance with the Truth in Lending Act? If so, please identify each such person. Defendant objected claiming: See General Objections. American General further objects on the ground that the information sought is neither reasonably calculated to lead to the discovery of admissible evidence.

275

Appx. G.4

Consumer Class Actions: A Practical Litigation Guide

General, unspecified objections to interrogatories are insufficient and improper. Josephs v. Harris Corp., 677 F.2d 985 (3d Cir. 1982); Stabilus, A Div of Fichtel, Baldwin, Johnson and Greaves, 144 F.R.D. 258 (E.D. Pa. 1992). It is probative to know the financial arrangement Defendant had with these insurance companies. They are believed to be affiliated companies. Is Defendant earning more money from the insurance business than from the lending business? These interrogatories are relevant on the issue of Defendants incentive to sell unwanted and overpriced insurance products to consumers as part of its routine consumer lending. Plainly, these interrogatories are relevant issues for discovery purposes. See Fort Washington Resources v. Tannen, 153 F.R.D. 78, 79 (E.D. Pa. 1994). Accordingly, the objections must be stricken. Interrogatories Numbers 31, 34, 3741. Interrogatories Numbers 31, 34, 3741 concern the percentage of customers who refinanced their loans with Defendant who also purchased insurance. Interrogatory Number 31 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who also purchased credit property insurance from you. Interrogatory Number 34 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who also purchased term life insurance from you. Interrogatory Number 37 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who also purchased single life insurance and/or disability insurance from you. Interrogatory Number 38 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who also purchased collateral protection insurance from you. Interrogatory Number 39 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who also purchased non-filing insurance from you. Interrogatory Number 40 asks: Identify the percentage of customers who refinanced their unsecured loan with you from July 1991 through the present who also purchased nonfiling insurance from you.

First, if Defendant was advised by individuals who were not attorneys, then the attorney-client privilege does not apply. Second, Defendant has failed to demonstrate how or why this Interrogatory is burdensome. See, Hall v. Harleysville Ins. Co., 164 F.R.D. 406 (E.D. Pa. 1996). Finally, the request is relevant to corroborate whether Defendant knew it was violating the Truth in Lending Act. Interrogatories Numbers 2930, 3233, 3536. Plaintiffs Interrogatory Numbers 2930, 3233, 3536 concern Defendants relationship with the insurance companies whose products it sold to Plaintiff. Interrogatory Number 29 asks: (a) What is the relationship between you and Yosemite Insurance Company? (b) Do you have any ownership interest in Yosemite Insurance Company? If yes, please explain. Interrogatory Number 30 asks: Are you under contract (formal or informal) to sell insurance on behalf of Yosemite Insurance Co.? If yes, set forth in detail the terms of the agreement including provisions for payment of commission(s), fees and expenses. Interrogatory Number 32 asks: (a) What is the relationship between you and Protective Life Insurance Co.? (b) Do you have any ownership interest in Protective Life Insurance Co. If yes, please explain. Interrogatory Number 33 asks: Are you under contract (formal or informal) to sell insurance on behalf of Protective Life Insurance Co.? If yes, please set forth in detail the terms of the agreement including provisions for payment of commission(s), fees and expenses. Interrogatory Number 35 asks: (a) What is the relationship between you and Union Fidelity Insurance Company? (b) Do you have any ownership interest in Union Fidelity Life Insurance Co. If yes, please explain. Interrogatory Number 36 asks: Are you under contract (formal or informal) to sell insurance on behalf of Union Fidelity Life Insurance Company? If yes, please set forth in detail the terms of the agreement including provisions for payment of commission(s), fees and expenses. Defendant objected to each of these Interrogatories claiming: See General Objections.

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Sample Pleadings to Compel Discovery

Interrogatory Number 41 asks: Identify the percentage of customers who refinanced their loans with you from July 1991 through the present who did not purchase any insurance from you. Defendant objected to each of these interrogatories claiming: See General Objections. As stated above, general, unspecified objections to interrogatories on the ground of work product or attorney client privilege is insufficient and improper. Josephs v. Harris Corp., 677 F.2d 985 (3rd Cir. 1982); Stabilus, A Div of Fichtel, Baldwin, Johnson and Greaves, 144 F.R.D. 258 (E.D. Pa. 1992). An interrogatory is not objectionable simply because it seeks information which requires research and compilation of data. Hall v. Harleysville Ins. Co., 164 F.R.D. 406 (E.D. Pa. 1996); Naglak v. Pennsylvania State University, 133 F.R.D. 18 (M.D. Pa. 1990). This data should be on Defendants computers and it should be relatively easy for Defendant to compute the numbers. Further, the information sought is relevant for both the class action issues and the substantive claims. Regarding the class action issues, the interrogatories are relevant on the issue of commonalty, i.e. to what extent Plaintiffs experience is similar to other customers. See Fed.R.Civ.P. 23(a)(2). The interrogatories are also relevant on the issue of whether the insurance sales were truly voluntary or in fact coerced. See In re Milbourne, 108 B.R. 522, 542 (Bky., E.D. Pa. 1989)(Evidence that a very high percentage of customers purchase insurance is probative in customers attempt to establish that insurance was required even where it was professed to be voluntary). If the sales were not truly voluntary, the cost of the premiums should be disclosed as part of the finance charge under the Truth in Lending Act, 15 U.S.C. 1601 et seq. Plaintiffs objections are ill-founded and unspecific. Therefore, they must be stricken. Interrogatories Numbers 4454. Interrogatory Numbers 4454 concern the commissions, profits and fees Defendant received from the various insurance companies whose products it sold to Plaintiff. Interrogatory Number 44 asks: (a) Regarding the purchase of the non-filing1 insurance, did you at any time receive a rebate from the insurer regarding the purchase of non-filing insurance? (b) If yes, explain when you received the rebate and the amount of the rebate. Interrogatory Number 45 asks: Identify the amount of commission(s), profits and/or fees you received for selling Plaintiff credit life insurance.
1 Non filing Insurance is insurance creditors elect to purchase against the potential consequences of not filing the documents necessary to perfect their security interest. See 15 U.S.C. 1605(d)(2).

Appx. G.4

Interrogatory Number 46 asks: Identify the total amount of commission(s), profits and/or fees you received for selling credit life insurance to your customers from July 1991 through the present. Interrogatory Number 47 asks: Identify the amount of commission(s), profits and/or fees you received for selling Plaintiff credit disability insurance. Interrogatory Number 48 asks: Identify the total amount of commission(s), profits and/or fees you received for selling credit disability insurance to your customers from July 1991 through the present. Interrogatory Number 49 asks: Identify the amount of commission(s), profits and/or fees you received for selling Plaintiff collateral protection insurance. Interrogatory Number 50 asks: Identify the total amount of commission(s), profits and/or fees you received for selling collateral protection insurance to your customers from July 1991 through the present. Interrogatory Number 51 asks: Identify the amount of commission(s), profits and/or fees you received for selling Plaintiff nonfiling insurance. Interrogatory Number 52 asks: Identify the amount of commission(s), profits and/or fees you received for selling to all your customers nonfiling insurance from July 1991 through the present. Interrogatory Number 53 asks: Identify the amount of commission(s), profits and/or fees you received for selling Plaintiff term life insurance. Interrogatory Number 54 asks: Identify the amount of commission(s), profits and/or fees you received for selling term life insurance to your customers from July 1991 through the present. Defendant objected to each of these Interrogatories again claiming: See General Objections.

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fendant submitted over 345 pages of documents assumedly in response to Request No. 9. which seeks: 9. All operating manuals, memoranda or other documents concerning internal procedures of Defendant regarding the sale of insurance products, including collateral protection, credit life, credit disability, nonfiling and/or term life insurance. Fed.R.Civ.Pro. 34(b) provides in part: A party who produces documents for inspection shall produce them as they are kept in the usual course of business or shall organize and label them to correspond with the categories in the request. Defendant has failed to organize and label the responsive documents. Defendant is left to guess which documents, if any, are responsive to the individual document requests. This is impermissible. See Fed.R.Civ.Pro. 34(b); Stiller v. Arnold, 167 F.R.D. 68 (N.D. Ind. 1996). The documents appear to be some of Defendants policies and procedures regarding lending and insurance. However, the documents are not all of the documents responsive to Document Request No. 9. The documents refer to additional policies and procedures which have not been produced. For example document D0007 directs that branch employees must be trained on the proper insurance sales policies and procedures found in the following sources: 1 1 1 1 1 1 1 Directive and Information System, Section 6; Insurance Product Guide (IPG); Lending Manual, Section 5; Business Development Manual, Section 6; District Manager Desk manual, Task #46; Branch Manager Desk manual, Task #13; Customer Service Representative Desk Manual, task#9,#10 and #13. 1 State Operating procedure 6000; and 1 Miscellaneous Insurance brochures and publications available from Insurance operations. A copy of document D0007 is attached as Exhibit L. None of these other documents were produced. A half-hearted document production is not acceptable. Accordingly, Pursuant to Fed.R.Civ.Pro. 37(a)(3), Defendants responses to Document Request No. 9 must be stricken and Defendant shall produce and identify all documents responsive to Plaintiffs Document Production. Regarding Document Requests 18, 1018, during an extended telephone conversation between counsel for Plaintiff and counsel for Defendant, Defendants counsel agreed to produce documents responsive to Document Requests Nos. 118. See, Flitter November 7, 1997 letter and Bryce reply letter of November 21, 1997. As of todays date, the documents have yet to be produced. These requests address Plaintiffs specific claims and Defendants financial relationship with

As stated above, general, unspecified objections to interrogatories are insufficient and improper. Josephs v. Harris Corp., 677 F.2d 985 (3rd Cir. 1982); Stabilus, A Div of Fichtel, Baldwin, Johnson and Greaves, 144 F.R.D. 258 (E.D. Pa. 1992). The answer to each of these interrogatories is relevant to whether there are Truth in Lending and consumer fraud violations. If Defendant is obtaining rebates, profits and commissions for the insurance at rates which exceed the lawful maximums Defendants actions may be violations. Profit data or commission data is also evidentiary on the pervasiveness of the practice or itself a violation of law, if excessive. Defendants ill-founded objections must be stricken. Interrogatory Number 63. Plaintiffs Interrogatory number 63 asks: Identify all other lawsuits in which you have been named in the past 5 years which alleged any violation of the Truth in Lending Act. Include counsel names and addresses. Defendant again objected stating: See General Objections. Interrogatories which ask whether Defendant has been sued by other customers in similar lawsuits are relevant and proper. See Corrigan v. Methodist Hospital, 158 F.R.D. 54 (E.D. Pa. 1994)(Court ruled that requests for information seeking complaints and expert reports from any other medical malpractice lawsuits are acceptable, if properly limited). In our case, Plaintiffs interrogatory is limited and narrow in scope. It is only for a time frame of five years and only concerns lawsuits involving the Truth in Lending Act. The Interrogatory is probative on the issue of notice and intent on behalf of Defendant and may lead to discovery of evidence. Accordingly, Defendants objection should be stricken. Interrogatory Number 64. Plaintiffs Interrogatory Number 64 asks: Identify each person who prepared, provided information or assisted in the preparation of your answers to the forgoing interrogatories and the accompanying document request. Defendant again objected stating: See General Objections. However, an interrogatory seeking the names of persons who assisted in the preparation of the interrogatories is permissible. Ballard v. Allegheny Airlines, Inc., 54 F.R.D. 67 (E.D. Pa. 1972). Defendants objection should be stricken. C. Defendants Response to Plaintiffs Document Request Is Unacceptable Plaintiff lodged Document Requests. Defendant withdrew objections to Requests 118. Defendant reaffirmed objection to Requests 1920. See, Flitter letter of November 7, 1997 and Bryce Letter of November 21, 1997. On January 6, 1998, De-

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Sample Pleadings to Compel Discovery

the various insurance companies. Without the requested documents Plaintiff will be prejudiced as it will be impossible to verify Plaintiffs claims. Accordingly, Defendant should be Ordered to produce said documents. See Fed.R.Civ.Pro. 37(a). Document Request No. 19 seeks: All documents [Defendant] intend[s] to introduce into evidence. Defendant objected, claiming: See General Objections. American General further objects to this request as premature. Discovery requests seeking the identity of witnesses and other tangible evidence may be sought, even if a case is in its infancy. Fischer and Porter Co. v. Tolson, 143 F.R.D. 93 (E.D. Pa. 1992). Defendant should produce the documents it may introduce into evidence. Defendants objection should be stricken. Document Request No. 20 seeks: All documents referred to in preparing answers to the foregoing interrogatories. Defendant objected: See General objections and Objections to interrogatories. All non-privileged documents responsive to these Requests should be produced. If Defendant is referring to documents in order to answer its Interrogatories, then all non- privileged original documents should be produced. Those documents are just as relevant as the interrogatories. It would seem irrational for Defendant to agree to answer Interrogatories Nos. 4, 5, 15, 1728, 4243, 5562 but object to a document request which seeks the documents which form the basis for the interrogatory answers. The original documents are just as relevant as the interrogatory answers. Accordingly, Plaintiffs response must be stricken. D. Attorneys Fees. Plaintiff is entitled to reasonable counsel fees to pay its costs of preparing this motion to compel. Fed. R. Civ. P. 37(a)(4)(A) provides the relevant rule:

Appx. G.4

If the motion [to compel] is granted,. . . .the court shall, after affording an opportunity to be heard, require the party or deponent whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorneys fees, unless the court finds that the motion was filed without the movant first making a good faith effort to obtain the disclosure or discovery without the court action, or that the opposing partys nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust. Plaintiffs counsel has demonstrated that he first attempted to resolve the problem without court involvement and Defendant has no substantial justification for refusing to produce the requested material. As to all the objections which have been withdrawn, Plaintiff has still not received the answers or documents. Even the questions which Defendant agreed to answer have not been answered, in nearly five months. As to the other discovery requests, most of any answers are general or generic, or ill founded. Fed. R. Civ. P. 37(a)(4)(A) states that the court shall award attorneys fees under such circumstances. Therefore, the court should order Defendant to pay Plaintiffs counsels fees for filing this motion. IV. CONCLUSION All discovery sought by Plaintiff relates to facts which are relevant and material to the case. Defendants recalcitrance cannot be condoned. Plaintiffs Motion to Compel under Federal Rules of Civil Procedure 37 should be granted. DATE: CARY L. FLITTER, ESQUIRE Lundy, Flitter, Beldecos & Berger, P.C. 450 N. Narberth Avenue Narberth, PA 19072 MICHAEL D. DONOVAN, ESQUIRE Donovan Miller, LLC 1608 Walnut Street, Suite 1400 Philadelphia, PA 19103 Attorneys for Plaintiff

279

Appendix H

Sample Motion and Order for Protection of Class Members Files

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) ) ) ) ) v. ) ) CHICAGO ACCEPTANCE ) CORP., and Illinois corporation, ) ILLINOIS MOTOR SALES, ) INC., an Illinois corporation, ) and PAUL ROBERTS AUTO ) SALES, INC., an Illinois ) corporation ) Defendants. ) ) BRASMO CORRAL, individually and on behalf of all others similarly situated. Plaintiffs, MOTION FOR A PROTECTIVE ORDER Now comes the plaintiff, Brasmo Corral, by his attorneys, and moves this Court to issue a protective order pursuant to Illinois Supreme Court Rule 101(c)(1). In support of his motion plaintiff would show: 1. Plaintiff filed this class actions on June 17, 1983, on behalf of all persons who purchased a motor vehicle from Illinois Motor Sales, Inc. pursuant to a retail installment sales contract that was assigned to Chicago Acceptance Corporation and from whom the secured collateral was repossessed by Chicago Acceptance Corp., subsequent to June 18, 1980 and later resold to a dealer affiliated with Chicago Acceptance Corp., Illinois Motor Sales, Inc., or Paul Roberts Motor Sales, Inc. 2. Plaintiff seeks to protect any and all documents, books, and records in the possession of any defendant which relate to the sale, repossession, or resale after repossession of motor vehicles purchased by persons who are class members. 3. Plaintiff requests this protective order so that he will be able to gain access to documents, books, and records described above through discovery procedures. 4. Plaintiff has a right to gain access to such documents, books, and records through discovery since they are relevant to the subject matter of the complaint.

5. Since this action has been brought on behalf of a class, plaintiff needs access to the above-described documents, books, and records to determine the identity of class members. 6. None of the defendants would in any way be prejudiced if the Court grants this motion. 7. After personal consultation and reasonable attempts, the parties are unable to reach an accord on this matter. WHEREFORE, plaintiff moves this Court to enter a protective order forbidding defendants from destroying the documents, books, and records described herein. [Attorney] IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) ) v. ) ) Chicago Acceptance Corp., et seq. ) ) Corral, et al. ORDER This case having come on to be heard on plaintiffs request for a Protective Order, all parties being present through their attorneys, and the Court being fully advised of the premises, IT IS HEREBY ORDERED that: 1. Defendants Chicago Acceptance Corp., Illinois Motor Sales, Inc. and Paul Roberts Motor Sales, Inc. are prohibited from destroying, tampering with or removing from Cook County any and all documents, books and records pertaining to putative class members in the above-styled action, specifically including but not limited to documents pertaining to repossession, repossession sales, any subsequent resale and calculations of any surplus or any deficiency resulting from the repossession of any putative class members automobile. 2. Defendants attorney shall notify defendant of this order immediately by telephone. [Judge]

281

Appendix I

Brief in Support of Plaintiffs Motion to Restrict Defendants Communications with Class Members

IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY PENNSYLVANIA CIVIL DIVISION In Re: Metropolitan Life Insurance Company Policyholders Litigation This Document Relates To: All Cases ) ) ) ) ) No. GD94-2685 ) ) )

Floyd v. City of Philadelphia, 1 Phila. 188, 1978 Phila. Cty. Rptr. LEXIS 34 (Phila Cty. 1978) Gulf Oil v. Bernard, 452 U.S. 89 (1981) Howle v. Columbia Organic, C.A. 3:92-1110-17 (D.C.S.C 1992) Impervious Paint Industries, Inc. v. Ashland Oil, 508 F. Supp. 720 (W.D. Ky), appeal dismissed without opinion, 659 F.2d 1081 (6th Cir. 1981) In Re Silicone Gel Breast Implants Products, Liability Litigation No. CV 92-P-1000-S (S.D. Ohio 1992) In Re Federal Skywalk Cases, 97 F.R.D. 370 (W.D.Mo. 1983) Kleiner v. First National Bank of Atlanta, 751 F.2d 1193 (11th Cir. 1985) Pekular v. Eich, 355 Pa. Super 276, 513 A.2d 427 (1986) Resnick v. American Dental Assn, 95 F.R.D. 372 (N.D. Ill, 1982) Tedesco v. Mishkin, 629 F. Supp. 1474 (S.D.N.Y. 1986) Miscellaneous Manual for Complex Litigation (Second), 30.24 (1985) BRIEF IN SUPPORT OF PLAINTIFFS MOTION TO PROHIBIT METLIFE FROM MAILING UNSUPERVISED, ONE-SIDED AND MISLEADING COMMUNICATIONS TO CLASS MEMBERS I. INTRODUCTION The planned communications by Metropolitan Life Insurance Company (MetLife) to thousands of Pennsylvania residents who are class members in these class actions without this Courts approval threatens serious prejudice to their rights because it provides one-sided and misleading information and is seeking a release of their life insurance replacement claims. See MetLifes letter to this court dated March 23, 1994 with the attached letters it proposes to send class members attached hereto as Exhibit A [not reprinted herein]. Rule 1713 of the Pennsylvania Rules of Civil Procedure places the duty on the courts in class actions to supervise communications from Defendants to class members to prevent one-sided and misleading communications. As demonstrated below, the facts of these cases and the law from cases where the courts have considered non-judicially

TABLE OF CONTENTS TABLE OF AUTHORITIES I. INTRODUCTION II. STATEMENT OF THE CASE A. The Class Action Claims Against MetLife B. The Pennsylvania Insurance Departments Extensive Investigation of MetLifes Replacement Practices C. The Insurance Departments Recommendations D. The Letters Developed by Metlife Are One-Sided and Misleading 1. MetLifes One-Sided and Misleading Letters 2. The Proposed Letters To Be Mailed to Class Members Conflict With The Insurance Departments Findings 3. MetLifes Proposed Release Is One-Sided and Misleading 4. MetLifes Proposed Phone Bank Creates the Potential For One-Sided and Misleading Communications III. LEGAL ARGUMENT A. This Court Has The Duty To Supervise and Regulate Metlifes Communications With Class Members B. Courts in Pennsylvania and Elsewhere Have Recognized Their Duty To Supervise Communications Between Defendants and Class Members CONCLUSION TABLE OF AUTHORITIES Bower v. Bunker Hill Co., 689 Supp. 1032 (E.D. Wash. 1985) Erhardt v. Prudential Group, Inc., 629 F.2d 843 (2d Cir. 1980)

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FINDINGS AND CONCLUSIONS The observed pattern of deceptive solicitations and concealed replacements by MetLife sales representatives appears to have been for the purpose of increasing their commissions. Report at p. 58. C. The Insurance Departments Recommendation The Report incorporates an Order rendered by the Insurance Department resulting from its MetLife examination (Ex. 1, Report under front cover). The Order adopts certain Recommendations listed in the Report whereby MetLife is directed to develop a plan to identify and notify policyholders affected by MetLifes improper replacement insurance activity within the three-year reporting period and to take steps to restore the policyholder to his or her prior policies.4 It is now unknown whether the Insurance Department has explicitly approved the letters that MetLife proposes to mail to class members. But irrespective of whether or not it was, this Court has an independent duty under Pa.R.Civ.P. 1713 to supervise such notices. Plaintiffs claims here cannot be extinguished by the Insurance Department nor by the Insurance Department and MetLife acting in concert. See Pekular v. Eich, 355 Pa. Super. 276, 513 A.2d 427 (1986). In Pekular, the Court recognized that the Pennsylvania legislature in enacting the Unfair Insurance Practices Act, 40 P.S.
4 See Report at p. 164 providing the following Recommendations as to MetLifes Replacement Activity during the reporting period: 2. MetLife shall develop a plan to identify and notify Pennsylvania policyholders, whether active or inactive, who purchased life insurance during the period January 1, 1990 through December 31, 1993, funded in whole or in part, by values taken from other MetLife insurance policies or annuity contracts. (a) Those policyholders who might have been misled or deceived in the purchase of a replacement policy during the period described above shall be surveyed and asked if they were misled or deceived, and any affirmative response in either of these regards shall cause MetLife to take appropriate steps to restore the policyholder to his or her prior policy(ies). (b) All other policyholders who purchased replacement policies during the period described above shall be surveyed and asked if they were misled or deceived. If the policyholder responds affirmatively in a sworn writing stating with specificity the nature of the misrepresentation or deception, MetLife shall take appropriate steps to restore the policyholder to his or her prior policy(ies). 3. MetLife shall implement corrective measures in order to make whole all policyholders identified as having incurred an expense load charge on a new policy funded in whole or in part from another MetLife insurance or annuity policy, which would not have occurred had the replacement activity been fully disclosed.

approved defendant communications to a class, demonstrate that Courts routinely prevent unsupervised Defendant communications to Class members. II. STATEMENT OF THE CASE A. The Class Action Claims Against MetLife These two class actions were filed on February 18, 1994 and February 28, 1994. The Representative and Class Plaintiffs are or were policyholders of MetLife who were sold replacement insurance policies which were funded by the cash value in an existing policy from 1983 until the present (The Classes). The Classes assert, inter alia, that MetLife violated the Pennsylvania Unfair Trade And Deceptive Practice Act (the Consumer Protection Law), breached their fiduciary duty to the Classes, and its duty of good faith and fair dealing, committed concealment by deceit and negligently supervised their agents in the sale of insurance. B. The Pennsylvania Insurance Departments Extensive Investigation Of MetLifes Replacement Practices The Pennsylvania Department of Insurance (The Insurance Department) released a Report of Market Conduct Examination (Report) on March 11, 1994 condemning the insurance selling tactics of MetLife in Pennsylvania.1 The Report highlights and details the Insurance Departments extensive examination of MetLifes management, marketing and sales practices and procedures in Pennsylvania from January 1, 1990 to December 31, 1992. (Ex. 1 p. 4)2 One aspect of the Insurance Departments examination focused on MetLifes policies and practices involved in the sale of replacement insurance. (Report at pp. 15-59)3 The Report concluded that for the four-year period between January 1990 and December 1993 MetLife had engaged in an observed pattern of . . . concealed replacements. The Report found inter alia:

1 The Insurance Department has the authority to undertake a market conduct examination of licensed insurance companies pursuant to 40 P.S. Sec. 323.5 to determine whether any insurer in Pennsylvania has engaged in unfair insurance practices. 2 The Report will be submitted separately to the Court [not reprinted herein]. 3 The Report defines Replacement as: . . .a transaction in which new life insurance or a new annuity is to be purchased, and it is known or should be known to the proposing agent, broker, or proposing insurer if there is no agent, that by reason of the transaction, existing life insurance or an annuity has been or is to be one of the following: Lapsed, forfeited, surrendered, assigned to replacing insurer or otherwise terminated. Converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits, dividend cash values or other policy cash values. . . . Id. at p. 910.

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Brief in Support of Plaintiffs Motion

1 et seq. (UIPA) did not intend to make the limited remedies available to the Insurance Department under the UIPA the exclusive remedy for insureds but instead intended that they be permitted to pursue their private rights to sue irrespective of actions taken by the Insurance Department under the Unfair Trade Practice and Consumer Protection Law, 73 P.S. 201 et seq. as well as other laws. The Court in Pekular unequivocally held: We see no inconsistency between the UIPA providing for administrative investigation and an imposition of limited penalties and the CPL providing a means by which a consumer may privately seek compensation for wrongs allegedly suffered. Our conclusion that there is no inherent irreconcilable conflict is supported by the fact that the UIPA contains no provision either stating or implying that the power vested in the Insurance Commissioner represents the exclusive means by which an insurers unfair or deceptive acts are to be penalized or that the insured is precluded from seeking private compensation for damages incurred. Id. at 434. Therefore, this Court under Pa.R.Civ.P. 1713 has a duty to supervise MetLifes proposed Class member communications and prevent one-sided and misleading communications.5 D. The Letters Developed By MetLife Are One-Sided and Misleading By letter dated March 23, 1994, MetLife notified this Court and Class counsel of its intent to send Pennsylvania class member policyholders letters and attempt to obtain releases from them. See Exhibit A. The letters proposed by MetLife will be mailed to some but not all of the Class members in these actions, i.e., they will only be mailed to those Class members whose policies were replaced between 1990 and 1993. The defined classes here extend back to 1983. 1. MetLifes One-Sided and Misleading Letters The letters proposed to be sent by MetLife include a release. The letters advise them that if they [the Class member] were misled or deceived in the sale of replacement in5 Rule 1713 provides in relevant part: RULE 1713. CONDUCT OF ACTIONS (A) In the conduct of actions to which this rule applies, the court may make appropriate orders (1) determining the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument; (2) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice, other than notice under Rule 1712, be given in such manner as the court may direct to some or all of the members of any step in the action, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate.

Appx. I

surance MetLife is willing to cancel the replacement transaction and restore any transferred value to the original policy. This relief, however, without adjustments to take into account, interest, dividends, etc. could not make the policyholders whole. If the policyholder without any guidance from MetLife or the Insurance Department is somehow able to determine that the replacement transaction involved deception, then the policyholder is requested to mail a claim form and Release to MetLife. The letters are one-sided and misleading because they do not: 1. Inform Class members about the nature of the Insurance Department findings about MetLifes replacement practices and policies how they were or could have been injured by such practices and policies; 2. Inform the Class members about the serious charges of replacement insurance wrongdoing found by the Pennsylvania Insurance Department against MetLife to enable them to make an informed decision before signing the MetLife release; 3. Inform Class members how to determine whether or not they were deceived or misled by MetLife; 4. Inform Class members of facts they should consider to determine whether or not they were deceived or misled by MetLife; 5. Inform Class members of the value of the consideration offered by MetLife to settle their claims before executing a broad release; 6. Inform Class members that by signing the proposed MetLife release they may be releasing all their claims in these class actions; 7. Inform Class members about these class actions and the valuable claims asserted on behalf of policyholders in these class actions against MetLife; 8. Inform Class members about the availability of undersigned counsel to represent class members in pursuing claims against MetLife; 9. Inform the Class members about the serious charges of replacement insurance wrongdoing alleged by the representative plaintiffs in these actions to enable them to make an informed decision before signing the MetLife release; 10. Inform Class members they may not receive any monetary benefits by signing the MetLife release; 11. Inform Class members that MetLife may have violated their fiduciary duties to them, and may have interests that conflict with the policyholders interests in obtaining releases from Class members; 12. The MetLife letters provide for a phone bank where it will engage in unsupervised oral communications with Class members which have a potential for being onesided and misleading. 2. The Proposed Letters To Be Mailed To Class Members Conflict With The Insurance Departments Findings The proposed letters require policyholders to somehow determine if they were misled or deceived. However, the proposed letters do not provide any description of the deception found in the replacement activities of MetLife agents by the

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Appx. I

Consumer Class Actions: A Practical Litigation Guide

III. LEGAL ARGUMENT A. This Court Has The Duty To Supervise And Regulate MetLifes Settlement Communications With Class Members Pa.R.Civ.P. 1703(b) provides that upon filing of the complaint the class action shall be assigned forthwith to a judge who shall be in charge of it for all purposes. A class subject to the class rules is presumed to exist until and unless the Court rules otherwise. See Pa.R.Civ.P. 1701(a). The judge to whom the case is assigned has the duty to make appropriate orders controlling the course of the action. See Pa.R.Civ.P. 1713 and its Explanatory Note. The supervisory judge must also approve any compromise or settlement of the class action. See Pa.R.Civ.P. 1714(A) which provides: (A) No class action shall be compromised, settled or discontinued without the approval of the court after hearing. This Court therefore has the duty to regulate MetLifes proposed settlement communications with Class members. See, Floyd v. City of Philadelphia, 1 Phila. 188, 1978 Phila. Cty. Rptr. LEXIS 34 (Phila. Cty. 1978) (Exhibit B attached hereto) [not reprinted herein] (Court exercises authority to regulate misrepresentations in defendants settlement communications prior to certification). The duty created by Rule 1713 to supervise any step in a class action has also long been recognized under Rule 1713s federal counterpart Federal Rule 23(d).6 See, In Gulf Oil v. Bernard, 452 U.S. 89 (1981) where the Supreme Court recognized that inherent in the policy underlying federal Rule 23 is the district courts duty to police the class action: Class actions serve an important function in our system of civil justice. They present, however, opportunities for abuse as well as problems for courts and counsel in the management of cases. Because of the potential for abuse a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and parties. 452 U.S. at 99100. The duty of the Court to supervise and regulate communications between defendants and class members before and after class certification has been recognized by many courts. See Floyd v. City of Philadelphia, supra, Kleiner v. First National Bank of Atlanta, 751 F.2d 1193 (11th Cir. 1985); Howle v. Columbia Organic, C.A. 3:92-1110-17 (D.C.S.C. 1992) (precertification order prohibiting defendants communication with prospective class members) (Exhibit C attached hereto) [not re6 Fed.R.Civ.P. Rule 23(d)2 provides, inter alia: (d) Orders in Conduct of Actions. In the conduct of actions to which this rule applies, the court may make appropriate orders: (2) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given in such manner as the court may direct to some or all of the members of any step in the action. . . .

Insurance Department such that policyholders can determine if they were subject to these deceptive practices. Instead, the letters only inform policyholders that the replacement activity may be appropriate in many individual situations which suggests to policyholders that MetLifes replacement activity was permitted. This statement is false and directly contradicts the Insurance Department Report: Written instructions to MetLifes sales force state . . . the replacement of existing life or health insurance or annuities, in this or any other company, is generally to the disadvantage of the policyowner, and Company representatives are, of course, forbidden to solicit insurance for replacement of existing insurance in all cases where it is unlawful and, even if lawful, where it is contrary to the best interests of the policyowner. Id. at p. 17. The letters also as noted above do not provide policyholders with any information about these class actions, their claims in these actions or that they are represented by counsel in these actions who they can consult. 3. MetLifes Proposed Release Is One-Sided and Misleading MetLifes proposed Release is one-sided and misleading because it is a general release of all claims, including claims in these actions, and must be executed before the policyholder is even apprised of the consideration, if any, to be provided in return for the release. Class member policyholders should be provided with specific information about the nature and scope of their claims and the monetary value of any offer to settle their claims so that they can make an informed judgment before deciding to release their claims. 4. MetLifes Proposed Phone Bank Creates The Potential For One-Sided and Misleading Communications Given the one-sided complicated nature of replacement insurance transactions it can be expected that many policyholders will have questions. MetLifes proposed letters to policyholders thus provide policyholders with an 800 phone bank number to call. It is expected that MetLife agents will be advising policyholders as to whether they were deceived or misled and as to their rights, if any, to obtain a settlement from MetLife. Policyholders having received a proposed letter may call the 800 number and seek to obtain additional information from MetLife agents. The proposed phone bank, which will involve unsupervised oral communications between MetLife agents and Class members has the potential for additional one-sided and misleading communications. This is especially true here, because of the already serious breaches of fiduciary duty found by the Insurance Department and the conflict between MetLife and its replacement policyholders to settle any and all claims as cheaply as possible.

286

Brief in Support of Plaintiffs Motion

printed herein]; In Re Federal Skywalk Cases, 97 F.R.D. 370, 377 (W.D.Mo. 1983). For other cases where courts have recognized their duty to supervise and regulate communications between defendants and class members see, Erhardt v. Prudential Group, Inc., 629 F.2d 843, 845 (2d Cir. 1980); Impervious Paint Industries, Inc. v. Ashland Oil, 508 F. Supp. 720, 72224 (W.D.Ky.), appeal dismissed without opinion, 659 F.2d 1081 (6th Cir. 1981); Tedesco v. Mishkin, 629 F. Supp. 1474, 1484 (S.D.N.Y. 1986); Resnick v. American Dental Assn, 95 F.R.D. 372, 37677 (N.D. Ill. 1982); and Bower v. Bunker Hill Co., 689 F. Supp. 1032, 103334 (E.D.Wash. 1985). See also Manual for Complex Litigation (Second) 30.24 (1985) ([T]he court should not enter any order restricting communications between the litigants or their counsel and the potential or actual class members except when justified by actual or threatened misconduct of a serious nature . . . Nevertheless, a limited restrictionsuch as precluding a defendant from soliciting class members to opt out of the litigationwill sometimes be justified). (footnotes omitted) That these class actions have not yet been certified is irrelevant since Pa.R.Civ.P. 1701 explicitly provides that the action is a class action until the Court rules otherwise. See Rule 1701(a) defining a class action: (a) As used in this chapter Class action means any action brought by or against parties as representatives of a class until the court by order refuses to certify it as such or revokes a prior certification under these rules. Class members in Pennsylvania are therefore afforded protection of the class action rules upon the filing of the class action complaint. See also Impervious Paint Industries v. Ashland Oil, 508 F. Supp. 720 (W.D.Ky. 1981) where the court explained class members entitlement to protection under federal Rule 23 upon filing of the class action complaint: During the time between the institution of a class action and the close of the opt-out period, the status of plaintiffs counsel in relation to the class members cannot be stated with precision. While class counsel clearly have the duty to represent the interests of the absent class members, it would also appear that contact initiated by class counsel prior to the close of the opt-out period would be unethical as direct solicitation of clients, if the purpose or predictable effect of the contact is to discourage a decision to opt out of the class. Thus, the peculiar status of time may place additional burdens on class counsel: For purposes of the obligation to avoid compromising the rights of the class members, class counsel must treat them as clients; for purposes of the obligation to avoid unethical solicitation, class counsel must treat the class members as non-clients. (Emphasis added) 508 F. Supp. at 722. This Court therefore has the duty to supervise and regulate the form and content of letters that MetLife proposes to send Class members.

Appx. I

B. Courts In Pennsylvania and Elsewhere Have Recognized Their Duty To Supervise Communications Between Defendants And Class Members Communications, especially settlement communications, to Class members such as that proposed by MetLife are routinely regulated by the Courts. The only now known Pennsylvania court to consider the supervision of defendant settlement communications with individual class members was in Floyd v. City of Philadelphia, 1 Phila. 188, 1978 Phila. Cty. Rptr. LEXIS 34 (Phila. Cty. 1978) (attached hereto as Exhibit B) [not reprinted herein]. In Floyd, the defendant city owned a water treatment plant which leaked chlorine gas which allegedly injured the Plaintiffs upon inhalation. Prior to certification, the city sought to correspond with class members to settle their claims individually. The Floyd court exercised its power to regulate correspondence by entering an order which prohibited inter alia: 1. Any misrepresentations as to the status, purpose and effects of the actions and of actual or potential court orders; 2. Representations which reflected adversely on any party, counsel, the Court or the administration of justice; 3. Solicitations for opt-outs pursuant to R.Civ.P. 1711(A). Ex. B, p. 6. More recently, settlement communication schemes similar to MetLifes were supervised by the courts in the breast implant litigation. See, e.g., order entered in In Re Silicone Gel Breast Implants Products Liability Litigation, CV 92-P-1000-S (S.D. Ohio 1992) (Ex. D) [not reprinted herein]. In the Silicone Gel case, District Court Judge Pointer entered an order regulating the defendants settlement communications with class members which included provisions requiring disclosure of the class action, identification of class counsel, a prohibition on the dispensation of legal advice and requiring the mailing of neutrally worded form letters agreed to between class counsel and defendants. (Ex. D) The rationale for supervising such communications was explained in Erhardt v. Prudential Group, 629 F.2d 843, 845 (2d Cir. 1980) where the court found that unapproved, legally incomplete, untruthful, nonobjective communications would not be judicially approved: It is the responsibility of the court to direct the best notice practicable to class members, Rule 23(c)(2), and to safeguard them from unauthorized, misleading communications from the parties or their counsel. Unapproved notices to class members which are factually or legally incomplete, lack objectivity and neutrality, or contain untruths will surely result in confusion and adversely affect the administration of justice. To prevent abusive practices in the absence of a local rule, the court should include in its order of notice a provision limiting within constitutional parameters any unauthorized correspondence by parties and their counsel with class members.

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are likely to seriously prejudice Class members rights. It is therefore requested that this Court prohibit the mailing of the letters and releases and supervise and regulate MetLifes communications with Class members. A proposed Order is attached [not reprinted herein]. Attorney Counsel for the Representative Plaintiff and the Class

Erhardt, 629 F.2d at 846. And see Bower v. Bunker Hill, 689 F. Supp. 1032, 1034 (E.D.Wash. 1985). For the reasons stated above, this Court has a duty to supervise MetLifes proposed communications to Class members and should not permit MetLife to send any letters or releases to Class members that are one-sided and misleading. CONCLUSION MetLifes proposed letters and releases to be mailed to Class members are one-sided and misleading and therefore

288

Appendix J

Sample Objection to Defendants Document Request to Named Plaintiff

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

ADDITIONAL OBJECTION TO DEPOSITION DOCUMENT REQUEST Now comes the plaintiff DENISE SMITH, through her attorneys and objects to producing a certain document in connection with her deposition as follows: Request number 6 asks for: 6. All documents which related to telephone communications between plaintiff and her attorneys. Objection: Because of the attorney-client privilege plaintiff objects to production of the document described below. The correspondence was written after DENISE SMITH had become a client of the Legal Assistance Foundation, which was on April 10, 1980. Mrs. Smith came to the office seeking legal advice regarding the subject matter of this suit and all communications after April 10, 1980 between her and her attorneys are privileged. Description of document: The document is a letter dated February 2, 1981 sent by DENISE SMITH to Louisa Seston an attorney for Legal Assistance Foundation. The letter concerns the hospital bill owed to Cook County Hospital for DENISE SMITHs admission of December 28, 1978 and phone collection efforts by the defendants.

DENISE SMITH, and CECILIA SAUCEDO a/k/a ARRES, individually and on behalf of all others similarly situated, Plaintiffs, v. DAVID D. MIKELL, DOCTORS SERVICE BUREAU, INC., a corporation and THE BUREAUS, INC. a corporation, Defendants.

One of Plaintiffs Attorneys

289

Appendix K

Sample Motions for Class Certification

This appendix provides five sample class certification motions. Additional examples of class certification motions (in print and on a WordPerfect disk) are included in National Consumer Law Center, Consumer Law Pleadings With Disk, Numbers One through Five. These sample motions for class certification will be listed below by volume number, such as CLP#1 or CLP#2: 1 Odometer rollback case, CLP#1 3.3; 1 Financing of automobile sales, CLP#1 4.8; 1 Case involving car dealers race discrimination against customers and rebate theft, CLP#3 3.6; 1 UDAP, warranty and lemon law claims arising out of leasing of vehicles, CLP#1 9.3; 1 Uninhabitable mobile home park conditions, CLP#2 2.1.7; 1 Real estate broker fraud case, CLP#2 4.2.2; 1 Fair Debt Collection Practices Act case, CLP#3 3.2; 1 Collection agency litigation abuse case, CLP#2 11.2.5; 1 Student loan collection abuse case, CLP#2 14.3; 1 Trade school abuses and student loan collections, CLP #2 13.8.1; and 1 Tax agency filing baseless proof of claims in chapter 13 bankruptcies, CLP#3 7.2.4.

PLAINTIFFS MOTION FOR CLASS CERTIFICATION Plaintiffs, by counsel, hereby move this Court, pursuant to Rule 23 of the Federal Rules of Civil Procedure, to certify this action as a class action and Plaintiffs Gene C. Bauer and Carol A. Bauer as class representatives. Plaintiffs seek certification of a class of all persons in the United States who, during the one year prior to the filing of this action, received letters or other communications from Defendants substantially in the form of Exhibit A and Exhibit B attached to Plaintiffs Complaint [not reprinted herein]. Excluded from the Class are all officers and directors of the Defendants. Respectfully submitted ROSS & MARLER, P.C. By: M.D. Marler Address Phone Number Justin Hunt, LLC M.D. Justin D.A. Reardon Address Phone Number Dated: January 7, 1999 Attorneys for Plaintiffs

K.1 Fair Debt Collection Practices ActMotion and Proposed Order (Bauer)
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) CIVIL ACTION NO: 98) FIRST UNION MORTGAGE ) CLASS ACTION CORPORATION, ) HUTCHENS, McCALLA, ) RAYMER & ECHEVARRIA ) and DAVID MITCHELL, ) Defendants. ) ) GENE C. BAUER, CAROL A. BAUER, on behalf of themselves and all others similarly situated, Plaintiffs,

ORDER
AND NOW, upon consideration of Plaintiffs Motion for Class Certification (the Motion) and Memorandum of Law in support thereof, and defendants response thereto, IT IS, this day of , 1999, HEREBY ORDERED that the Motion is GRANTED. This action shall be maintained as a class action in accordance with Federal Rule of Civil Procedure 23(a) and (b) pursuant to the following findings of fact: 1. The Class, defined as all persons in the United States who, during the one year prior to the filing of this action, received letters or other communications from Defendants substantially in the form of Exhibit A and Exhibit B to Plaintiffs Complaint, is so numerous that joinder of all members is impracticable; 2. There are questions of law and/or fact common to the Class; 3. The claims of Plaintiffs Gene C. Bauer and Carol A. Bauer are typical of the claims of the Class; 4. Plaintiffs will fairly and adequately protect the interests of the Class;

291

Appx. K.2

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The Amended Complaint alleges that LVB and the home improvement contractors with which it dealt, induced consumers to enter into binding contracts without complying with federal and state laws providing that consumers who sign home improvement contracts have three business days after their transaction is concluded and all terms are disclosed to reconsider and cancel the transaction, without obligation. The Mounts allege that LVBs practice violates the federal Truth in Lending Act (Count I), the Illinois Consumer Fraud Act (Count II) and constitutes common law fraud (Count III). Plaintiff seeks certification of a class consisting of all persons who satisfy the following criteria: 1. They signed a contract with a home improvement contractor. 2. They also signed a retail installment obligation that was purchased by Lake View Bank, directly or indirectly. 3. The date on the contract with the home improvement contractor is earlier than the date of credit approval by Lake View Bank. 4. The obligation to Lake View Bank is secured by real estate. 5. The address of the real estate securing the obligation is the same as the consumers residence, as shown by the transaction file. The class includes persons who signed contracts within three years next before the filing of this action, for purposes of Count I, persons whose contracts were outstanding at any time within three years next before the filing of this action, for purposes of Count II, and persons whose contracts were outstanding at any time within five years next before the filing of this action, for purposes of Count III. The grounds for this motion are stated in the accompanying memorandum of law. Respectfully Submitted, [Attorney]

5. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members which would establish incompatible standards of conduct for the parties opposing the Class, as well as a risk of adjudications with respect to individual members which would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; 6. Defendants have acted or refused to act on grounds generally applicable to the Class; 7. The questions of law and/or fact common to the members of the Class predominate over any questions affecting only individual members; 8. A class action is superior to other available methods for the fair and efficient adjudication of this controversy; and it is further ORDERED, that Plaintiffs Gene Bauer and Carol Bauer are certified as Class representatives; and it is further ORDERED, that excluded from the Class are all officers and directors of the Defendants; and it is further ORDERED, that M.D. Marler of Ross & Marler, P.C. and M.D. Justin of Justin Hunt, LLC shall serve as Co-Lead Counsel, with responsibility for coordinating the work of other Class Counsel; and it is further ORDERED, that Plaintiffs shall submit a proposed form of notice to the Class within thirty (30) days of entry of this Order. [United States District Court Judge]

K.2 TIL Rescission and Deceptive Practices CaseHome Improvement Contract (Mount)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) MATTHEW MOUNT and ) LESLIE MOUNT, on behalf ) of themselves and all others ) similarly situated, ) Plaintiffs, ) ) v. ) ) LASALLE BANK LAKE VIEW, ) Defendant. ) ) PLAINTIFFS MOTION FOR CLASS CERTIFICATION Plaintiffs Matthew Mount and Leslie Mount respectfully requests that this Court enter an order pursuant to Rule 23 of the Federal Rules of Civil Procedure that Counts IIII of the Amended Complaint may proceed against defendant LaSalle Bank Lake View (LVB) as a class action.

K.3 TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) HARVEY CYCLE & ) CAMPER, INC., doing business ) as WATSON MOTORSPORT, ) LTD.; and WONDERLIC & ) ASSOCIATES, INC., doing ) business as WONDERLIC ) FINANCE, ) Defendants. ) ) CHRSITINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff,

292

Sample Motions for Class Certification

PLAINTIFFS MOTION FOR CLASS CERTIFICATION Plaintiff respectfully requests that the Court enter an order providing that Counts I and II of the complaint may proceed on behalf of a class against defendants Harvey Cycle & Camper, Inc., d/b/a Watson Motorsport, Ltd. (Watson) and Wonderlic & Associates, Inc., d/b/a Wonderlic Finance (Wonderlic). In support of this motion, plaintiff states: 1. Counts I and II (Counts III and IV raise individual warranty claims) allege that defendants understated the finance charge and annual percentage rate on retail installment contracts, primarily for the purchase of used cars. Count I is based on the Truth in Lending Act, 15 U.S.C. 1601 et seq. (TILA), and implementing Federal Reserve Board Regulation Z, 12 C.F.R. part 226. Count II is based on the Illinois Sales Finance Agency Act, and implementing regulations, 38 Ill.Admin.Code part 160, which effectively require finance companies such as Wonderlic to comply with TILA as a matter of state law and provide additional remedies for aggrieved consumers. The disclosures were generated by computer and typed onto printed forms disseminated by Wonderlic to used car dealers, such as Watson. 2. Plaintiff seeks to represent a class of all persons who signed a retail installment contract on Wonderlics printed form that included a charge for V.S.I. insurance in the amount financed and did not include it in the finance charge and the annual percentage rate. For purposes of Count I, the TILA claim, the class includes all such persons whose contracts are dated within one year prior to the filing of this action. For purposes of Count II, the Sales Finance Agency Act claim, the class nominally extends back five years and includes only persons with addresses in the State of Illinois.1 3. All requirements of Rule 23 of the Federal Rules of Civil Procedure have been met. a. The class is so numerous that joinder of all members is impractical. Prior to filing suit, plaintiffs counsel were informed by the car dealer involved in this case, Watson, that they alone generated several hundred transactions containing the disclosure item at issue. b. There are questions of law and fact common to the class, which predominate over any questions affecting only individual class members. The principal question is whether defendants standardized disclosures violated TILA and Regulation Z. c. There appear to be no individual questions, other that whether a class member received a TILA statement containing the offending disclosures, which can be determined by ministerial inspection of defendants records.

Appx. K.4

d. Plaintiffs claim is typical of the claims of the class, which all arise from the same operative facts and are based on the same legal theory. e. Plaintiff will fairly and adequately protect the interests of the class. They have retained counsel experienced in handling class claims and claims involving unlawful business practices. Neither plaintiff nor her counsel have any interests which might cause them not to vigorously pursue this claim. f. A class action is a superior method for the fair and efficient adjudication of this controversy. Most of the class members are working-class persons who are probably unaware that the finance charges and annual percentage rates on their transactions were understated. The interest of class members in individually controlling the prosecution of separate claims against defendants is small because the maximum damages in an individual action are $1,000. Management of this class claim is likely to present significantly fewer difficulties than those presented in many class claims, e.g., for securities fraud. These grounds are further explained and supported by the accompanying memorandum of law. WHEREFORE, plaintiff requests that this action may proceed as a class action. Respectfully Submitted, [Attorney]

K.4 TIL Untimely Disclosure Case (Diaz)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) WESTGATE LINCOLN ) MERCURY, INC., ) Defendant. ) ) SALVATOR DIAZ, on behalf of himself and all others similarly situated, Plaintiff, PLAINTIFFS CORRECTED MOTION FOR CLASS CERTIFICATION

1 Our preliminary investigation indicates that the actual composition of the classes defined for each count may be substantially identical; i.e., the violations complained of began less than five years ago and may have been limited to Illinois. Plaintiff has propounded discovery (Appendix A [not attached herein]) to identify the class members. Each class definition also includes the requirement that the underlying retail installment contract have been documented as one for personal, family or household purposes; since the transactions at issue involved used cars, it is highly unlikely that there are any others.

Plaintiff, Salvator Diaz, respectfully requests, pursuant to Rule 23 of the Federal Rules of Civil Procedure, that the Court certify this action as a class action. Plaintiff seeks certification of a class consisting of all persons who, on or after September 2, 1993 (one year before the filing of this action), signed the same printed form as Exhibit A [not attached herein] with Westgate, without previously or simultaneously receiving Truth in Lending disclosures relating to Exhibit A. In support of this motion, plaintiff states:

293

Appx. K.5

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MOTION TO PROCEED AS A CLASS Plaintiff Carmen Ortiz, by her attorneys, moves pursuant to 2-801 et seq. of the Illinois Code of Civil Procedure, Ill. Rev. Stat. ch. 110, 2-801 et seq., for a determination that this action may proceed as a class action. In support of her motion plaintiff alleges as follows. 1. Plaintiffs complaint alleges that: (a) defendants business procedures regarding single interest physical damage insurance violate the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121 1/2, 261 et seq. (Count I); (b) defendants breached the contract of insurance by failing to pay claims of class members whose cars were damages while the insurance was in force (Count II); (c)defendant GMAC breached its fiduciary duty in the purchase of single interest physical damage insurance for class members (Count III); and (d) defendant GMAC violated the Illinois Sales Finance Agency Act, Ill. Rev. Stat. ch. 17, 5201 et seq. in the purchase of single interest physical damage insurance for class members (Count IV). 2. The class is composed of all persons who: a. financed purchases of motor vehicles for their own personal and/or household use through General Motors Acceptance Corporation (hereafter GMAC); b. purchased the vehicle from an automobile dealer located within the state of Illinois; c. had single interest physical damage insurance purchased for them by GMAC through Motors Insurance Corporation (hereafter MIC) after December 2, 1990. There is a subclass of plaintiffs who also: d. sustained motor vehicle damage while the MIC policy was in force and either received no payment or credit from the MIC insurance policy or were required to surrender the automobile to GMAC in order to receive the payment or credit. 3. The class is so numerous that joinder of all members is impracticable. 4. There are questions of fact and law common to the class, which common questions predominate over any questions affecting only individual members. 5. The representative party will fairly and adequately protect the interests of the class. 6. A class action is an appropriate method for the fair and efficient adjudication of the controversy. WHEREFORE, plaintiff Ortiz prays that this Court allows this action to proceed as a class action. Respectfully Submitted, [Attorney]

1. This is a Truth in Lending action. The complaint alleges that Westgate had plaintiff and others sign notes without providing any of the disclosures required by the Truth in Lending Act. 2. Exhibit A is a standard printed form document which Westgate has consumers sign. 3. Such a claimin essence, that a standard printed form fails to comply with disclosure requirements imposed by a federal statute and regulationsis eminently suitable for class certification. 4. All requirements of Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been met: a. The class is so numerous that joinder of all members is impracticable. Exhibit A is a standard form that was consistently used by Westgate since prior to the beginning of the class period. b. There are questions of law and fact common to the entire class. These common questions predominate over any questions affecting only individual members of the class. c. The claims of plaintiffs as representative parties are typical of the claims of the class. d. Plaintiff will fairly and adequately protect the interests of the class, and the class representative will vigorously prosecute this case through his attorneys. e. A class action is superior to other available methods of resolving the controversy. These grounds are further explained and supported by the accompanying memorandum. Respectfully Submitted, [Attorney]

K.5 Deceptive Practices Case Vendors Single Interest Insurance (Ortiz)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) ) ) ) ) v. ) ) GENERAL MOTORS ) ACCEPTANCE ) CORPORATION, INC. and ) MOTORS INSURANCE ) CORPORATION, INC., ) Defendants. ) ) CARMEN ORTIZ, individually and on behalf of all others similarly situated, Plaintiffs,

294

Appendix L

Sample Opening Memoranda in Support of Class Certification

This appendix provides eight sample memoranda in support of class certification. Additional examples of memoranda in support of class certification (in print and on a WordPerfect disk) are included in National Consumer Law Center, Consumer Law Pleadings With Disk, Numbers One through Five. These sample opening memoranda will be listed below by volume number, such as CLP#1 or CLP#2: 1 Abuses related to forced-placed automobile insurance, CLP#1 2.2, CLP#5 5.3; 1 Odometer rollback case, CLP#1 3.6; 1 Case involving car dealers race discrimination against customers and rebate theft, CLP#3 3.6; 1 Used car financing case, CLP#1 4.9; 1 Automobile lease case, CLP#1 9.4; 1 Automobile pawn case, CLP#3 4.3.5; 1 Rent-to-own case, CLP#4 11.2; 1 Home improvement financing scheme, CLP#4 2.1.1; 1 Uninhabitable mobile home park conditions, CLP#2 2.1.7; 1 Membership campground case, CLP#1 6.6; 1 Real estate broker fraud case, CLP#2 4.2.3; 1 Land installment sale case, CLP#3 10.3; 1 Fair Debt Collection Practices Act case, CLP#3 3.2; 1 Collection agency litigation abuse case, CLP#2 11.2.5; 1 Trade school abuses and student loan collections, CLP #2 13.8.1; and 1 Tax agency filing baseless proof of claims in chapter 13 bankruptcies, CLP#3 7.2.4.

L.1 Fair Debt Collection Practices Act Case (Bauer)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) v. ) ) CIVIL ACTION NO: 98FIRST UNION MORTGAGE ) CORPORATION, HUTCHENS, ) CLASS ACTION McCALLA, RAYMER & ) ECHEVARRIA and DAVID ) MITCHELL, ) Defendants. ) ) GENE C. BAUER, CAROL A. BAUER, on behalf of themselves and all others similarly situated, Plaintiffs, MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION I. BACKGROUND Plaintiffs, by counsel, respectfully submit this memorandum in support of their Motion for Class Certification (the Motion) pursuant to Rules 23(a), 23(b)(1), (2) and (3) of the Federal Rules of Civil Procedure (the Rules), seeking certification of this action as a class action and Plaintiffs Gene C. Bauer and Carol A. Bauer as class representatives. This is a consumer class action brought on behalf of all persons in the United States who, during the one year prior to the filing of this action, received letters or other communications from Defendants substantially in the form of Exhibit A and Exhibit B attached to Plaintiffs Complaint [not reprinted herein]. Plaintiffs assert claims under the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA) for declaratory and injunctive relief, actual, statutory and punitive damages, costs and attorneys fees. Plaintiffs filed a ComplaintClass Action in this case on October 8, 1998. In response, Defendant First Union Mortgage Corporation (First Union) filed an Answer on November 25, 1998 and Defendants Hutchens, McCalla, Raymer & Echevarria (HMRE) and David Mitchell (Mitchell) filed

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Appx. L.1

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nership composed of various attorneys located and doing business in Florida, Georgia, Tennessee and North Carolina. Contrary to the letterhead set forth at the top of each page of the Letters, neither Hutchens nor any of the individual attorneys named in the letterhead maintains a principal office at 1100 Corporate Center Drive, Raleigh, North Carolina. Rather, the address and telephone number reflected on the letterhead and represented as belonging to HMRE are actually the address and telephone number of First Unions corporate headquarters. In addition, under the applicable least sophisticated consumer standard, the letterhead deceptively and falsely represents that each one of HMREs partners is licensed to practice law in the State of North Carolina when, in fact, three of the partners are not licensed to practice law in North Carolina. The Letters are signed by HMRE by Defendant Mitchell. Contrary to the representation of the Letters, Mitchell is not an attorney. Rather, the Complaint alleges that Mitchell was an employee of First Union and worked in the mortgage foreclosure division of First Union in Raleigh, North Carolina. Plaintiffs believe that Mitchell and First Union used the HMRE name and the misleading letterhead to collect a debt by means of a name other than the true name. Furthermore, the Letters sent by HMRE are even coded according to First Unions own internal coding sequence for in-house documents and letters. Plaintiffs believe that the Defendants acted in a false, deceptive and unethical manner when they designed, compiled and furnished the HMRE letterhead knowing that it would be used to create the false belief in consumers that a large established law firm was participating in the collection of a debt when in fact no such law firm was so participating. Additionally, Plaintiffs believe that no attorney reviewed or participated in a review of the Letters before they were mailed to Plaintiffs. See, e.g., Taylor, supra; Littles v. Lieberman, 90 B.R. 700 (E.D. Pa. 1988). The Letters were the only communications, written or otherwise, made to Plaintiffs by the Defendants. In violation of Section 1692g(a) of the FDCPA, none of the Letters advised Plaintiffs that they had a right to dispute the validity of the alleged debt and that the Defendants would provide verification of the alleged debt if the Plaintiffs disputed the validity of the alleged debt and/or requested verification of the debt. Further, regardless of whether the above validation/verification language was effectively conveyed to the least sophisticated consumer, it was contradicted, overshadowed and obscured by extraneous language contained in the Letters so as to confuse or make uncertain what the least sophisticated consumers rights are under the law. Plaintiffs believe that the objective least sophisticated consumer would interpret the communications contained in the Letters as being issued, authorized or approved by an attorney and meaning that unless the consumer made the requisite payment in the time allotted, the Defendants would start a lawsuit to foreclose on that consumers mortgaged property and also sue the consumer personally. A legal action to foreclose on Plaintiffs mortgaged property and to sue them personally could only be brought in the county and state in which the consumers and their property are located. Since Plaintiffs

an Answer on December 17, 1998. The parties are currently negotiating and finalizing a proposed Case Management Stipulation and Order setting forth a schedule for discovery and for this Motion and responses thereto, which is anticipated to be filed shortly. In essence, the Complaint alleges that First Union used the name of HMRE in the process of collecting or attempting to collect First Unions own debts. A creditor is a debt collector even though it is collecting its own debt, where it uses a lawyers letterhead on its dunning letters, falsely indicating that a third person was collecting the debt. Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232 (5th Cir. 1997); Young v. Citicorp Retail Services, Inc., 1997 WL 280508 (D. Conn. 1997). The debt collection was attempted through the use of standard printed form letters sent to Plaintiffs (the Letters). The Letters violated the FDCPA in a variety of ways, as set forth in the Complaint. For example, under the applicable least sophisticated consumer test, see Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir. 1991), the Letters represented, albeit incorrectly, that they were from an attorney. Each page of the Letters contains full letterhead representing that HMRE maintained a principal office at 1100 Corporate Center Drive. The Letters state we may also sue you personally for the unpaid balance and all other sums due under the mortgage. However, not only were the Letters signed by Mitchell, who is not an attorney, but neither HMRE nor any of its members or employees are licensed to practice law in Pennsylvania, the venue where such a suit would have to be filed. A collection letter purporting to be from an attorney but that is actually signed by a non-attorney violates the FDCPAs prohibition against falsely representing or implying that an individual is an attorney. 15 U.S.C. 1692e(3). A collection notice also violates the FDCPA if a consumer would reasonably believe that the notice threatens legal action and the collector cannot, or does not intend to, take legal action. United States v. National Financial Services, Inc., 98 F.3d 131, 135 (4th Cir. 1996); Crossley v. Lieberman, 868 F.2d 506 (3d. Cir. 1989); Wilborn v. Dun & Bradstreet Corporation, 1998 U.S. Dist. LEXIS 12618, *23 (N. D. Ill. 1998); In re Belile, 209 B.R. 658 (Bankr. E.D. Pa. 1997). II. FACTS The facts in this case are simple and straightforward. First Union holds a first mortgage on Plaintiffs property at [Street], [City], Pennsylvania. Two debt collection letters dated March 6, 1998, bearing First Unions address at 1100 Corporate Center Drive, Raleigh, North Carolina, but under the name of HMRE, were sent to Plaintiffs at their home. Copies of the Letters are attached to Plaintiffs Complaint as Exhibits A and B [not reprinted herein]. Plaintiffs believe that First Union used the name of HMRE in the process of collecting or attempting to collect the amount allegedly owed by Plaintiffs to First Union. As such, First Union is a debt collector within the meaning of Sections 1692a(6) and 1692j of the FDCPA. Although HMRE purported to be a law firm that was hired by First Union to collect debts, Plaintiffs believe that the evidence will show that HMRE is not a law firm but is instead a marketing part-

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Sample Opening Memoranda in Support of Class Certification

and their property are located in [City], Pennsylvania, any legal action described above must be brought in [County], Pennsylvania. However, at the time that the Plaintiffs received the Letters, HMRE and Mitchell were not licensed to practice law in the Commonwealth of Pennsylvania and had no legal standing to institute suit against Plaintiff in [County]. Despite this fact, Defendants Letters stated falsely that we may also sue you personally for the unpaid principal balance and all other sums due under the mortgage. As a result of the acts alleged above, Plaintiffs suffered actual damages and out-of-pocket expenses. III. ARGUMENT A. General Legal Standards Governing Class Certification For a suit to be maintained as a class action under Rule 23, Plaintiffs must allege facts establishing each of the four threshold requirements of subsection (a) of the Rule, which provides: 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. See Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239, 246 (3d Cir.), cert. denied, 421 U.S. 1011 (1975). Plaintiffs must also allege that this action qualifies for class treatment under at least one of the subdivisions of Rule 23(b). Under Rule 23(b)(1), a class action may be maintained where prosecution of separate actions by individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members which would establish incompatible standards of conduct for the parties opposing the class, or (B) adjudications with respect to individual members which would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. Under Rule 23(b)(2), a class action will be appropriate where the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. Under Rule 23(b)(3), a class action will be appropriate where the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Plaintiffs bear the initial burden of advancing reasons why a putative class action meets the requirements of Rule 23. However, Plaintiffs burden is not a heavy one. See Piel v. National Semiconductor Corp., 86 F.R.D. 357, 368 (E.D. Pa. 1980). See also Anderson v. City of Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982); Paxton v. Union Natl Bank, 688 F.2d 552,

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562 (8th Cir. 1982). Once a plaintiff has demonstrated a preliminary legal showing that the requirements of Rule 23 have been met, the burden of proof is upon the defendant to demonstrate otherwise. 2 H. Newberg, Newberg on Class Actions (3d Ed. 1992) (Newberg) 7.22 at 7-74 to 7-75. Provided that a plaintiffs contentions regarding the class issues are based upon a reasonable foundation, the court should not deny certification because of a defendants challenge. See Sollenbarger v. Mountain States Tel. & Tel. Co., 121 F.R.D. 417 (D.N.M. 1988); In re Industrial Gas Antitrust Litig., 100 F.R.D. 280 (N.D. Ill. 1983); Kuck v. Berkey Photo, Inc., 81 F.R.D. 736 (S.D.N.Y. 1979). B. The Proposed Class Satisfies the Requirements of Rule 23(a) The Supreme Court has noted that [c]lass actions serve an important function in our system of civil justice. Gulf Oil Co. v. Bernard, 452 U.S. 89, 99 (1981). The Court has also recognized that the class action procedure is necessary for private rights of action to be initiated. Deposit Guar. Natl Bank v. Roper, 445 U.S. 326, rehg. denied, 446 U.S. 947 (1980). As stated in Roper, class actions serve an important function in our system of civil justice because they permit plaintiffs to vindicat[e] the rights of individuals who otherwise might not consider it worth the candle to embark on litigation in which the optimum result might be more than consumed by the cost. Id. at 338. The determinations called for by Rule 23 are questions addressed to the sound discretion of the district court. Gulf Oil Co., 452 U.S. at 100. A decision to grant class certification is not a final order; it may be altered or amended as the case progresses towards resolution on the merits. Fed.R.Civ.P. 23(c)(1); In re School Asbestos Litig., 789 F.2d 996, 1011 (3d Cir. 1986); 7B C. Wright & A. Miller, Federal Practice and Procedure 1785, at 128 (1986) (Wright & Miller). Moreover, the Third Circuit has adopted a liberal construction of Rule 23. See, e.g., Eisenberg v. Gagnon, 766 F.2d 770, 785 (3d Cir.), cert. denied sub nom Wasserstrom v. Eisenberg, 474 U.S. 946 (1985); Kahan v. Rosenstiel, 424 F.2d 161 (3d Cir.), cert. denied, 398 U.S. 950 (1970); Peil v. Speiser, 97 F.R.D. 657 (E.D. Pa. 1983). Therefore, in a close case, the court should find the prerequisites to class certification established. Eisenberg, 766 F.2d at 785; Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998). The focus is simply whether the prerequisites of Rule 23 have been met. Dawes v. The Philadelphia Gas Commission, 421 F. Supp. 806, 813 (E.D. Pa. 1976). In determining whether an action may be maintained as a class action, the issue is merely whether the representative plaintiffs have demonstrated the probability of the existence of a sufficient number of persons inclined and similarly situated. The court is not to conduct an exploration of the merits when deciding upon certification of a class. Eisen v. Carlisle & Jacqueline, 417 U.S. 156, 17778 (1974); Kahan, 424 F.2d at 168; Spark v. MBNA Corporation, supra; Chestnut Fleet Rentals, Inc. v. Hertz Corp., 72 F.R.D. 541, 543 (E.D. Pa. 1976). Moreover, since class determination is made at the pleading stage of the action, the substantive allegations in the complaint are accepted as true for purposes of the class motion. Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n.15 (2d Cir. 1978); Blackie v. Barrack, 524 F.2d 891, 901 n.16 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976); Vine v. Beneficial Fin. Co., 374 F.2d 627,

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to Plaintiffs Complaint [not reprinted herein]. As to the exact number of Class members, Defendants possess documents which will establish that figure. Accordingly, it is indisputable that the numerosity requirement is easily satisfied as to the Class. 2. There are questions of law and fact common to the Class Rule 23(a)(2) requires a showing of the existence of questions of law or fact common to the class. Fed.R.Civ.P. 23 (a)(2). This threshold of commonality is not high. In re School Asbestos Litig., 789 F.2d at 1010 (quoting Jenkins v. Raymark Indus., Inc., 782 F.2d 468 (5th Cir. 1986), cert. denied, 479 U.S. 852 (1987)). The rule does not require that all questions be common or even that common questions predominate. Hummel v. Brennan, 83 F.R.D. 141, 145 (E.D. Pa. 1979); Kuhn v. Philadelphia Electric Co., 80 F.R.D. 681, 684 (E.D. Pa. 1978). All class members need not share identical claims; factual differences among the claims of the putative class members do not defeat certification. Baby Neal v. Casey, 43 F.3d 48, 56 (3d. Cir. 1994). Indeed, a single common question is sufficient to satisfy the requirements of Rule 23(a)(2). In re Prudential Insurance Company America Sales Practice Litigation Agent Actions, 148 F.3d 283, 310 (3d Cir. 1998); Baby Neal v. Casey, 43 F.3d at 56. A common question is one which arises from a common nucleus of operative facts regardless of whether the underlying facts fluctuate over the class period and vary as to individual claimants. In re School Asbestos Litig., 104 F.R.D. at 429; Cohen v. Uniroyal, Inc., 77 F.R.D. 685, 69091 (E.D. Pa. 1977); Muth v. Dechert, Price & Rhoads, 70 F.R.D. 602, 607 (E.D. Pa. 1976); In re Corrugated Container Antitrust Litig., 80 F.R.D. 244, 250 (S.D. Tex. 1978). Courts have typically found a common nucleus of operative facts where, as in the present action, the defendant engaged in standardized conduct toward putative class members. Keele v. Wexler, 1998 U.S. App. LEXIS 15029 (7th Cir. 1998) (class certified in FDCPA action on behalf of all Colorado residents who received debt collection letters from defendant); Wilborn v. Dun & Bradstreet Corporation, 1998 U.S. Dist. LEXIS 12618 (N.D. Ill. 1998) (FDCPA class certified regarding form collection letter); West v. Costen, 558 F. Supp. 564 (W. D. Va. 1983) (FDCPA class certified regarding alleged failure to provide required validation notices). See also Prudential, 148 F.3d at 309310 (Prudentials orchestrated sales presentations, the plaintiffs common legal theories, Prudentials common defenses, and other common issues undoubtedly satisfy the commonality and predominance requirements); Chandler v. Southwest Jeep-Eagle, 162 F.R.D. 302, 308 (N.D. Ill. 1995) (common nucleus of operative facts where defendants engaged in standardized conduct toward members of the proposed class); Heartland Communications v. Sprint Corp., 161 F.R.D. 111 (D. Kan. 1995) (class certification granted where the contracts signed by all proposed class members contained virtually the same provision as that challenged by the named class representative). Moreover, it is well established that the presence of some individualized issues does not overshadow the common nucleus of operative fact presented when the defendant has engaged in standardized conduct toward the Class. See Prudential, supra (individual damages do not undermine predominance of common issues); Dawes, 421 F. Supp. at 814 (pres-

63233 (2d Cir.), cert. denied, 389 U.S. 970 (1967), and if any doubt exists, any error, if there is to be one, should be committed in favor of allowing the class action. Hoffman Elec., Inc. v. Emerson Elec. Co., 754 F. Supp. 1070, 1075 (W. D. Pa. 1991). See also Moskowitz v. Lopp, 128 F.R.D. 624, 628 (E.D. Pa. 1989); Ettinger v. Merrill Lynch Pierce, Fenner & Smith, Inc., 122 F.R.D. 177, 179 (E.D. Pa. 1988). Further, judicial economy requires that this action proceed through the class action vehicle. The Plaintiffs and the Class members only alternative to proceeding as a class action is to file individual claims. To do so would be time consuming and redundant, as each Plaintiff would be required to conduct discovery into Defendants business practices to prove exactly the same allegations and proffer exactly the same evidence. Each Plaintiff would then be required to brief and argue the same questions of law. This action should be certified as a class action because, as discussed below, all of the requirements of Rule 23(a) have been met. 1. The Class is so numerous that joinder of all members is impracticable Rule 23(a)(1) requires that the proponent of a class action demonstrate that the class is so numerous that joinder of all members is impracticable. Fed.R.Civ.P. 23(a)(1). The Rule does not require that joinder be impossible; rather, joinder of all members is impracticable when the procedure would be inefficient, costly, time-consuming, and probably confusing. Ardrey v. Federal Kemper Ins. Co., 142 F.R.D. 105, 111 (E.D. Pa. 1992). This Court may make common sense assumptions in order to support the finding of numerosity. Snider v. Upjohn Co., 115 F.R.D. 536, 539 (E.D. Pa. 1987) (quoting Wolgin v. Magic Marker Corp., 82 F.R.D. 168, 171 (E.D. Pa. 1979)). Moreover, precise enumeration of the members of a class is not necessary for the action to proceed as a class action. See, e.g., Epstein v. Moore, [198889 Transfer Binder] Fed. Sec. L. Rep. (CCH) k 93, 957 at 90,442 (D.N.J. 1988). It is permissible to estimate class size. In re ORFA Sec. Litig., 654 F. Supp. 1449, 1464 (D.N.J. 1987). In applying this rule, it has consistently been held that joinder is impracticable where the class is composed of hundreds of potential claimants; indeed, impracticability of joinder has often been found where the class is composed of less than 100 members. See, e.g., Eisenberg, 766 F.2d at 78586 (90 class members meet numerosity requirement); Weiss v. York Hospital, 745 F.2d 786, 808 (3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985) (92 class members meet numerosity requirement); Zeffiro v. First Pennsylvania Banking & Trust Co., 96 F.R.D. 567, 569 (E.D. Pa. 1983) (51 class members sufficient); Philadelphia Electric Co. v. Anaconda American Brass Co., 43 F.R.D. 452 (E.D. Pa. 1968) (certification of class with 25 members); Korn v. Franchard Corp., 456 F.2d 1206, 1209 (2d Cir. 1972) (70 members); Leyva v. Buley, 125 F.R.D. 512 (E.D. Wash. 1989) (joinder of 50 migrant workers impracticable); Basile v. Merrill Lynch Pierce, Fenner & Smith, Inc., 105 F.R.D. 506 (S.D. Ohio 1985) (23 members). Plaintiffs seek certification of a class of all persons in the United States who, during the one year prior to the filing of this action, received letters or other communications from Defendants substantially in the form of Exhibit A and Exhibit B

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ence of individual damage claims does not justify denial of class treatment of common issues); Heartland Communications, 161 F.R.D. at 11415 (minor differences in contracts signed by class members did not suffice to preclude a finding of commonality). This action is appropriate for class certification because, as set forth in the Complaint, there are numerous questions of fact and law common to the Class in that all members received the same form collection letter. Each member of the proposed Class is a victim of Defendants false and misleading representations, threats and attempts to collect debt.1 Accordingly, given the presence of the common questions raised by the form letters, it is indisputable that Rule 23(a)(2)s requirement for the existence of common questions of fact or law is satisfied. 3. The claims of the representative parties are typical of the claims of the Class Rule 23(a)(3) requires that the claims of the class representatives be typical of the claims . . . of the class. Fed.R.Civ.P. 23(a)(3). Rule 23(a)(3) and the adequacy of representation requirement set forth in subsection (a)(4), are designed to assure that the interests of unnamed class members will be adequately protected by the named class representatives. See, e.g., General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157 n.13 (1982); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 449 (3d Cir. 1977), cert. denied, 434 U.S. 1086 (1978); In re School Asbestos Litig., 104 F.R.D. at 42930. The threshold for establishing typicality is low. Typicality does not require that the claims of the class members be identical. Eisenberg, 766 F.2d at 786. Rule 23 does not require that the representative plaintiff have endured precisely the same injuries that have been sustained by the class members, only that the harm complained of be common to the class. . . . Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir. 1988) (emphasis in original). The measure of whether a plaintiffs claims are typical is whether the nature of plaintiffs claims, judged from both a factual and a legal perspective, are such that in litigating his personal claims he can reasonably be expected to advance the interest of absent class members. See, e.g., Falcon, 457 U.S. at 156157; Weiss, 745 F.2d at 80910 n.36; Scott v. University of Delaware, 601 F.2d 76, 84 (3d Cir.), cert. denied, 444 U.S. 931 (1979). Under a frequently employed formulation, typicality is demonstrated where the plaintiff can show that the issues of law or fact he or she shares in common with the class occupy the same degree of centrality to his or her claims as to those of unnamed class members. See Weiss, 745 F.2d at 80910 n.36 (citing Donaldson v. Pillsbury, 554 F.2d 825 (8th Cir.), cert. denied, 434 U.S. 856 (1977)). Put another way, [c]laims [are considered] typical when the essence of the allegations concerning liability, and not the particularities, sug1 Commonality is not defeated by slight differences in class members positions, Blackie v. Barrack, 524 F.2d at 902, or because all of the allegations of the class do not fit together like pieces of a jigsaw puzzle. Green v. Wolf Corp., 406 F.2d 291, 300 (2d Cir. 1968), cert. denied, 395 U.S. 977 (1969). Rather than considering the merits of the substantive claims, the courts inquiry should be limited to verifying the existence of common questions of law or fact. Moskowitz v. Lopp, 128 F.R.D. at 629.

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gest adequate representation of the interests of the proposed class members. In re School Asbestos Litig., 104 F.R.D. at 430 (citing Piel, 97 F.R.D. at 659); Prudential, 148 F.3d at 311312. Where, as here, the Plaintiffs allege a common pattern of wrongdoing, and will present the same evidence (based on the same legal theories) to support both their claims and the claims of the Class members, courts have held the typicality requirement to be satisfied, notwithstanding factual variances in the position of each class member. As recently held by the Third Circuit in Prudential, where the named plaintiffs, as well as members of the proposed class, all have overarching claims arising from a fraudulent scheme, the typicality requirement is satisfied regardless of whether different facts underlie each class members claim. Prudential, 148 F.3d at 311312. Typicality is even more easily satisfied in an FDCPA action such as the one at bar because the claims are based on the nature of the Letters. Keele v. Wexler, 1998 U.S. App. LEXIS 15029 at *1516; Wilborn v. Dun & Bradstreet Corporation, 1998 U.S. Dist. LEXIS 12618 at *11. The representative Plaintiffs are typical victims of Defendants improper practices. Plaintiffs claims arise out of the same course of conduct, i.e., the use of form collection letters, and are based on the same legal theories as those of the Class members. For example, whether First Unions sending collection letters in the name of HMRE rendered First Union a debt collector within the meaning of Section 1692a(6) and constituted a violation of Section 1692j of the FDCPA, see Masuda v. Thomas Richards & Co., 759 F. Supp. 1456 (C.D. Cal. 1991), is a typical issue for each member. The essence of each putative Class members claim is precisely the same. Accordingly, the common issues necessarily share the same degree of centrality, Weiss, 745 F.2d at 80910 n.36, to the named representatives claims such that in litigating the liability issues, the representative Plaintiffs can reasonably be expected to advance the interests of all Class members toward a favorable determination with respect to each such issue. The claims of the representative Plaintiffs are typical of the claims of the Class. 4. The Plaintiffs will fairly and adequately protect the interests of the Class The requirement of Rule 23(a)(4) is met if it appears that (1) Plaintiffs attorneys are qualified, experienced and generally able to conduct the litigation and (2) Plaintiffs interests are not antagonistic to those of the class they seek to represent. See, e.g., Prudential, 148 F.3d at 312; Lewis v. Curtis, 671 F.2d 779, 788 (3d Cir.), cert. denied, 459 U.S. 880 (1982); Bogosian, 561 F.2d at 449; Wetzel, 508 F.2d at 247. The existence of the elements of adequate representation are presumed and [t]he burden is on the defendant to demonstrate that the representation will be inadequate. In re School Asbestos Litig., 104 F.R.D. at 430 (citing Lewis, 671 F.2d at 788). As the court explained in Cook v. Rockwell Intl Corp., 151 F.R.D. 378, 386 (D. Colo. 1993): [A]dequate representation presumptions are usually invoked in the absence of contrary evidence by the party opposing the class. On the issue of no conflict with the class, one of the tests for adequate representation, the presumption fairly arises be-

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relief or corresponding declaratory relief with respect to the class as a whole; or (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members . . . Fed.R.Civ.P. 23(b)(1), (2), (3). This action qualifies as a class action under Rule 23(b)(1) because it would make little sense for individual members of the Class to prosecute separate actions, given the possibility of inconsistent adjudications which would not be helpful to the Defendants in establishing appropriate procedures under the FDCPA. Such individual prosecutions would also risk adjudications that might dispose of the interests of other members who had not filed suit, and might present obstacles to the protection of those individuals interests. This action qualifies as a class action under Rule 23(b)(2) because the Letters designed and mailed by Defendants represent actions of general applicability to all members of the Class. This case also qualifies for certification under Rule 23(b)(3).3 As discussed above, there are numerous questions of law and fact common to the Class. Once common questions of liability are resolved, all that remains is the mechanical act of computing the amount of damages suffered by each Class member. See Blackie v. Barrack, 524 F.2d at 905. Plaintiffs have alleged a uniform practice and policy conducted by Defendants against Plaintiffs and the Class members. Accordingly, the issues of law and fact which flow from Defendants uniform activity predominate over any individual issue.4 Common issues predominate over individual issues where plaintiffs have alleged a common course of conduct on the part of a defendant. Prudential, 148 F.3d at 314315. In addition to finding the predominance of common questions, Rule 23(b)(3) also requires that the Court determine that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. It has been widely recognized that a class action is superior to other available methodsparticularly, individual lawsuitsfor the fair and efficient adjudication of a suit that affects a large number of persons injured by violations of consumer protection laws or common law. Prudential, 148 F.3d at 316. Consumer class actions such as the case at bar easily satisfy the superiority requirement of Rule 23. Wilborn v. Dun & Brad3 Courts have often certified classes for the purposes of both equitable relief and damages. Crempan v. Automobile Club, 22 FEP Cas (BNA) 180 (E.D. Mich. May 19, 1977) (in employment discrimination case, (b)(2) class certified for injunctive relief and (b)(3) class certified for back pay); see also Williams v. Empire Funding Corp., supra, slip op. at 1718, n.14 (attached hereto as Exhibit B) [not reprinted herein]. 4 Obviously, there may be individual differences in the amount of damages claimed by different Class members. However, the need for individual damage calculations does not defeat class certification where common questions as to liability predominate. Prudential, 148 F.3d at 311312; Seidman v. American Mobile Systems, Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1994).

cause of the difficulty of proving negative facts. On the issue of professional competence of counsel for the class representative, the presumption fairly arises that all members of the bar in good standing are competent. Finally, on the issue of intent to prosecute the action vigorously, the favorable presumption arises because the test involves future conduct of persons, which cannot fairly be prejudged adversely. If there are any doubts about adequate representation or potential conflicts, they should be resolved in favor of upholding the class, subject to later possible reconsideration, or subclasses might be created initially. Id., (quoting 2 Newberg, 7.24 at pp. 7-81, 7-82). Both prongs of the adequacy test are met here. First, Plaintiffs have retained counsel highly experienced in class action litigation to prosecute their claims and those of the Class. Attached hereto as Exhibit A is a copy of the biographies of Plaintiffs counsel [not reprinted herein]. See also Williams v. Empire Funding Corp., (E.D. Pa. 1998 WL 813429 November 24, 1998) (attached hereto as Exhibit B) (appointing one of Plaintiffs counsel, Justin Hunt, LLC, as class counsel in consumer protection class action) [not reprinted herein]. Second, there is nothing to suggest that the representative Plaintiffs have any interest antagonistic to the vigorous pursuit of the Class claims against Defendants.2 Plaintiffs share with the Class the interest in establishing that the Letters violate the FDCPA. Accordingly, the representative Plaintiffs adequately represent the interests of the Class. C. The Conditions of Rule 23(b) Have Been Met In addition to meeting the prerequisites of Rule 23(a), an action must satisfy at least one of the three conditions of subdivision (b) of Rule 23. Plaintiffs proceed here under Rule 23(b)(1), (2) and (3) which provides in pertinent part: An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: (1) the prosecution of separate actions by or against individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive
2 Because of the difficulty in proving the negative, it is Defendants burden to prove any antagonism. See Lewis, 671 F.2d at 788.

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street Corporation, 1998 U.S. Dist. LEXIS 12618 at *3133. See also Lake v. First Nationwide Bank, 156 F.R.D. 615, 626 (E.D. Pa. 1994) (public interest in seeing that rights of consumers are vindicated favors disposition of claims in a class action). Defendants improper collection activities have been directed toward a large number of geographically dispersed persons to such an extent that the cost of pursuing individual litigation to seek recovery against a well-financed adversary is not feasible. Thus, the alternatives to a class action are either no recourse for hundreds of injured consumers, or even in the unlikely event that they all become aware of their rights and could locate counsel, a multiplicity of scattered suits resulting in the inefficient administration of litigation. In addition, in the absence of class certification, the very short statute of limitations provided by Section 1692k(d) of the FDCPA would begin to run and would require scores of unsophisticated consumers, many of whom are unaware that they have claims, to commence suit immediately to obtain any recovery. Accordingly, a class action is superior to other available methods for the fair and efficient adjudication of this matter. There is no question but that this class action would be easily manageable. This case presents no manageability difficulties that would preclude class certification. IV. CONCLUSION For all the foregoing reasons, Plaintiffs respectfully request that this Court grant their motion for an order certifying this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of the proposed Class of individuals defined herein, and certifying Plaintiffs Gene C. Bauer and Carol A. Bauer as proper representatives of the Class. Respectfully submitted, ROSS & MARLER, P.C. By: M.D. Marler Address Phone Number JUSTIN HUNT, LLC M.D. Justin D.A. Reardon Address Phone Number Attorneys for Plaintiffs and the Class Dated: January 7, 1999

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L.2 TIL, UDAP, and Breach of Contract CaseCredit Card Issuers Failure to Refund Credit Balance (Coe)
UNITED STATES DISTRICT COURT DISTRICT OF DELAWARE ) ) ) ) ) CIVIL ACTION NO. 98) v. ) CLASS ACTION ) ADVANTA NATIONAL BANK, ) Defendant. ) ) GEORGE L. COE, III and JANET R. COE, on behalf of themselves and all those similarly situated, MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION I. PRELIMINARY STATEMENT A. Background and Nature of the Case Plaintiffs, by counsel, respectfully submit this memorandum in support of their Motion for Class Certification pursuant to Rules 23(a), 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure (the Rules), seeking certification of this action as a class action and plaintiffs George L. Coe, III and Janet R. Coe as class representatives. This is a consumer class action brought on behalf of consumer credit cardholders as to whom defendant Advanta National Bank (Advanta) failed and refused to refund credit balances within a reasonable time. Plaintiffs assert claims under the federal Truth in Lending Act (TILA), Regulation Z of the Federal Reserve Board (Regulation Z), for breach of contract and for violations of the Delaware Consumer Fraud Act (CFA). B. Procedural History Plaintiffs filed a Class Action Complaint (the Complaint) in this case on May 7, 1998. In response, Advanta filed an Answer on August 10, 1998. The parties filed a Proposed Discovery Plan under Rule 26(f) on September 24, 1998 and exchanged Rule 26(a)(1) disclosures on October 16, 1998. With respect to discovery that has taken place to date, plaintiffs have propounded interrogatories and document requests to which Advanta responded on November 2, 1998. In addition, plaintiffs have noticed depositions of twelve Advanta witnesses, two of which have commenced as of the date of this Motion. Those depositions revealed that there may yet be documents that Advanta has not produced and the plaintiffs will be following up with defendant to obtain that discovery. C. The Class As set forth in the Complaint, plaintiffs seek certification of a class of all persons who, from May 6, 1994 had a credit card account with Advanta with a credit balance in excess of

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fund check for another seven to ten days and, thereafter, a customer can expect additional delay due to the time for mailing and receipt. Mrs. Coe advised Advantas representative that such a practice was a violation of, among other things, federal law which required credit balance refunds within seven days. The Advanta representative responded that Advanta followed and was subject to Delaware law, not federal law. Eventually, Advanta undertook to refund the credit balance and a check in the amount of $822.75 was mailed out to the Coes. The check was dated February 3, 1998, more than seven business days after the January 22 request. See Exhibit P1 included in Exhibit A attached hereto [not reprinted herein]. B. Facts as to the Class Plaintiffs do not anticipate that Advanta will dispute that, in fact, it is subject to Regulation Z of TILA in that it regularly extends consumer credit more than 25 times a year. In fact, F. Ralph Dim, Advantas manager of customer service, estimated that Advanta has approximately 7 million cardholders. Although discovery has not yet been completed in this case, the documents produced and the two as yet untranscribed depositions of Advanta representatives that have commenced so far provide support for plaintiffs belief that they are not the only Advanta customers whose refunds have been withheld in violation of law. This is because Advanta has failed to structure a system that is guaranteed to forward credit balance refunds to their customers in the time required by the TILA. For example, Advantas computer system is not programmed to automatically generate credit balance refunds due to customers. In other words, if a payment in excess of the existing balance is received by Advanta, even if that payment comes from another recognized financial institution, the computer will not automatically generate a check in the amount of the resulting credit and send it to the cardholder. Rather, Advanta waits for the customer to contact Advanta and affirmatively request that a credit balance refund be issued. See Exhibit A42 included in Exhibit A attached hereto (training of customer service representatives to refund overpayments or credit balances to customers only upon request). It is only at that point that Advanta, through the entry of data into the system by one of its customer service representatives, begins the research process that eventually culminates in the issuance of a check to the customer. Further, Advanta also employs a policy that a request for an account to be closed, such as Mr. Coes request on December 4, 1997, is not interpreted by Advanta as a request for a credit balance refund, even though there is obviously nothing else to do with the money upon closing an account other than to return the credit balance to its owner. Instead, according to Ms. Little, the customer must specifically ask for the refund. As such, a cardholder who does not use the magic words required by Advanta will be left to wait interminably for his or her refund. That these policies have affected other consumers in addition to the plaintiffs has been borne out by documents produced by Advanta to date. Among those documents are apparent complaints of two other Advanta customers who did not

one dollar ($1.00) and as to whom Advanta failed to refund the credit balance within a reasonable time. Excluded from the Class are all officers and directors of the defendant. II. FACTS A. Facts as to the Plaintiffs The facts in this case are simple and straightforward. Plaintiffs were the holders of a credit card issued by Advanta. In late October 1997 or early November 1997, plaintiffs accepted a credit card offer at a much lower interest rate from another bank. As is common in such situations, the new card issuer will pay off the account balance owed to the previous bank (in this case, Advanta) and debit the new card in the amount of the payoff of the prior card. Also, it is common in such situations that the previous bank will receive a payoff amount in excess of the amount necessary to cover the actual account balance. On November 9, 1997, funds were transmitted to Advanta in excess of the amount needed to clear the plaintiffs balance. Specifically, the transfer of funds to Advanta resulted in a credit balance of $822.75 due to the plaintiffs. Thereafter, the plaintiffs made verbal and written requests for a refund of their $822.75 credit balance being held by Advanta. For example, one of the documents produced by Advanta to date shows that Mr. Coe telephoned Advanta on December 4, 1997, almost one month after the creation of the credit balance and requested that the account be closed because of the balance transfer to the other credit card company, First USA of Atlanta, Georgia. See Exhibits A34, A37-39 included in Exhibit A attached hereto [not reprinted herein]. Notwithstanding, Advanta did not issue the Coes their credit refund. Thereafter, by letter dated January 5, 1998, Mrs. Coe wrote to Advanta and requested the account be closed and the refund be mailed to their home. See Exhibit B to Complaint [not reprinted herein]. Again, Advanta failed to respond. The Coes called yet again, on January 22, 1998. See Exhibit A37. Having received no response to their repeated requests for a refund of the credit balance, Mrs. Coe again telephoned Advanta on or about February 2, 1998.5 Mrs. Coe, at that time, again demanded an immediate refund of the credit balance. A person, who identified herself as a representative of Advanta, advised Mrs. Coe that Advanta receives thousands and thousands of credit balance transfers a month, which usually result in excess credit balances to the cardholders. The representative further advised that it was Advantas policy and practice for any credit refund in excess of $100 to search for the check which usually takes fourteen days. Then, according to Advantas policy and practice, it will not issue the re5 Although Advanta retained a record of some of the Coes calls, as per the exhibits referenced above, Advanta does not have a system whereby each and every contact from a customer is recorded. According to as yet untranscribed deposition testimony of C. Spencer, an Advanta customer service representative, a phone call or letter from an Advanta customer will be recorded only if the representative affirmatively takes action to record the contact on the computer system. Such a system explains why Advanta may have records of some, but not all, contacts from the Coes and members of the Class.

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receive refunds within the requisite time. See Exhibits A51A72 and A86-A100 included in Exhibit A attached hereto. In the case of customer Jake Green, a written request for refund was received by Advanta on May 19, 1997. The refund check was not mailed out until June 11, 1997, according to the envelopes postmark, over three weeks later. Explaining the delay, a letter from an Advanta executive stated that all customer correspondence is reviewed within 30 days. I do not feel that this is unacceptable. Ex. A68. In the case of customer Lucy Lu, the customer wrote on November 3, 1997 that she had been calling customer service constantly almost everyday for over a month to request this refund check & the status of the check. Ex. A87. She later recounts in subsequent correspondence, dated November 11, 1997, her various conversations with customer service representatives and a supervisor who promised the issuance of her check on November 6, 1997. Exs. A88-A89. Not until she wrote a letter to Advantas president, Ex. A90-A91, did she receive the refund check requested months earlier. Plaintiffs believe that the facts in this case will show that Advanta has knowingly and intentionally implemented a policy and practice of withholding or delaying credit balance refunds, in violation of federal law, in order to generate additional profits in the form of investment or interest earnings on its customers credit balances for each day it can delay making refunds. III. ARGUMENT A. General Legal Standards Governing Class Certification For a suit to be maintained as a class action under Rule 23, plaintiffs must allege facts establishing each of the four threshold requirements of subsection (a) of the Rule which provides: 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. See Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239, 246 (3d Cir.), cert. denied, 421 U.S. 1011 (1975). Plaintiffs must also allege that this action qualifies for class treatment under at least one of the subdivisions of Rule 23(b). Under Rule 23(b)(2), a class action will be appropriate where the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. Under Rule 23(b)(3), a class action will be appropriate where the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

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Plaintiffs bear the initial burden of advancing reasons why a putative class action meets the requirements of Rule 23. However, plaintiffs burden is not a heavy one. See Piel v. National Semiconductor Corp., 86 F.R.D. 357, 368 (E.D. Pa. 1980). See also Anderson v. City of Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982); Paxton v. Union Natl Bank, 688 F.2d 552, (8th Cir. 1982). Once a plaintiff has demonstrated a preliminary legal showing that the requirements of Rule 23 have been met, the burden of proof is upon the defendant to demonstrate otherwise. 2 H. Newberg, Newberg on Class Actions (3d Ed. 1992) (Newberg) 7.22 at 7-74 to 7-75. Provided that a plaintiffs contentions regarding the class issues are based upon a reasonable foundation, the court should not deny certification because of a defendants challenge. See Sollenbarger v. Mountain States Tel. & Tel. Co., 121 F.R.D. 417 (D.N.M. 1988); In re Industrial Gas Antitrust Litig., 100 F.R.D. 280 (N.D. Ill. 1983); Kuck v. Berkey Photo, Inc., 81 F.R.D. 736 (S.D.N.Y. 1979). B. The Proposed Class and Subclasses Satisfy the Requirements of Rule 23(a) of The Federal Rules of Civil Procedure The Supreme Court has noted that [c]lass actions serve an important function in our system of civil justice. Gulf Oil Co. v. Bernard, 452 U.S. 89, 99 (1981). The Court has also recognized that the class action procedure is necessary for private rights of action to be initiated. Deposit Guar. Natl Bank v. Roper, 445 U.S. 326, rehg. denied, 446 U.S. 947 (1980). As stated in Roper, class actions serve an important function in our system of civil justice because they permit plaintiffs to vindicat[e] the rights of individuals who otherwise might not consider it worth the candle to embark on litigation in which the optimum result might be more than consumed by the cost. Id. at 338. The determinations called for by Rule 23 are questions addressed to the sound discretion of the district court. Gulf Oil Co., 452 U.S. at 100. A decision to grant class certification is not a final order; it may be altered or amended as the case progresses towards resolution on the merits. Fed.R.Civ.P. 23(c)(1); In re School Asbestos Litig., 789 F.2d 996, 1011 (3d Cir. 1986); 7B C. Wright & A. Miller, Federal Practice and Procedure, 1785, at 128 (1986) (Wright & Miller). Moreover, the Third Circuit has adopted a liberal construction of Rule 23. See, e.g., Eisenberg v. Gagnon, 766 F.2d 770, 785 (3d Cir.), cert. denied sub nom Wasserstrom v. Eisenberg, 474 U.S. 946 (1985); Kahan v. Rosenstiel, 424 F.2d 161 (3d Cir.), cert. denied, 398 U.S. 950 (1970); Peil v. Speiser, 97 F.R.D. 657 (E.D. Pa. 1983). Therefore, in a close case, the court should find the prerequisites to class certification established. Eisenberg, 766 F.2d at 785; Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998). The focus is simply whether the prerequisites of Rule 23 have been met. Dawes v. The Philadelphia Gas Commission, 421 F. Supp. 806, 813 (E.D. Pa. 1976). In determining whether an action may be maintained as a class action, the issue is merely whether the representative plaintiffs have demonstrated the probability of the existence of a sufficient number of persons inclined and similarly situated. The court is not to conduct an exploration of the merits when deciding upon certification of a class. Eisen v. Carlisle & Jacqueline, 417 U.S. 156, 17778 (1974); Kahan, 424 F.2d at 168; Spark v. MBNA Corporation, supra; Chestnut Fleet Rentals, Inc. v. Hertz Corp., 72

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1989) (joinder of 50 migrant workers impracticable); Basile v. Merrill Lynch Pierce, Fenner & Smith, Inc., 105 F.R.D. 506 (S.D. Ohio 1985) (23 members). Plaintiffs seek certification of a class of all persons who, from May 6, 1994 had a credit card account with Advanta with a credit balance in excess of one dollar ($1.00) and as to whom Advanta failed to refund the credit balance within a reasonable time. As to the exact number of Class members, defendant possesses documents which will establish that figure. Accordingly, it is indisputable that the numerosity requirement is easily satisfied as to the Class. 2. There are questions of law and fact common to the Class Rule 23(a)(2) requires a showing of the existence of questions of law or fact common to the class. Fed.R.Civ.P. 23 (a)(2). This threshold of commonality is not high. In re School Asbestos Litig., 789 F.2d at 1010 (quoting Jenkins v. Raymark Indus., Inc., 782 F.2d 468 (5th Cir. 1986), cert. denied, 479 U.S. 852 (1987)). The rule does not require that all questions be common or even that common questions predominate. Hummel v. Brennan, 83 F.R.D. 141, 145 (E.D. Pa. 1979); Kuhn v. Philadelphia Electric Co., 80 F.R.D. 681, 684 (E.D. Pa. 1978). All class members need not share identical claims; factual differences among the claims of the putative class members do not defeat certification. Baby Neal v. Casey, 43 F.3d 48, 56 (3d. Cir. 1994). Indeed, a single common question is sufficient to satisfy the requirements of Rule 23(a)(2). In re Prudential Insurance Company America Sales Practice Litigation Agent Actions, 148 F.3d 283, 310 (3d. Cir. 1998); Baby Neal v. Casey, 43 F.3d at 56. A common question is one which arises from a common nucleus of operative facts regardless of whether the underlying facts fluctuate over the class period and vary as to individual claimants. In re School Asbestos Litig., 104 F.R.D. at 429; Cohen v. Uniroyal, Inc., 77 F.R.D. 685, 69091 (E.D. Pa. 1977); Muth v. Dechert, Price & Rhoads, 70 F.R.D. 602, 607 (E.D. Pa. 1976); In re Corrugated Container Antitrust Litig., 80 F.R.D. 244, 250 (S.D. Tex. 1978). Courts have typically found a common nucleus of operative facts where, as in the present action, the defendant engaged in standardized conduct toward putative class members. Prudential, 148 F.3d at 309310 (Prudentials orchestrated sales presentations, the plaintiffs common legal theories, Prudentials common defenses, and other common issues undoubtedly satisfy the commonality and predominance requirements); Chandler v. Southwest Jeep-Eagle, 162 F.R.D. 302, 308 (N.D. Ill. 1995) (common nucleus of operative facts where defendants engaged in standardized conduct toward members of the proposed class); Heartland Communications v. Sprint Corp., 161 F.R.D. 111 (D. Kan. 1995) (class certification granted where the contracts signed by all proposed class members, while not identical, contained virtually the same provision as that challenged by the named class representative); Fogie v. Rent-A-Center, 867 F. Supp. 1398, 1402 (D. Minn. 1993) (common issues of fact and law where all class members signed the same contract); In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litigation, 122 F.R.D. 251 (C.D. Cal. 1988) (class certification appropriate where the class claims were primarily grounded on misrepresentations and omissions contained in a common core of documents); Lessard v. Metropoli-

F.R.D. 541, 543 (E.D. Pa. 1976). Moreover, since class determination is made at the pleading stage of the action, the substantive allegations in the complaint are accepted as true for purposes of the class motion. Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n.15 (2d Cir. 1978); Blackie v. Barrack, 524 F. 2d 891, 901 n.16 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976); Vine v. Beneficial Fin. Co., 374 F.2d 627, 63233 (2d Cir.), cert. denied, 389 U.S. 970 (1967), and if any doubt exists, any error, if there is to be one, should be committed in favor of allowing the class action. Hoffman Elec., Inc. v. Emerson Elec. Co., 754 F. Supp. 1070, 1075 (W.D. Pa. 1991). See also Moskowitz v. Lopp, 128 F.R.D. 624, 628 (E.D. Pa. 1989); Ettinger v. Merrill Lynch Pierce, Fenner & Smith, Inc., 122 F.R.D. 177, 179 (E.D. Pa. 1988). Further, judicial economy requires that this action proceed through the class action vehicle. The plaintiffs and the Class members only alternative to proceeding as a class action is to file individual claims. To do so would be time consuming and redundant, as each plaintiff would be required to conduct discovery into defendants business practices to prove exactly the same allegations and proffer exactly the same evidence. Each plaintiff would then be required to brief and argue the same questions of law. This action should be certified as a class action because, as discussed below, all of the requirements of Rule 23(a) have been met. 1. The Class is so numerous that joinder of all members is impracticable Rule 23(a)(1) requires that the proponent of a class action demonstrate that the class is so numerous that joinder of all members is impracticable. Fed.R.Civ.P. 23(a)(1). The Rule does not require that joinder be impossible; rather, joinder of all members is impracticable when the procedure would be inefficient, costly, time-consuming, and probably confusing. Ardrey v. Federal Kemper Ins. Co., 142 F.R.D. 105, 111 (E.D. Pa. 1992). This Court may make common sense assumptions in order to support the finding of numerosity. Snider v. Upjohn Co., 115 F.R.D. 536, 539 (E.D. Pa. 1987) (quoting Wolgin v. Magic Marker Corp., 82 F.R.D. 168, 171 (E.D. Pa. 1979)). Moreover, precise enumeration of the members of a class is not necessary for the action to proceed as a class action. See, e.g., Epstein v. Moore, [198889 Transfer Binder] Fed. Sec. L. Rep. (CCH) k 93, 957 at 90,442 (D.N.J. 1988). It is permissible to estimate class size. In re ORFA Sec. Litig., 654 F. Supp. 1449, 1464 (D.N.J. 1987). In applying this rule, it has consistently been held that joinder is impracticable where the class is composed of hundreds of potential claimants; indeed, impracticability of joinder has often been found where the class is composed of less than 100 members. See, e.g., Eisenberg, 766 F.2d at 78586 (90 class members meets numerosity requirement); Weiss v. York Hospital, 745 F.2d 786, 808 (3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985) (92 class members meets numerosity requirement); Zeffiro v. First Pennsylvania Banking & Trust Co., 96 F.R.D. 567, 569 (E.D. Pa. 1983) (51 class members sufficient); Philadelphia Electric Co. v. Anaconda American Brass Co., 43 F.R.D. 452 (E.D. Pa. 1968) (certification of class with 25 members); Korn v. Franchard Corp., 456 F.2d 1206, 1209 (2d Cir. 1972) (70 members); Leyva v. Buley, 125 F.R.D. 512 (E.D. Wash.

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tan Life Ins. Co., 103 F.R.D. 608 (D. Me. 1984) (class certification granted where all proposed class members were parties to the same contract and subject to the same standardized conduct by the defendant). Moreover, it is well established that the presence of some individualized issues does not overshadow the common nucleus of operative fact presented when the defendant has engaged in standardized conduct toward the Class. See Prudential, supra (individual damages do not undermine predominance of common issues); Dawes, 421 F. Supp. at 814 (presence of individual damage claims does not justify denial of class treatment of common issues); Heartland Communications, 161 F.R.D. at 11415 (minor differences in contracts signed by class members did not suffice to preclude a finding of commonality); In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litigation, 122 F.R.D. at 254 (where the allegations concerning issues of common conduct, standardized documents and common misrepresentations, individualized issues of reliance, causation and damages do not render the case unsuitable for class certification). This action is appropriate for class certification because, as set forth in the Complaint, there are numerous questions of fact and law common to the Class. Additional examples include whether Advantas policies of not programming its computer to automatically generate refund checks to consumers with credit balances, of requiring consumers to affirmatively request a refund and of not treating a request to close an account as a request for a refund are in violation of the TILA, Regulation Z and state law. Each member of the proposed Class is a victim of defendants improper withholding of property and was victimized by the same or substantially similar unfair and deceptive conduct.6 Accordingly, given the presence of so many common questions, it is indisputable that Rule 23(a)(2)s requirement for the existence of common questions of fact or law is satisfied. 3. The claims of the representative parties are typical of the claims of the Class Rule 23(a)(3) requires that the claims of the class representatives be typical of the claims . . . of the class. Fed.R.Civ.P. 23(a)(3). Rule 23(a)(3) and the adequacy of representation requirement set forth in subsection (a)(4), are designed to assure that the interests of unnamed class members will be adequately protected by the named class representatives. See, e.g., General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157 n.13 (1982); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 449 (3d Cir. 1977), cert. denied, 434 U.S. 1086 (1978); In re School Asbestos Litig., 104 F.R.D. at 42930. The threshold for establishing typicality is low. Typicality does not require that the claims of the class members be identical. Eisenberg, 766 F.2d at 786. Rule 23 does not require
6 Commonality is not defeated by slight differences in class members positions, Blackie v. Barrack, 524 F.2d at 902, or because all of the allegations of the class do not fit together like pieces of a jigsaw puzzle. Green v. Wolf Corp., 406 F.2d 291, 300 (2d Cir. 1968), cert. denied, 395 U.S. 977 (1969). Rather than considering the merits of the substantive claims, the courts inquiry should be limited to verifying the existence of common questions of law or fact. Moskowitz v. Lopp, 128 F.R.D. at 629.

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that the representative plaintiff have endured precisely the same injuries that have been sustained by the class members, only that the harm complained of be common to the class . . . Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir. 1988) (emphasis in original). The measure of whether a plaintiffs claims are typical is whether the nature of plaintiffs claims, judged from both a factual and a legal perspective, are such that in litigating his personal claims he can reasonably be expected to advance the interest of absent class members. See, e.g., Falcon, 457 U.S. at 156157; Weiss, 745 F.2d at 80910 n.36; Scott v. University of Delaware, 601 F.2d 76, 84 (3d Cir.), cert. denied, 444 U.S. 931 (1979). Under a frequently employed formulation, typicality is demonstrated where the plaintiff can show that the issues of law or fact he or she shares in common with the class occupy the same degree of centrality to his or her claims as to those of unnamed class members. See Weiss, 745 F.2d at 80910 n.36 (citing Donaldson v. Pillsbury, 554 F.2d 825 (8th Cir.), cert. denied, 434 U.S. 856 (1977)). Put another way, [c]laims [are considered] typical when the essence of the allegations concerning liability, and not the particularities, suggest adequate representation of the interests of the proposed class members. In re School Asbestos Litig., 104 F.R.D. at 430 (citing Piel, 97 F.R.D. at 659); Prudential, 148 F.3d at 311312. Where, as here, the plaintiffs allege a common pattern of wrongdoing, and will present the same evidence (based on the same legal theories) to support both their claims and the claims of the Class members, courts have held the typicality requirement to be satisfied, notwithstanding factual variances in the position of each class member. As recently held by the Third Circuit in Prudential, where the named plaintiffs, as well as members of the proposed class, all have overarching claims arising from a fraudulent scheme, the typicality requirement is satisfied regardless of whether different facts underlie each class members claim. Prudential, 148 F.3d at 311312. See also, Robinson v. Countrywide Credit Industries, 1997 U.S. Dist. LEXIS 15712 (E.D. Pa. October 8, 1997) (a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action, and it may remain so despite the need, if liability is found, for separate determination of the damages suffered by individuals within the class); Hanrahan v. Britt, supra (typicality established where claims of all class members are based on the same systematic conduct and legal theories); Mathews, 1996 U.S. Dist. LEXIS 17790 at *8-9 (plaintiffs allegations of common course of fraudulent conduct and large unitary scheme satisfy the typicality requirement). The representative plaintiffs are typical victims of defendants improper practices. Plaintiffs claims arise out of the same course of conduct and are based on the same legal theories as those of the Class members. The gravamen of plaintiffs claims is that Advantas failure to refund credit balances within a reasonable time deprived plaintiffs of the unrestricted use of their money, caused them to incur interest charges owed to the transferee credit card issuer and effectively converted the funds to Advantas own use and benefit. The essence of each putative Class members claims is precisely the same. Accordingly, the common issues necessarily share the same degree of centrality, Weiss, 745 F.2d at 80910 n.36, to the named representatives claims such that in litigating the liabil-

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establishing that Advantas refusal to timely refund credit balances violates federal and state law. Accordingly, the representative plaintiffs adequately represent the interests of the Class. C. The Conditions of Rule 23(b)(2) and (3) Have Been Met In addition to meeting the prerequisites of Rule 23(a), an action must satisfy at least one of the three conditions of subdivision (b) of Rule 23. Plaintiffs proceed here under Rule 23(b) (2) and (3) which provide in pertinent part: An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: *** (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members . . . Fed.R.Civ.P. 23(b)(2), (3). This action qualifies as a class action under Rule 23(b)(2) because Advantas practice and policy of delaying and withholding refunds of credit balances is an action of general applicability to all members of the Class. This action also qualifies for certification under Rule 23(b)(3).8 As discussed above, there are numerous questions of law and fact common to the Class. Once common questions of liability are resolved, all that remains is the mechanical act of computing the amount of damages suffered by each Class member. See Blackie v. Barrack, 524 F.2d at 905. Plaintiffs have alleged a uniform practice and policy conducted by Advanta against plaintiffs and the Class members. Accordingly, the issues of law and fact which flow from defendants uniform activity predominate over any individual issue.9 Common issues predominate over individual issues where plaintiffs have alleged a common course of conduct on the part of defendant. Prudential, 148 F.3d at 314315.

ity issues, the representative plaintiff can reasonably be expected to advance the interests of all Class members toward a favorable determination with respect to each such issue. The claims of the representative plaintiffs are typical of the claims of the Class. 4. The plaintiffs will fairly and adequately protect the interests of the Class The requirement of Rule 23(a)(4) is met if it appears that (1) plaintiffs attorneys are qualified, experienced and generally able to conduct the litigation and (2) plaintiffs interests are not antagonistic to those of the class they seek to represent. See, e.g., Prudential, 148 F.3d at 312; Lewis v. Curtis, 671 F.2d 779, 788 (3d Cir.), cert. denied, 459 U.S. 880 (1982); Bogosian, 561 F.2d at 449; Wetzel, 508 F.2d at 247. The existence of the elements of adequate representation are presumed and [t]he burden is on the defendant to demonstrate that the representation will be inadequate. In re School Asbestos Litig., 104 F.R.D. at 430 (citing Lewis, 671 F.2d at 788). As the court explained in Cook v. Rockwell Intl Corp., 151 F.R.D. 378, 386 (D. Colo. 1993): [A]dequate representation presumptions are usually invoked in the absence of contrary evidence by the party opposing the class. On the issue of no conflict with the class, one of the tests for adequate representation, the presumption fairly arises because of the difficulty of proving negative facts. On the issue of professional competence of counsel for the class representative, the presumption fairly arises that all members of the bar in good standing are competent. Finally, on the issue of intent to prosecute the action vigorously, the favorable presumption arises because the test involves future conduct of persons, which cannot fairly be prejudged adversely. If there are any doubts about adequate representation or potential conflicts, they should be resolved in favor of upholding the class, subject to later possible reconsideration, or subclasses might be created initially. Id., (quoting 2 Newberg, 7.24 at pp. 7-81, 7-82). Both prongs of the adequacy test are met here. First, plaintiffs have retained counsel highly experienced in class action litigation to prosecute their claims and those of the Class. Attached hereto as Exhibit B is a copy of the biographies of plaintiffs counsel [not reprinted herein]. See also Williams v. Empire Funding Corp., C.A. No. 97-4518 (E.D. Pa. November 24, 1998) (attached hereto as Exhibit C) (appointing one of plaintiffs counsel, Justin Hunt, LLC as class counsel in consumer protection class action under TILA) [not reprinted herein]. Second, there is nothing to suggest that the representative plaintiffs have any interest antagonistic to the vigorous pursuit of the Class claims against Advanta.7 Plaintiffs share with the Class the interest in

7 Because of the difficulty in proving the negative, it is defendants burden to prove any antagonism. See Lewis, 671 F.2d at 788.

8 Courts have often certified classes for the purposes of both equitable relief and damages. Crempan v. Automobile Club, 22 FEP Cas (BNA) 180 (E.D. Mich. May 19, 1977) (in employment discrimination case, (b)(2) class certified for injunctive relief and (b)(3) class certified for back pay); see also Williams v. Empire Funding Corp., supra, slip op. at 1718, n.14 (attached hereto as Exhibit C) [not reprinted herein]. 9 Obviously, there will be individual differences in the amount of damages claimed by different Class members. However, the need for individual damage calculations does not defeat class certification where common questions as to liability predominate. Prudential, 148 F.3d at 311312; Seidman v. American Mobile Systems, Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1994).

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In addition to finding the predominance of common questions, Rule 23(b)(3) also requires that the Court determine that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. It has been widely recognized that a class action is superior to other available methodsparticularly, individual lawsuitsfor the fair and efficient adjudication of a suit that affects a large number of persons injured by violations of consumer protection laws or common law. Prudential, 148 F.3d at 316. Consumer class actions such as the case at bar easily satisfy the superiority requirement of Rule 23. See Lake v. First Nationwide Bank, 156 F.R.D. 615, 626 (E.D. Pa. 1994) (public interest in seeing that rights of consumers are vindicated favors disposition of claims in a class action). Defendant has inflicted economic injury on a large number of geographically dispersed persons to such an extent that the cost of pursuing individual litigation to seek recovery against a well-financed adversary is not feasible. Thus, the alternatives to a class action are either no recourse for hundreds of injured consumers, or even in the unlikely event that they all become aware of their rights and could locate counsel, a multiplicity of scattered suits resulting in the inefficient administration of litigation. Accordingly, a class action is superior to other available methods for the fair and efficient adjudication of this matter. There is no question but that this class action would be easily manageable. This case presents no manageability difficulties that would preclude class certification. D. Plaintiffs State Law Claims Should Be Certified Class certification of plaintiffs pendent state claims under the CFA and for common law breach of contract is also appropriate. Certifying a class for the common law claims presents the same Rule 23 analysis as does certifying the federal law claims. Numerous courts in this Circuit favor certifying classes with respect to pendent common law claims. See Eisenberg, 766 F.2d at 786; In re Fiddlers Wood Bondholders Litig., 102 F.R.D. 291, 292 (E. D. Pa. 1984); In re IGI Sec. Litig., 122 F.R.D. 451, 460 (D.N.J. 1988); In re ORFA Sec. Litig., 654 F. Supp. at 1461; Dekro v. Stern Bros. & Co., 540 F. Supp. 406, 418 (W.D. Mo. 1982). The same proof which will be introduced to establish the TILA violations is also highly relevant to the common law claim. Accordingly, common questions predominate as to those claims. Similarly, courts have certified state law consumer protection claims. See Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998) (class action certified as to claim under CFA arising from defendants misleading advertisements for credit card accounts); Rosen v. Fidelity Fixed Income Trust, 169 F.R.D. 295, 302 (E.D. Pa. 1995) (court conditionally certified class as to claims under Pennsylvania consumer protection law); Lake v. First Nationwide Bank, supra (court certified a class for purposes of settlement which was based on claims under, inter alia, consumer protection law). All of the requirements of Rule 23 are met with respect to the CFA and common law claims. The same systematic conduct which gave rise to the TILA claims also gave rise to these pendent claims, and common questions exist as to whether defendants activities were in violation of applica-

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ble law. Hence, common questions of fact predominate over any individual questions, and certification of the pendent claims is superior to other available methods for litigating those claims. IV. CONCLUSION For all the foregoing reasons, plaintiffs respectfully request that this Court grant their motion for an order certifying this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of the proposed Class of individuals defined herein, and certifying plaintiffs George L. Coe, III and Janet R. Coe as proper representatives of the Class. Respectfully submitted, By: BALDWIN & BALDWIN Address Phone Number JUSTIN HUNT, LLC M.D. Justin D.A. Reardon Address Phone Number Date: Attorneys for Plaintiffs and the Class

L.3 TIL Rescission and Deceptive Practices CaseHome Improvement Contract (Mount)
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) ) v. ) ) LASALLE BANK LAKE ) VIEW, ) Defendant. ) ) MATTHEW MOUNT and LESLIE MOUNT, on behalf of themselves and all others similarly situated, Plaintiffs, PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION FOR CLASS CERTIFICATION I. NATURE OF THE CASE LaSalle Bank Lake View (LVB) is engaged in the business of extending consumer credit and purchasing consumer credit contracts originated by home improvement contractors.

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federal and state law,11 a consumer who signs a home improvement contract has three business days after the transaction is concluded and all terms are disclosed to reconsider and cancel the transaction, without obligation. (Am.Cmplt. k24) The consumer must be furnished with a written notice stating that he or she has until a specified time in which to reconsider and cancel the transaction, without obligation. (Am.Cmplt. k25) The three days are supposed to commence when a binding agreement, including the financing terms, is entered into. Id. The dealers would, as a regular practice, evade the threeday cancellation right by inducing consumers to sign binding obligations prior to finalization and approval of the financing terms. (Am.Cmplt. k27) Then, after three days had elapsed and the consumers were no longer at liberty to cancel the first contracts, the dealers would present them with the second contracts, containing the financing terms. The second contracts were assigned to LVB. The segmentation of the transaction through the twocontract practice effectively defeats the consumers right to cancel. At the time the first contract is presented, the consumer is ignorant of the total cost of the transaction. When the financing terms are later presented in the second contract, the first contract is a binding obligation and the consumer is no longer free to simply walk away from the obligation. The two-contract procedure was addressed in a recent opinion of the Attorney General of Kentucky. Opinion No. 92-41, 1992-2 Trade Cas. (CCH) k69,916 (Exhibit H) [not attached herein]. The Attorney General had no difficulty concluding that it violated TILA and state law, and warned that it is extremely important that the seller not do anything to lead the consumer to believe that she is bound prior to [the time she signs the credit contract]. Id. The Attorney General explained: [A] consumer unable to pay cash might be forced to sign a credit contract she had never seen simply because her right to cancel the sales [first] contract had expired. This would eliminate the protection of the state and federal cooling off periods. (1992-2 Trade Cas. at p. 88,383) An article, K. Keest, Spiking and Loan-Splitting in Home Improvement Financing: Artful Dodges, Clearinghouse Review, August 1992, pp. 415421 (Exhibit I) [not attached herein] also warns of the unacceptable results of the two-contract scheme: the problem with the second transactions rescission notice, of course, is that if the consumer tries to cancel it within three days after learning of the full financed cost for
11 TILA gives the consumer three days in which to cancel a credit transaction secured by his or her principal residence and not entered into to finance the initial acquisition or construction of the residence. 15 U.S.C. 1635. The Federal Trade Commission home solicitation sales regulation, 16 C.F.R. part 429, gives a corresponding three-day cancellation right with respect to transactions in which a seller calls upon the consumer at home. Illinois (and most other states) have enacted statutes that are substantially identical to the FTC regulation. ICFA 2B, Ill.Rev.Stats., ch. 121-1/2, 262B, 815 ILCS 505/2B.

(Amended Complaint [Am.Cmplt.] k5) LVB enters into standard form agreements with multiple home improvement dealers (dealers) to generate consumer installment obligations secured by mortgages on the properties on which the work is done. (Am.Cmplt. k17) Examples of the LVB-dealer agreements are in Group Exhibit A [not attached herein]. The Mounts allege that the dealers use an illegal twocontract procedure to generate these obligations. First, the dealers procure consumers signatures on purportedly binding contracts which do not disclose LVBs financing terms. (The one used in the case of the Mounts is Exhibit B. [not attached herein]) Then, after the consumers are no longer at liberty to cancel the first contract, the dealers present them with second contracts, containing onerous financing terms from LVB. (Am.Cmplt., k1) (The second contract used in the case of the Mounts is Exhibit C. [not attached herein]) The second contract is assigned to LVB. LVB had an extensive credit approval process for the second, installment contract (Exhibit D [not attached herein]; Deposition of Joseph Moskal [Exhibit E] [not attached herein], pp. 1619, 4546). The process included an appraisal and title search, and necessarily took some time to complete. (In the case of the Mounts, it took several months, see Exhibit F; Moskal Dep. [Exhibit E], pp. 6670.) The execution of the first contract insured that the customer would not back out of the deal while this process was taking place, or as a result of sticker shock when the cost of the financing was made known. LVB required that the first contract be presented at the time the credit application was presented to it for approval. (Deposition of Nicholas Anthony [Exhibit G], pp. 2728, 4849) [not attached herein] Count I of the complaint alleges that this two-contract practice violates the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. Count II alleges that it violates the Illinois Consumer Fraud Act (ICFA), Ill.Rev.Stats., ch. 1211/2, k262, 815 ILCS 505/2. Count III alleges that it constitutes common law fraud. LVB is liable for the acts of the dealers on three grounds: (1) It knew of the dealers use of the first contracts and agreed to or acquiesced in their use. (Moskal Dep. [Exhibit E], pp. 4, 19) (2) LVB is automatically liable for TILA rescission violations under 15 U.S.C. 1641. (3) LVB is automatically liable for the dealers acts under the following provision, which is required by law10 and included in all retail installment contracts purchased by LVB: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER. (Am.Cmplt. k19) The challenged two contract practice is a clever circumvention of a consumers three-day right to rescind. Under both
10 16 C.F.R. part 433.

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the first time, the contractors cash or credit contract is, in theory, still there to be paid . . . the consumers right to think about the purchase, to be fully informed of the financial consequences, and to cancel without penalty if he or she chooses has been negated. (p. 419) In many cases, the first contracts purportedly obligate the consumers to pay substantial penalties (1535% of the full contract price) to the dealer for any attempted cancellation more than three days after the date of the first contract.12 Often, the first contracts purport to allow the dealer to confess judgment against the consumer.13 In addition, they often promise the consumers financing and security terms other than those ultimately approved (i.e., a lower interest rate or more attractive payment structure was promised, or a mortgage not initially required). (Am.Cmplt. k31, 32) In some cases, such as that involving the Mounts, the dealer would commence work prior to the presentation of the final financing terms. (Am.Cmplt. k33) This practice is known as spiking in the home improvement business, and serves no purpose other than to prevent the consumer from backing out of the deal. The artificial bifurcation of transactions into a first and second contract thus effectively deprives consumers of the right to three business days in which to reconsider and cancel the entire transaction after all of the terms are known. It is well established that the use of deception, coercion or artifice to circumvent a consumers rescission rights is a violation of TILA, 5 of the Federal Trade Commission Act and state laws, such as ICFA 2, which prohibit unfair and deceptive acts and practices in consumer transactions. Complaints alleging unfair and deceptive practices based on the same scenario involved in this case have been upheld in Fidelity Financial Services, Inc. v. Hicks, 214 Ill.App.3d 398, 574 N.E.2d 15 (1st Dist. 1991); Santiago v. Turner Acceptance Corp., 76 C 1247 (N.D.Ill., April 21, 1980) (Exhibit J) [not attached herein]; Reid v. North Jersey Home Energy Center, Inc., L-084324-85 (Superior Court of New Jersey, March 2, 1989) (Exhibit K) [not attached herein]; and Doggett v. County Sav. & L. Co., 373 F.Supp. 774, 777 (E.D.Tenn. 1974). For purposes of plaintiffs motion for class certification, it is important to point out that the violation exists in any case in which the consumer signs a binding contract prior to written disclosure of the financing terms. It is not essential to show (i) that the first contract contains a cancellation penalty, (ii)
12 The inclusion of cancellation charges in a home improvement contract that are not related to the actual loss incurred upon cancellation has been held to be an unfair and deceptive practice in decisions long antedating the plaintiffs transactions. In re American Aluminum Corp, 84 F.T.C. 21 (1974), affd per curiam, 522 F.2d 1278 (5th Cir. 1975); In re Capital Builders, Inc., 92 F.T.C. 274 (1978); In re United Builders, Inc., 92 F.T.C. 291 (1978); In re Tri-West Construction Co., 86 F.T.C. 1051 (1975); Gonzalez v. Schmerler Ford, 397 F.Supp. 323 (N.D.Ill. 1975). In light of these decisions, the only purpose of providing for such charges was to provide a means of coercing unsophisticated consumers not familiar with Federal Trade Commission law. 13 The use of a confession of judgment provision in a consumer contract is a violation of the FTC credit practices regulation, 16 C.F.R. part 444. Most consumers are not familiar with this FTC regulation.

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that the first contract allows the dealer to confess judgment against the consumer, (iii) that the first contract affirmatively misrepresents the financing terms ultimately presented in the second contract, or (iv) that the dealer began work prior to disclosure of the financing terms. The penalty or confession of judgment clause and spiking are aggravating factors, ensuring that a consumer will not exercise a right to cancel. The three day right of rescission is a bright line test. If a consumer is not given an unequivocal three day right to cancel the transaction without penalty, that consumers rights have been violated, whether or not aggravating circumstances are present. II. EVIDENCE OF THE PRACTICE Plaintiffs will introduce documentary evidence establishing systematic and classwide implementation of the two contract practice. The practice was aggravated by penalties and spiking, and plaintiffs will prove the aggravating factors at trial. However, the basic violation is made out in the cases of both the plaintiffs and the class by documentary and statistical evidence from LVBs files. A. PLAINTIFFS The Mounts entered into a binding agreement (first contract) with Budget Construction Company on November 8, 1990 for a room addition to be added to their home for a price of $26,000. (Exhibit B). At the same time, Budget took a credit application. (Am.Cmplt. k8) Indeed, the first contract promises that the Mounts would receive an FHA loan for $17,500 with an annual percentage rate of 14% with payments of $273.21 for 10 years. In addition the Mounts would pay Budget $8,500 in 36 monthly payments of $292.11 each. (Am.Cmplt. k9) Budget thereupon proceeded to commence performance of the work. (Am.Cmplt. k10) LVB was aware of the spiking because LVBs agent inspected the Mount residence on December 7, 1990. (Deposition of Elyse Paulus Mount [Exhibit L] [not attached herein], p. 19) On December 20, 1990, after Budget had begun work, the Mounts were presented with and signed a retail installment contract (Exhibit C), which provided for an annual percentage rate of 16%, an amount financed of $29,550, finance charges of $30,220.80 and 120 monthly payments of $498.09 each for a total of $59,770.80. The total payment obligation under Exhibit C, presented to the Mounts after the work was begun, is thus more than $16,000 higher than the total payment obligation under Exhibit B [not attached herein]. The Mounts complained about Budget proceeding with the work. Budgets response was to tell the Mounts that they were required to proceed with the contract, or Budget would sue them. (E. Mount Dep. [Exhibit L], p. 53 [not attached herein]) In January 1991, the Mounts were given a Notice of Right to Cancel dated December 20, 1990. (Exhibit M) [not attached herein] When the Mounts complained about the document being dated December 20, 1990, they were told that the cancellation was rather a moot point since the work was in progress. (E. Mount Dep. [Exhibit J], pp. 7273) Furthermore, Exhibit

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Exhibit OO [not attached herein], a set of documents obtained from the Better Business Bureau, illustrates the use of the two-contract procedure by Paul Construction and LVB. On June 6, 1991, the consumers signed an ostensibly binding contract with Paul. The contract refers to financing over a term of 180 months, but does not contain the required TILA disclosures. It also states that the consumers had three business daysuntil June 10, 1991to On September 10, 1991, LVB approves financing termsbut over 120 months only. If the consumers were not comfortable with the new financing terms, or simply did not want to pay the total amount of finance charges shown on the TILA disclosures, they could not just walk away. The first contracts were prepared on printed forms, and it is obvious that each of the dealers used the same contract forms with each of its customers. LVB required the dealer to provide it with the first contract for every second contract that it purchased. (Moskal Dep. [Exhibit E], pp. 6364). Hence, each of the LVB customers whose dealer is one of these listed above was subjected to the same practice. (There are likely others, but the use of illegal form documents by 23 dealers who finance through LVB clearly establishes a class.) C. SUMMARY The suitability for class adjudication of the claims regarding the practice of interfering with a consumers three day right to rescind is established by Judge Aspens certification of essentially identical classes in a virtually identical case, Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989), and Judge Prentice Marshalls certification of a substantially identical unlawful inducement claim in Santiago v. Turner Acceptance Corp., 76 C 1247 (N.D.Ill., April 21, 1980) (Exhibit J). See also Reid v. North Jersey Home Energy Center, Inc., L-084324-85 (Superior Court of New Jersey, March 2, 1989) (Exhibit K). Proof of the violation is made through documents, such as those referenced above. III. FACTORS TO BE CONSIDERED IN CERTIFYING A CLASS ACTION In determining whether a class action will be allowed, the substantive allegations of the complaint should be taken as true. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975); Heastie v. Community Bank of Greater Peoria, supra, 125 F.R.D. 669 (N.D.Ill. 1989); Sharif by Salahuddin v. New York State Education Department, 127 F.R.D. 84, 87 (S.D.N.Y. 1989). The Court should resolve any doubt regarding the propriety of certification in favor of allowing the class action, so that it will remain an effective vehicle for deterring corporate wrongdoing. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968); accord, In re Folding Cartons Antitrust Litigation, 75 F.R.D. 727 (N.D.Ill. 1977). As demonstrated below, this is an ideal case for a class action. Each of the prerequisites for a class action is met. Indeed, the nature of the practice complained ofsubverting the rights of large numbers of customers whose claims are too small to make individual litigation practicableis such as to make a class action essential.

M refers only to the right to cancel the December 20, 1990 transaction, not to the November 8, 1990 transaction. Any right to cancel the second contract was compromised by the same circumstances that led the Mounts to sign it in the first place. The Mounts believed that they could not cancel the November transaction, because the work had begun and that they would be liable to Budget. (E. Mount Dep. [Exhibit L], p. 53) B. CLASS MEMBERS LVB has produced lists of all of the home improvement dealers that it dealt with. (Exhibit N) [not attached herein] Most of those dealers use first contracts which contain penalty clauses purporting to obligate the home owners in the event of cancellation or clauses allowing the dealer to confess judgment. Plaintiffs have collected the first contract forms used by 23 dealers which do business with LVB.14 All are purportedly binding contracts. All contain cancellation clauses, confession of judgment clauses or both. (All Exterior Installations, Inc., Exhibit O [not attached herein]; All Season Windows, Exhibit P [not attached herein]; American Thermal Window Products, Inc., Exhibit Q [not attached herein]; Archway Construction Co., Exhibit R [not attached herein]; A. W. Aluminum & Construction Co., Exhibit S [not attached herein]; Blue Ribbon Remodeling, Exhibit T [not attached herein]; Brighton Heating & Cooling, Inc., Exhibit U [not attached herein]; Budget Construction Company, Exhibit V [not attached herein]; Correct General Contractors, Exhibit W [not attached herein]; Creative Exteriors, Inc., Exhibit X [not attached herein]; Danleys Garage World, Exhibit Y [not attached herein]; 1st Choice Remodeling Co., Exhibit Z [not attached herein]; Fortune Lumber & Building Co., Exhibit AA [not attached herein]; Globe Builders Co., Exhibit BB [not attached herein]; Hallmark Builders, Inc., Exhibit CC [not attached herein]; Key Energy Systems, Inc., Exhibit DD [not attached herein]; Lake County Window & Door, Inc., Exhibit EE [not attached herein]; Modern General Contractors, Inc., Exhibit FF [not attached herein]; Paul Construction Company, Exhibit GG [not attached herein]; Rossi Home Improvers Co., Exhibit HH [not attached herein]; 2nd City Construction Co., Exhibit II [not attached herein]; Superior Exteriors, Inc., Exhibit JJ [not attached herein]; Wilson Builders, Exhibit KK [not attached herein] There is no legitimate reason for having a first contract form with illegal cancellation penalties, confession-of-judgment clauses, and the like except to perpetrate the two-contract practice. A number of the exhibits show that is precisely what is happening. For example, Exhibits R, T, Z, AA, FF, GG and II show that the consumers were being assured of financing on undisclosed terms. Other exhibits show that the dealers in fact enforce the first contracts by demanding payment of the penalties by homeowners if they attempt to cancel, in many cases filing lawsuits to collect the penalties. See Exhibits R, T, DD and II. As noted above, similar threats were directed against the Mounts.
14 Some of these contracts were obtained from court files, so they do not necessarily evidence transactions that were financed or financed by LVB.

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A. NUMEROSITY The first requirement of Rule 23(a) is that the class members are so numerous that joinder is not practicable. The numerosity prerequisite is satisfied if it is reasonable to conclude that the number of members of the proposed class is greater than the minimum number required for class certification, which is about 30-40. Swanson v. American Consumer Industries, 415 F.2d 1326 (7th Cir. 1969)(18 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (1029 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient). It is not necessary that the precise number of class members be known. McCleery Tire Service, Inc. v. Texaco, Inc., 1975-2 Trade Cas. (CCH) k60,581 (E.D.Pa. 1975). It is sufficient that the record gives rise to a reasonable inference that numerosity is satisfied. A class action may proceed upon estimates as to the size of the proposed class. In re Alcoholic Beverages Litigation, 95 F.R.D. 321 (E.D.N.Y. 1982). In the present case, LVB has stated that it will not contest numerosity. (Exhibit LL) [not attached herein] LVB has some 1942 home improvement contracts. (Defendants Responses to Plaintiffs First Set of Requests for Production of Documents, k3 [Exhibit MM] [not attached herein]). Furthermore, it is obvious from the fact that dealers use form contracts and that LVB went to the trouble of creating and documenting a relationship with each dealer that multiple consumers were financed through LVB by each dealer. Thus, the 23 dealers alone likely generated enough contracts so as to make joinder impracticable. Despite the fact that the plaintiffs have received little class discovery from the defendants, it is clear that the numerosity requirement is met. B. COMMON QUESTIONS OF LAW AND FACT The commonality requirement is satisfied if there are common questions linking the class members that are substantially related to the outcome of the litigation. Jordan v. County of Los Angeles, 669 F.2d 1311, 1320 (9th Cir. 1982); Blackie v. Barrack, 524 F.2d 891, 910 (9th Cir. 1975). A number of such questions are presented in this case. These questions include, among others: a. Whether the two-contract practice was carried out, as alleged. b. Whether the two-contract practice violates TILA. c. Whether the two-contract practice is unfair and deceptive. d. Whether the two-contract practice is a scheme to defraud. e. Whether class members are entitled to a declaration of a continuing right to rescind (which they can elect to exercise upon the receipt of notice). f. The liability of LVB for the two-contract practice under TILA, the FTC-required contract language, or on a theory of concerted action. The only individual questions are: (i) whether a class member signed a first contract; and (ii) whether the date on the first contract is prior to that on the second retail installment contract assigned to LVB. The answers to both require nothing more than the ministerial examination of the files of

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LVB. Indeed, it may not even be necessary to examine all of the files: once it is apparent that, e.g., Budget had a practice of getting consumers to sign first contracts, the jury may reasonably infer that it was consistently carried out. In any event, an individual issue which can be readily answered by inspection of files is not a barrier to class certification. Heastie v. Community Bank of Greater Peoria, supra, 125 F.R.D. 669 (N.D.Ill. 1989). An action challenging the legality of a standardized business practice applied to an entire group of customers is wellsuited for class certification. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974) (propriety of disclosure documents under Truth in Lending Act); Haroco v. American National Bank & Trust Co., 121 F.R.D. 664, 669 (N.D.Ill. 1988) (improper computation of interest); Kleiner v. First National Bank of Atlanta, 97 F.R.D. 683 (N.D.Ga. 1983) (same); Heastie v. Community Bank of Greater Peoria, supra. C. TYPICALITY The typicality requirement of Fed.R.Civ.P. 23(a)(3) is satisfied if the representatives claim arises from the same event or practice or course of conduct that gives rise to the claims of other class members and [the representatives] claims are based on the same legal theory. De La Fuentes v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983); Jordan v. County of Los Angeles, 669 F.2d 1311, 1321 (9th Cir. 1982). Typicality . . . does not require the named plaintiff to be in the identical situation as every member of the class. United States v. Davis, 756 F.Supp. 1162, 1169 (E.D.Wis. 1991). In the present case, the claims of plaintiffs and the class members all arise from the same events and course of conduct. The claims of plaintiffs and the class members all arise from the use of a two-contract practice with respect to LVBs customers. The fact pattern is the same with respect to all class members, and the same legal theories are asserted on behalf of all. Accordingly, the typicality requirement has been satisfied. D. ADEQUACY OF REPRESENTATION The adequacy of representation requirement is satisfied if plaintiffs counsel is qualified, experienced, and generally able to conduct the proposed litigation and there are no antagonistic interests between the representative party and the class. Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978); Jordan v. County of Los Angeles, supra, 669 F.2d at 1323; Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 247 (3d Cir. 1975); In re Alcoholic Beverages Litigation, supra, 95 F.R.D. 321 (E.D.N.Y. 1982). The extensive experience and expertise of plaintiffs counsel in class actions and consumer litigation will ensure a vigorous prosecution of the rights of the class members. See, Declaration of [Attorney], Exhibit NN. [not attached herein] E. CERTIFICATION UNDER RULE 23(B)(2) An action may be maintained as a class action under Rule 23(b)(2) if:

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(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. G. PREDOMINANCE OF COMMON QUESTIONS The discussion above regarding common questions of law and fact shows not only that common questions exist but that they predominate over individual questions. Plaintiffs can prove, on a classwide basis, that large numbers of LVB transactions were originated by the illegal two-contract practice, and the affected transactions are readily identifiable. H. SUPERIORITY OF CLASS ACTION A class action is the only appropriate means of resolving this controversy. The claim of each individual class member is such that it is unlikely that he or she could afford to take on LVB. This is precisely the sort of case contemplated by the class action statutea scheme to violate the rights of many unsophisticated consumers. [O]ne of the primary functions of the class suit is to provide a device for vindicating claims, which, taken individually, are too small to justify legal action but which are of significant size if taken as a group. Brady v. LAC, Inc., 72 F.R.D. 22, 28 (S.D.N.Y. 1976). To permit the defendants to contest liability with each claimant in a single, separate suit, would, in many cases give defendants an advantage which would be almost equivalent to closing the door of justice to all small claimants. Hohmann v. Packard Instr. Co., 399 F.2d 711, 715 (7th Cir. 1968). Furthermore, even if individual actions were feasible, there is no reason to burden the court system with multiple actions where one will suffice. What we obviously are looking for is achieving the maximum bang for the judicial buck. Skelton v. General Motors Corp., 1985-2 Trade Cas. (CCH) k66,683 (N.D.Ill. 1985), at p. 63,218. III. MANAGEABILITY OF THE CLASS It is clear from the discussion above that the once this Court determines the common questions of law and fact concerning the legality of LVBs practices, identification of class members will easily ascertained by reference to LVBs records. Furthermore, LVB has agreed not to contest the manageability of the class. (Exhibit LL) IV. CONCLUSION For the reasons stated above, plaintiffs request this Court certify that Counts IIII of the Amended Complaint may proceed as a class action. Respectfully submitted, [Attorney]

the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole . . . In Counts IIII, plaintiffs seek a declaratory judgment declaring that each class member has a right to rescind his or her transaction. A declaration establishing a group of people have a right to rescind is an appropriate form of relief. Tcherepnin v. Franz, 461 F.2d 544 (7th Cir. 1972); Vasquez v. Superior Court, 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964 (1971); Smyth v. Kaspar American State Bank, 6 Ill.App.2d 64, 127 N.E.2d 149 (1st Dist. 1955), affd, 9 Ill.2d 27, 136 N.E.2d 796 (1956); Hess v. I.R.E. Real Estate Income Fund, 1993 Ill.App. LEXIS 263 (Ill.App., 1st Dist., Feb. 26, 1993). The archetypical case for (b)(2) certification is one where policies applicable to a large number of persons are challenged as unlawful. Certification of a suit seeking declaratory relief concerning the policies of a financial institution applicable to an entire class of persons is clearly appropriate under Rule 23(b)(2). Probe v. State Teachers Retirement System, 780 F.2d 776, 780 (9th Cir. 1986); Musto v. American General Corp., 615 F.Supp. 1483 (D.Tenn. 1985), revd other grounds, 861 F.2d 897 (6th Cir. 1988); Heastie v. Community Bank of Greater Peoria, supra, 125 F.R.D. 669 (N.D.Ill. 1989); Simon v. World Omni Leasing, Inc., 146 F.R.D. 197 (S.D.Ala. 1992). A case seeking substantial and meaningful declaratory and injunctive relief on the basis of a classwide practice may be certified under (b)(2) even though damages are also sought. Williams v. Lane, 129 F.R.D. 636, 639 (N.D.Ill. 1990) (certification under Rule 23(b)(2) may be appropriate even where plaintiffs seek damages, as long as [declaratory or] injunctive relief is additionally appropriate); Patrykus v. Gomilla, 121 F.R.D. 357, 363 (N.D.Ill. 1988) ((b)(2) certification appropriate where [d]eclaratory and injunctive relief are sought as an integral part of the relief for the entire class); Simon v. World Omni, supra; Ventura v. New York City Health & Hospitals Corp., 125 F.R.D. 595, 601 (S.D.N.Y. 1989); Brandt v. Owens-Illinois, Inc., 62 F.R.D. 160 (S.D.N.Y. 1973). F. CERTIFICATION UNDER 23(B)(3) Alternatively or in addition, plaintiffs seek certification under Fed.R.Civ.P. 23(b)(3), which provides that the Court may certify a class if: (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution and defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

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Appx. L.4

L.4 TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) HARVEY CYCLE & ) CAMPER, INC., Gottschall ) doing business as WATSON ) MOTORSPORT, LTD.; ) and WONDERLIC & ) ASSOCIATES, INC., doing ) business as WONDERLIC ) FINANCE, ) Defendants. ) ) CHRISTINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff, MEMORANDUM IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION I. INTRODUCTION Several years ago, a federal judge in Pennsylvania noted that The instant little adversarial proceeding presents to us a glimpse of the dark side of the marketplace, revealing that, as in the 1960s, the poor may still pay far more for everyday consumer goods than more affluent members of the community. See D. Caplovitz, The Poor Pay More, 81104 (1967); and W. Magnuson & J. Carper, The Dark Side of the Marketplace, 43241, 7576, 11820 (1968). As described in those documentaries, describing the lot of low-income consumers in the 1960s, we find that merchants who chargeand getexorbitant prices for consumer goods and finance companies which protect them through probable feigned innocence of the merchants activities are alive and well. . . . In re Stewart, 93 B.R. 878, 879 (Bankr. E.D.Pa. 1988). The genesis of the present case was a February 1994 purchase of a 1985 Buick by one such low-income consumer. Watson, the car dealer defendant, charged Christine Willis $4,135.28 for a car listed in the Blue Book for $2,400. Watson then arranged financing through Wonderlic, the finance company defendant, at an annual percentage rate of 43%. Notwithstanding the exorbitant price of the car, Watson delivered a vehicle that died after a couple of days, giving rise to the individual claims in Counts III and IV. Watson and Wonderlic also included some charges in Ms. Willis contract that are legally required to be in the finance charge and annual percentage rate, but were not so included. It is these charges that are the subject of class Counts I and II. Thus, as

in Stewart, defendants may be required to do that which equity and good conscience requires. Counts I and II are based on a standard $50 charge for V.S.I. insurance that Wonderlic had car dealers, such as Watson, include in the amount financed on the retail installment contracts it purchased. Plaintiff contends that the charge was legally part of the finance charge and annual percentage rate, as those terms are defined in TILA and Regulation Z, and that its inclusion in the amount financed resulted in the finance charge and annual percentage rate being understated. The complaint alleges that it was the standard policy and practice of Wonderlic and car dealers with which Wonderlic did business, such as Watson, to include the $50 charge in the amount financed and to exclude it from the finance charge and the annual percentage rate. Count I alleges that Watson and Wonderlic thereby violated TILA and Regulation Z. Count II is based on the Illinois Sales Finance Agency Act, 205 ILCS 606/1 et seq., and implementing regulations, 38 Ill.Admin. Code part 160, which among other things prohibits a sales finance agency from knowingly purchasing contracts from anyone who [u]ses a security instrument or document which is not in conformance with the provisions of . . . the Federal Consumer [Credit] Protection Act, of which TILA is Title I. 38 Ill.Admin. Code 160.230(h)(2). II. STANDARD FOR CLASS CERTIFICATION In determining whether a class will be certified, the merits of the case are not examined and the substantive allegations of the complaint should be taken as true. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669, 671 n. 2 (N.D.Ill. 1989); Riordan v. Smith Barney, 113 F.R.D. 60, 62 (N.D.Ill. 1986). The Seventh Circuit has said that Rule 23 must be liberally interpreted and read to favor maintenance of class actions. King v. Kansas City Southern Industries, 519 F.2d 20, 2526 (7th Cir. 1975). Class actions are essential to enforce laws protecting consumers. As the Illinois Appellate Court stated in Eshaghi v. Hanley Dawson Cadillac Co., 214 Ill.App.3d 995, 574 N.E.2d 760 (1st Dist. 1991): Even without resort to the relaxed standards of proof envisioned by the Consumer Fraud Act, Illinois has been hospitable to maintenance of class actions and has been willing to recognize that common questions of law and fact predominate in a great many situations. . . . In a large and impersonal society, class actions are often the last barricade of consumer protection. . . . To consumerists, the consumer class action is an inviting procedural device to cope with frauds causing small damages to large groups. The slight loss to the individual, when aggregated in the coffers of the wrongdoer, results in gains which are both handsome and tempting. The alternatives to the class actionprivate suits or governmental actionshave been so often found wanting in controlling consumer frauds that not even the ardent crit-

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the car dealer involved in this case, Watson, that it alone generated several hundred transactions containing the disclosure item at issue. Since other car dealers are involved, it is probable that the number of printed form documents containing the challenged disclosure exceeds the 1040 required for a class. The fact that we are dealing with a standard form document itself indicates that the numerosity requirement is satisfied. Swiggett v. Watson, 441 F.Supp. 254, 256 (D.Del. 1977) (in action challenging transfers of title pursuant to Delaware motor vehicle repairers lien, fact that Department of Motor Vehicles issued printed form for such transfer in and of itself sufficient to show that numerosity requirement was satisfied). Plaintiff has propounded discovery to confirm this and determine the exact number of class members. (Appendix A) [not attached herein] B. RULE 23(A)(2)COMMONALITY Fed.R.Civ.P. 23(a)(2) requires that there be a common question of law or fact. Not all factual or legal questions raised in the litigation need be common so long as at least one issue is common to all class members. Spencer v. Central States Pension Fund, 778 F.Supp. 985, 989 n.2 (N.D.Ill. 1991). Where a question of law involves standardized conduct of the defendants toward members of the proposed class, a common nucleus of operative facts is typically presented, and the commonality requirement . . . is usually met. Franklin v. City of Chicago, 102 F.R.D. 944, 949 (N.D.Ill. 1984); Patrykus v. Gomilla, 121 F.R.D. 357, 361 (N.D.Ill. 1988). In the present case, common questions of law and fact clearly predominate over individual concerns. Plaintiff alleges that a computer-generated entry on a standard printed form contract is illegal. That question is common to the class and the central issue in the case. Accordingly, numerous decisions hold that TILA disclosure claims are eminently suitable for class certification. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974); Adiel v. Chase Fed. S. & L. Assn, 810 F.2d 1051 (11th Cir. 1987); Hughes v. Cardinal Fed. S. & L. Assn, 566 F.Supp. 834 (S.D.Ohio 1983); Fetta v. Sears, Roebuck & Co., 77 F.R.D. 411 (D.R.I. 1977); Bantolina v. Aloha Motors, Inc., 419 F.Supp. 1116, 1122 (D.Haw. 1976); Jones v. Goodyear Tire & Rubber Co., 442 F.Supp. 1157 (E.D.La. 1977); Simon v. World Omni Leasing, Inc., 146 F.R.D. 197 (S.D.Ala. 1992); Johnson v. Steven Sims Subaru and Subaru Leasing, 1993 U.S.Dist. LEXIS 8078 (N.D.Ill., June 9, 1993) (Magistrate Judges recommendation). There are no issues of reliance under the Truth in Lending Act claim. Anyone who received a defective disclosure is entitled to recover, without proof of reliance or the like. Brown v. Marquette S. & L. Assn, 686 F.2d 608, 614 (7th Cir. 1982); Wright v. Tower Loan of Mississippi, 679 F.2d 436, 445 (5th Cir. 1982); In re Steinbrecher, 110 B.R. 155, (Bankr. E.D.Pa. 1990); Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299 (D.Del. 1990); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa. 1987). An objective standard is used to determine violations of the TILA, based on the representations contained in the relevant disclosure documents; it is unnecessary to inquire as to the subjective deception or misunderstanding of particular consumers. Zamrippa v. Cys Car Sales, Inc., 674

ics of class actions seriously contend that they are truly effective. The consumer class action, when brought by those who have no other avenue of legal redress, provides restitution to the injured, and deterrence of the wrongdoer. (574 N.E.2d at 764, 766) Congress expressly recognized the propriety of a class action under TILA by providing special damage provisions and criteria for TILA class action cases in 15 U.S.C. 1640(a). In 1976, Congress increased the statutory damages for class actions in 15 U.S.C. 1640. Pub. L. 94-240 (90 Stat. 257). The legislative history of the amendment clearly states: The chief enforcement tool will continue to be private actions for actual damages and civil penalties. Much of the testimony received in the hearings, and much of the debate in Subcommittee and Committee centered on the adequacy of the recovery ceiling for civil penalties in class actions. . . . . (Sen.R. No. 94-590, 94th Cong., 2d Sess., p. 8, 1976 USCCAN 438) In revising 15 U.S.C. 1640 to expressly refer to class actions, Congress recognized that potential class action liability is an important encouragement to the voluntary compliance which is so necessary to insure nationwide adherence to uniform disclosure. Bantolina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw. 1976). The possibility of class-action exposure is essential to the prophylactic intent of the Act, and is necessary to elevate truth-in-lending lawsuits from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance. Bantolina, 419 F.Supp. at 1120, citing the 1972 Federal Reserve Board annual report on the Truth in Lending Act. III. THE PROPOSED CLASS MEETS THE REQUIREMENTS FOR CERTIFICATION A. RULE 23(A)(1)NUMEROSITY Fed.R.Civ.P. 23(a)(1) requires that the class be so numerous that joinder of all members is impracticable. When the class is large, numbers alone are dispositive. . . . Riordan v. Smith Barney, 113 F.R.D. 60, 62 (N.D.Ill. 1986). Where the class numbers at least 40, joinder is generally considered impracticable. Swanson v. American Consumer Industries, 415 F.2d 1326, 1333 (7th Cir. 1969) (40 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (1029 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient); Kulins v. Malco, 121 Ill.App.3d 520, 530, 459 N.E.2d 1038 (1st Dist. 1984) (19 and 47 sufficient). It is not necessary that the precise number of class members be known. McCleery Tire Service, Inc. v. Texaco, Inc., 1975-2 Trade Cas. (CCH) k60,581 (E.D.Pa. 1975). A class action may proceed upon estimates as to the size of the proposed class. In re Alcoholic Beverages Litigation, 95 F.R.D. 321 (E.D.N.Y. 1982). Plaintiffs complaint challenges the propriety of an item which was inserted by computer in a standard printed form contract. Prior to filing suit, plaintiffs counsel were told by

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F.2d 877, 879 (11th Cir. 1982). TILA is a prophylactic measure that creates a system of private attorneys general to aid its enforcement. [citations] In order to penalize noncomplying creditors and to deter future violations, these private attorneys general may recover the statutory penalties even if they have not sustained any actual damages, or even if the creditors are guilty of only minute deviations from the requirements of TILA and implementing Regulation Z. [citations] Davis v. Werne, 673 F.2d 866, 869 (5th Cir. 1982). While plaintiff claims actual damages on behalf of the class under TILA, the damages are simply the $50 by which the finance charge was understated plus interest. The majority of decisions hold that the imposition of charges at an amount or rate exceeding that disclosed inflicts damage and entitles the consumer to restitution of the overcharge. Goldman v. First Natl of Chicago, 532 F.2d 10, 15 (7th Cir. 1976) (if in fact a finance charge was imposed and an interest rate applied when proper disclosures not made, actual damages would result); First Acadiana Bank v. FDIC, 833 F.2d 548 (5th Cir. 1988) (affirming FDIC order directing restitution of fee imposed by Bank that should have been, but was not, disclosed as part of finance charge); Sentinel Fed. S. & L. Assn v. OTS, 946 F.2d 85 (8th Cir. 1991) (same); Ransom v. S & S Food Center of Florida, 700 F.2d 670, 677 (11th Cir. 1983), affg Civ.A. 76-383-H (S.D.Ala., Sept. 11, 1979) (Appendix B) (affirming award of actual damages under Truth in Lending equal to the additional finance charge paid by each class member which exceeded the legally permissible finance charge); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa. 1987) (same principle used in governmental enforcement actions such as Sentinel and Acadiana governs determination of whether there are actual damages under Truth in Lending Act); In re Stewart, 93 B.R. 878, 883, 886 (Bankr. E.D.Pa. 1988) (the failure to disclose an excess finance charge imposed in the transaction gives rise to an additional claim for actual damages in that amount under 15 U.S.C. 1640(a)(1)); Preston v. First Bank of Marietta, 16 Ohio App.3d 4, 473 N.E.2d 1210 (1983) (lender failed to disclose a variable-rate feature as required by TILA; court held that such a violation would inflict actual damage equal to the amount of the excess interest over the original contract terms, and that instead of enforc[ing] the contract to require the mortgagors to pay the excess interest and then grant[ing] the mortgagors actual damages equal to the sum it just ordered them to pay, the court could restrain enforcement of the improperly-disclosed term with respect to future interest increases); First S. & L. Assn v. Kern, 55 Ill.App.3d 838, 370 N.E.2d 1326, 1330 (1977) (where TILA statement disclosed lesser charges than provided for in note, disclosure estopped the plaintiff from demanding the larger payment which was set forth in the note).15 It is not necessary for the consumer to prove that he or she could have gotten credit at a rate less than that actually imposed.

Appx. L.4

With respect to Count II, the Illinois Sales Finance Agency Act provides for statutory damages in an amount not more than 25% of the principal amount of the retail contract . . . which is the subject of the action. 205 ILCS 660/16. If plaintiffs contract is indicative, the 25% approximates the overcharge on the car. C. RULE 23(A)(3)TYPICALITY The rule requires that the claims of the named plaintiff be typical of the claims of the class: A plaintiffs claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory. The typicality requirement may be satisfied even if there are factual distinctions between the claims of the named plaintiffs and those of other class members. Thus, similarity of legal theory may control even in the face of differences of fact. De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983) (citation omitted). See also, Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992). In the instant case, typicality is inherent in the class definition. By definition, each of the class members has received a disclosure statement similar to the one plaintiff received. All class members claims arise from the same practice of defendants which gave rise to the named plaintiffs claims: the provision of defective disclosures. D. RULE 23(A)(4)ADEQUACY OF REPRESENTATION Rule 23 also requires that the named plaintiff provide fair and adequate protection for the interests of the class. That protection involves two factors: (a) the plaintiffs attorney must be qualified, experienced, and generally able to conduct the proposed litigation; and (b) the plaintiff must not have interests antagonistic to those of the class. Rosario v. Livaditis, supra, 963 F.2d 1013, 1018 (7th Cir. 1992). Plaintiff understands her obligations as class representative (Appendix C) 16 [not attached herein] and has retained experienced counsel, as is indicated by Appendix D, [not attached herein] which sets forth counsels qualifications. The second relevant consideration under Rule 23(a)(4) is whether the interests of the named plaintiff is coincident with the general interests of the class. Here, both plaintiff and the class members seek money damages as the result of defendants unlawful disclosures. Given the identity of claims between the plaintiffs and the class members, there is no potential for conflicting interests in this action. There is no antagonism between the interests of the named plaintiffs and those of the class. E. RULE 23(B)(3)COMMON QUESTIONS OF LAW OR FACT PREDOMINATE Rule 23(b)(3) requires that the questions of law or fact common to all members of the class predominate over ques16 This exhibit would be the plaintiffs affidavit.

15 The Uniform Guidelines for Enforcement of Regulation Z, issued before Congress adoption of the policy of restitution, provide that [w]hen there is an understated finance charge and the APR is correct, the creditor shall reimburse the overcharge (the difference between the actual and the overstated finance charge). 44 F.R. 1222 (Jan. 4, 1979).

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tions pertaining to individual members. This criterion is normally satisfied when there is an essential common factual link between all class members and the defendants for which the law provides a remedy. Halverson v. Convenient Food Mart, Inc., 69 F.R.D. 331 (N.D.Ill. 1974). In this case, the common nucleus of operative fact, Id. at 335, is that defendants have provided the same illegal disclosures to all class members. The dispositive issueindeed, the only issue under Count Iis whether defendants disclosures comply with TILA. Count II also involves an issue as to defendants culpability in issuing defective disclosures, but this is also a common question. As noted above, Truth in Lending disclosure claims have frequently been certified as class actions and, where based on standardized disclosure documents, are almost ideal class actions. F. RULE 23(B)(3)CLASS ACTION IS SUPERIOR TO OTHER AVAILABLE METHODS TO RESOLVE THIS CONTROVERSY Efficiency is the primary focus in determining whether the class action is the superior method for resolving the controversy presented. Eovaldi v. First Natl Bank, 57 F.R.D. 545 (N.D.Ill. 1972). The Court is required to determine the best available method for resolving the controversy in keeping with judicial integrity, convenience, and economy. Scholes, 143 F.R.D. at 189; Hurwitz v. R.B. Jones Corp., 76 F.R.D. 149 (W.D.Mo. 1977). The Seventh Circuit has held that it is proper for a court, in deciding the best available method, to consider the . . . inability of the poor or uninformed to enforce their rights, and the improbability that large numbers of class members would possess the initiative to litigate individually. Haynes v. Logan Furniture Mart, Inc., supra, 503 F.2d 1161 (7th Cir. 1974). In this case there is no better method available for the adjudication of the claims which might be brought by each individual consumer. The special efficacy of the consumer class action has been noted by the courts and is applicable to this case: A class action permits a large group of claimants to have their claims adjudicated in a single lawsuit. This is particularly important where, as here, a large number of small and medium sized claimants may be involved. In light of the awesome costs of discovery and trial, many of them would not be able to secure relief if class certification were denied. . . . In Re Folding Carton Antitrust Litigation, 75 F.R.D. 727, 732 (N.D.Ill. 1977) (citations omitted). Class certification will provide an efficient and appropriate resolution of the controversy. IV. CONCLUSION The proposed class meets the requirements of Rules 23(a) and (b)(3). Plaintiff respectfully requests that the Court certify Counts I and II of this action as a class action. Respectfully Submitted, [Attorney]

L.5 TIL Untimely Disclosure Case (Diaz)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) WESTGATE LINCOLN ) MERCURY, INC., ) Defendant. ) ) SALVATOR DIAZ, on behalf of himself and all others similarly situated, Plaintiff, MEMORANDUM IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION Plaintiff, Salvator Diaz, has moved for an order determining that this action may proceed as a class action against defendant Westgate Lincoln Mercury, Inc. (Westgate). This memorandum is submitted in support of this motion. I. NATURE OF THE CASE This is an action under the Truth in Lending Act, 15 U.S.C. 1601 et seq. Westgate, a car dealer, uses the printed form document attached as Exhibit A [not attached herein] in connection with proposed purchases of cars on time. Westgate has consumers who seek to purchase on time sign Exhibit A prior to the disclosure of the intended financing terms for the transaction. Exhibit A is a note obligating the consumer to pay the entire balance of the purchase price, plus interest at 20%. Exhibit A also provides for a confession of judgment against the consumer. For years, the use of confession of judgment clauses in consumer contracts has been outlawed by Federal Trade Commission regulations, 16 C.F.R. part 444; most consumers do not know this. The purpose and effect of Exhibit A is to attempt to lock in the consumer to a binding credit contract without giving the disclosure of the financing terms required by the Truth in Lending Act. At the time the financing terms are disclosed, the consumer is already party to a purportedly binding contract obligating him to purchase on credit and pay a high rate of interest, and which can supposedly be enforced in court against the consumer without notice or an opportunity to be heard. The obvious advantage of such a preliminary contractual document as Exhibit A is that [i]t is a device to avoid the possibility that the applicant will change his mind and revoke his application, or deal with a rival company. Armstrong v. United Ins. Co., 98 Ill.App.3d 1132, 1142, 424 N.E.2d 1216, 1223 (1st Dist. 1981), quoting Prudential Ins. Co. v. Lamme, 83 Nev. 146, 425 P.2d 346 (1967). See generally, Gonzales v. Sch-

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merler Ford, 397 F.Supp. 323 (N.D.Ill. 1975); Doggett v. County Savings & Loan Co., 373 F.Supp. 774, 777 (E.D.Tenn. 1974). When the document binds the consumer to proceed with a credit transaction, embodying specified credit terms, but is not accompanied with appropriate Truth in Lending disclosures, the purpose of TILA is subverted.17 Plaintiff brought suit on behalf of a class of all persons who, within the one-year limitations period, signed the same printed form as Exhibit A with Westgate, without previously or simultaneously receiving Truth in Lending disclosures. II. STANDARD FOR CLASS CERTIFICATION Class actions are essential to enforce laws protecting consumers. As the court stated in Eshaghi v. Hanley Dawson Cadillac Co., 214 Ill.App.3d 995, 574 N.E.2d 760 (1st Dist. 1991): In a large and impersonal society, class actions are often the last barricade of consumer protection. . . . To consumerists, the consumer class action is an inviting procedural device to cope with frauds causing small damages to large groups. The slight loss to the individual, when aggregated in the coffers of the wrongdoer, results in gains which are both handsome and tempting. The alternatives to the class actionprivate suits or governmental actionshave been so often found wanting in controlling consumer frauds that not even the ardent critics of class actions seriously contend that they are truly effective. The consumer class action, when brought by those who have no other avenue of legal redress, provides restitution to the injured, and deterrence of the wrongdoer. (574 N.E.2d at 764, 766) Moreover, Congress expressly approved of class actions to enforce the Truth in Lending Act. In response to judicial decisions declining to certify Truth in Lending cases as class actions, Congress specifically provided for classwide statutory damages in 15 U.S.C. 1640. The amount of statutory dam-

Appx. L.5

ages applicable to class actions was increased in 1976, Pub. L. 94-240 (90 Stat. 257), and the legislative history of that amendment states: The chief enforcement tool will continue to be private actions for actual damages and civil penalties. Much of the testimony received in the hearings, and much of the debate in Subcommittee and Committee centered on the adequacy of the recovery ceiling for civil penalties in class actions. . . . . (Sen.R. No. 94-590, 94th Cong., 2d Sess., p. 8, 1976 USCCAN 438) In revising 15 U.S.C. 1640 to expressly refer to class actions, Congress recognized that potential class action liability is an important encouragement to the voluntary compliance which is so necessary to insure nationwide adherence to uniform disclosure. Bantolina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw. 1976). The possibility of class-action exposure is essential to the prophylactic intent of the Act, and is necessary to elevate truth-in-lending lawsuits from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance. Bantolina, 419 F.Supp. at 1120, citing the 1972 Federal Reserve Board annual report on the Truth in Lending Act. In determining whether a class action will be allowed, the substantive allegations of the complaint should be taken as true. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989); Sharif by Salahuddin v. New York State Education Department, 127 F.R.D. 84, 87 (S.D.N.Y. 1989). The Court should resolve any doubt regarding the propriety of certification in favor of allowing the class action, so that it will remain an effective vehicle for deterring corporate wrongdoing. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968); accord, In re Folding Cartons Antitrust Litigation, 75 F.R.D. 727 (N.D.Ill. 1977). Finally, the class action determination is to be made as soon as practicable after the commencement of an action brought as a class action, and before any consideration of the merits. Koch v. Stanard, 962 F.2d 605, 607 (7th Cir. 1992). As demonstrated below, this is an ideal case for a class action. Each of the prerequisites for a class action is met. Indeed, the nature of the practice complained offailing to provide disclosures required by the Truth in Lending Actis such as to make a class action essential. In the balance of this memorandum, we show that this action satisfies each of the requirements for class certification. III. THE REQUIREMENTS FOR CLASS CERTIFICATION ARE SATISFIED. A. RULE 23(A)(1)NUMEROSITY The numerosity requirement of Fed.R.Civ.P. 23(a)(1) is satisfied if it is reasonable to conclude that the number of members of the proposed class is greater than the minimum number required for class certification, which is about 2040. Swanson v. American Consumer Industries, 415 F.2d 1326, 1333 (7th Cir. 1969) (40 class members sufficient); Cypress v. Newport News General & Nonsectarian Hosp. Assn, 375 F.2d 648, 653

17 The appropriate procedure to avoid violation of TILA and state unfair or deceptive acts or practices statutes is to provide that there is no binding contract of any sort until the disclosures required by Truth in Lending are furnished. Contract forms so providing are reproduced in the reported decisions, e.g., Strick v. Biener Pontiac Nissan, Inc., 136 Misc.2d 13, 517 N.Y.S.2d 365 (1987), and are in common use. For example, the contract in Strick provided: IF YOU AGREE TO ASSIST ME IN OBTAINING FINANCING FOR ANY PART OF THE PURCHASE PRICE, THIS ORDER SHALL NOT BE BINDING UPON YOU OR ME UNTIL ALL OF THE CREDIT TERMS ARE PRESENTED TO ME IN ACCORDANCE WITH REGULATION Z (TRUTH IN LENDING) AND ARE ACCEPTED BY ME. IF I DO NOT ACCEPT THE CREDIT TERMS WHEN PRESENTED, I MAY CANCEL THIS ORDER AND MY DEPOSIT WILL BE REFUNDED.

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which is not forthright, specific and unconditional . . . will be treated as an admission); County of Shelby v. Dow Chemical Co., 6 F.R.Serv.2d 1047, 105052 (W.D.Tenn. 1986) (answers which are ambiguous, or which claim that party cannot understand common English words used in the request, deemed admitted); Havenfield Corp. v. H & R Block, Inc., 67 F.R.D. 93, 97 (W.D.Mo. 1973) (evasive answers may thereby amount to an admission). B. RULES 23(A)(2) AND (B)(3)COMMONALITY AND PREDOMINANCE Fed.R.Civ.P. 23(a)(2) requires that there be a common question of law or fact. Rule 23(b)(3) requires that the common questions predominate over individual issues. The commonality requirement is satisfied if there are common questions linking the class members that are substantially related to the outcome of the litigation. Blackie v. Barrack, 524 F.2d 891, 910 (9th Cir. 1975). Common questions predominate if classwide adjudication of the common issues will significantly advance the adjudication of the merits of all class members claims. McClendon v. Continental Group, Inc., 113 F.R.D. 39, 4344 (D.N.J. 1986); Genden v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 114 F.R.D. 48, 52 (S.D.N.Y. 1987); Spicer v. Chicago Board Options Exchange, CCH Fed.Sec. L.Rptr. [198990 Transfer Binder] k94,943, at p. 95,254 (N.D.Ill. 1990); Alexander Grant & Co. v. McAlister, 116 F.R.D. 583, 590 (S.D.Ohio 1987). Where a case involves standardized conduct of the defendants toward members of the proposed class, a common nucleus of operative facts is typically presented, and the commonality requirement . . . is usually met. Franklin v. City of Chicago, 102 F.R.D. 944, 949 (N.D.Ill. 1984); Patrykus v. Gomilla, 121 F.R.D. 357, 361 (N.D.Ill. 1988). A Truth in Lending disclosure claim is ideally suited for classwide adjudication. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974); Adiel v. Chase Fed. S. & L. Assn, 810 F.2d 1051 (11th Cir. 1987); Hughes v. Cardinal Fed. S. & L. Assn, 566 F.Supp. 834 (S.D.Ohio 1983); Fetta v. Sears, Roebuck & Co., 77 F.R.D. 411 (D.R.I. 1977); Bantolina v. Aloha Motors, Inc., 419 F.Supp. 1116, 1122 (D.Haw. 1976); Jones v. Goodyear Tire & Rubber Co., 442 F.Supp. 1157 (E.D.La. 1977); Simon v. World Omni Leasing, Inc., 146 F.R.D. 197 (S.D.Ala. 1992); Johnson v. Steven Sims Subaru and Subaru Leasing, 1993 U.S.Dist. LEXIS 8078 (N.D.Ill., June 9, 1993) (Magistrate Judges recommendation). The controlling issue in this case is whether a consumer must be furnished with Truth in Lending disclosures when he is presented with Exhibit A for signature. The sorts of individual issues usually invoked by class action defendants as a barrier to certification are simply not present. For example, there is no requirement of reliance. White v. Arlen Realty & Development Corp., 540 F.2d 645, 64850 (4th Cir. 1975); In re Perkins, 106 B.R. 863, 864 (Bankr. E.D.Pa. 1989); Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299 (D.Del. 1990); Pearson v. Easy Living, Inc., 534 F.Supp. 884, 890 (S.D.Ohio 1981). Anyone who received a disclosure statement containing the offending disclosure is entitled to recover statutory damages. An objective standard is used to determine violations of the TILA, based on the representations contained in the relevant disclosure documents; it is unnecessary to inquire as to the subjective deception or

(4th Cir. 1967) (18 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (1029 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient); Scholes v. Stone, McGuire & Benjamin, 143 F.R.D. 181, 184 (N.D.Ill. 1992) (72 class members); Kulins v. Malco, 121 Ill.App.3d 520, 530, 459 N.E.2d 1038 (1st Dist. 1984) (19 and 47 sufficient). It is not necessary that the precise number of class members be known. McCleery Tire Service, Inc. v. Texaco, Inc., 1975-2 Trade Cas. (CCH) k60,581 (E.D.Pa. 1975). A class action may proceed upon estimates as to the size of the proposed class. In re Alcoholic Beverages Litigation, 95 F.R.D. 321 (E.D.N.Y. 1982). In the present case, Westgate has used Exhibit A throughout the class period. Defendants Response to Plaintiffs First Discovery Request [Exhibit B] [not attached herein], response to Interrogatory No. 6 (Westgate filed suit against another consumer based on the form represented by Exhibit A in 1991). Westgate admits that it enters into credit transactions with more than 25 consumers each year. Defendants Response to Plaintiffs First Discovery Request [Exhibit B], response to Requests to Admit Nos. 23. Westgate admits that Exhibit A is a printed or mechanically reproduced form which Westgate uses in its business. Defendants Response to Plaintiffs First Discovery Request [Exhibit B], response to Request to Admit No. 7. The fact that Westgate carried out the practice complained of through the use of standard printed form documents makes it is reasonable to infer that the numerosity requirement is satisfied. Swiggett v. Watson, 441 F.Supp. 254, 256 (D.Del. 1977) (in action challenging transfers of title pursuant to Delaware motor vehicle repairers lien, fact that Department of Motor Vehicles issued printed form for such transfer in and of itself sufficient to show that numerosity requirement was satisfied). Furthermore, when specifically asked the number of persons who signed Exhibit A without simultaneously or previously receiving a TILA disclosure statement, Westgate objected that plaintiffs question incorrectly assumed that TILA disclosures were required. Exhibit B, response to Requests to Admit Nos. 1417. This is frivolousWestgate can state whether a TILA disclosure statement was furnished without acknowledging that one was legally required. Westgate also refused to produce all other examples of Exhibit A signed within the class period, Exhibit B, response to Document Request No. 3, claiming that the request was irrelevant, overly broad and burdensome!18 Westgates attempt at evasion amounts to an admission that the requisite number of class members exist. ASEA, Inc. v. Southern P. Transp. Co., 669 F.2d 1242, 1245 (9th Cir. 1981) (It is also clear that an evasive denial, one that does not specifically deny the matter, or a response that does not set forth in detail the reasons why the answering party cannot truthfully admit or deny the matter, may be deemed an admission); Southern Ry. v. Crosby, 201 F.2d 878, 880 (4th Cir. 1953) (evasive responses treated as admissions); United States v. American Tel. & Tel. Co., 83 F.R.D. 323, 333 (D.D.C. 1979) (denial
18 Westgate also claimed that the request was unlimited in time and scope even though the introduction to plaintiffs discovery request clearly stated that responses should be made for the period September 1, 1992 to present unless otherwise stated. (Exhibit D) [not attached herein]

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misunderstanding of particular consumers. Zamrippa v. Cys Car Sales, Inc., 674 F.2d 877, 879 (11th Cir. 1982). The only individual issues concern identification of the class members. This requires nothing more than ministerial examination of defendants files to determine who signed a document similar to Exhibit A. This type of individual issue is not a barrier to class certification. Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989). C. RULE 23(A)(3)TYPICALITY Rule 23(a)(3) requires that the claims of the named plaintiff be typical of the claims of the class members. A plaintiffs claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory. De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983). The typicality requirement may be satisfied even if there are factual distinctions between the claims of the named plaintiffs and those of other class members. Id.; accord, Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992). Here, the class is defined as everyone within the period of limitations who signed the same form agreement with Westgate. Thus, the same legal and factual issues are presented on behalf of the entire class. D. RULE 23(A)(4)ADEQUACY OF REPRESENTATION Rule 23(a)(4) requires that the named plaintiff provide fair and adequate protection for the interests of the class. That protection involves two factors: (a) the plaintiffs attorney must be qualified, experienced, and generally able to conduct the proposed litigation; and (b) the plaintiff must not have interests antagonistic to those of the class. Rosario v. Livaditis, supra, 963 F.2d 1013, 1018 (7th Cir. 1992). Plaintiff has retained experienced counsel, as is indicated by Exhibit D [not attached herein]. He understands his obligations as class representative, see Exhibit E [not attached herein]. No conflicts of interests are apparent.19 E. RULE 23(B)(3)A CLASS ACTION IS SUPERIOR TO OTHER AVAILABLE METHODS TO RESOLVE THIS CONTROVERSY Efficiency is the primary focus in determining whether the class action is an appropriate method for resolving the controversy presented. Eovaldi v. First Natl Bank, 57 F.R.D. 545 (N.D.Ill. 1972). The Court is required to determine the best available method for resolving the controversy in keeping with judicial integrity, convenience, and economy. Scholes, supra, 143 F.R.D. 181, 189 (N.D.Ill. 1992); Hurwitz v. R.B. Jones Corp., 76 F.R.D. 149 (W.D.Mo. 1977). A court must consider the inability of the poor or uninformed to enforce their rights, and the improbability that large numbers of class members would possess the initiative to litigate individually. Haynes v. Logan Furniture Mart, supra, 503

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F.2d 1161 (7th Cir. 1974). In such a case, failure to certify a class will result in a failure of justice. Here, the individual claims are too small to make individual litigation against Westgate economically feasible. This strongly militates in favor of a class action: [O]ne of the primary functions of the class suit is to provide a device for vindicating claims which, taken individually, are too small to justify legal action but which are of significant size if taken as a group. Brady v. LAC, Inc., 72 F.R.D. 22, 28 (S.D.N.Y. 1976). In this case, there is no better method available for the adjudication of the claims which might be brought by each consumer who signed a document such as Exhibit A without the required disclosures. The special efficacy of the consumer class action has been noted by the courts and is applicable to this case: A class action permits a large group of claimants to have their claims adjudicated in a single lawsuit. This is particularly important where, as here, a large number of small and medium sized claimants may be involved. In light of the awesome costs of discovery and trial, many of them would not be able to secure relief if class certification were denied. . . . (In Re Folding Carton Antitrust Litigation, 75 F.R.D. 727, 732 (N.D.Ill. 1977) (citations omitted).) Moreover, as noted previously, Congress has selected the class action as the principal enforcement mechanism for the Truth in Lending Act. In Haynes, the Seventh Circuit noted the need for class actions to prevent violators of the [Truth in Lending] Act from limiting recovery to a few individuals where actual, wide-spread noncompliance is found to exist (503 F.2d at 1164). The facts of this case underscore the need for class action enforcement of the Truth in Lending Act. Plaintiff contends that Westgate uses a printed form that violates TILA for the purpose of locking consumers into credit transactions without disclosure of financing terms. This sort of conduct is inherently misleading and oppressive, and serves no legitimate purpose. No significant management problems are anticipated. Plaintiffs claim, presenting a straightforward question concerning the legality of a printed form, is significantly simpler than many claims routinely certified as class actions, such as securities and price-fixing cases. IV. CONCLUSION For the reasons stated above, the Court should certify a class as requested by plaintiff. Respectfully Submitted, [Attorney]

19 Only a substantial conflict relating to the subject matter of the litigation will render representation inadequate. Marshall v. Holiday Magic, 550 F.2d 1173 (9th Cir. 1977).

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early termination. 12 C.F.R. 213.4(g)(12). The form specifies a very onerous charge that is almost certainly unenforceable in an apparent effort to deter terminations; defendants in fact use a different method of calculating early termination liability. Moreover, part of the information necessary to determine early termination liability is set forth on a separate addendum, violating the requirement that all required disclosures be on two sides of a single paper. These omissions are quite seriousaccording to a 1989 study by the Attorney General of New York (Attachment A)[not attached herein], such charges typically amount to several thousand dollars. 2. The lease does not provide [a] statement identifying any express warranties or guarantees available to the lessee made by the lessor or manufacturer with respect to the leased property. 12 C.F.R. 213.4(g)(7). Item 36 of the form states that VFNA agrees to assign you its assignable rights under the manufacturers limited warranties, apparently on the theory that the average consumer sitting in a Volvo dealership will pull out a copy of the Uniform Commercial Code and look up what rights under a warranty are assignable. 3. The lease fails to disclose [t]he total amount paid or payable by the lessee during the lease term for official fees, registration, certificate of title, license fees, or taxes. 12 C.F.R. 213.4(g)(4). Item 7 on the VFNA form provides for estimated additional payments on account of these matters during the life of the lease, but no item on the form provides for disclosure of the information required by 12 C.F.R. 213.4(g)(4). 4. The lease fails to disclose [t]he amount or method of determining the amount of any penalty or other charge for . . . late payments (12 C.F.R. 213.4(g)(10)). The form is ambiguous as to the amount of the charge if part of the payment is timely and part is late. 5. The form fails to contain a required disclosure of the lessees appraisal rights. Although Item 35 provides that the lessees liability upon default is based on the value of the leased car, the form fails to disclose that the consumer has the right to use an appraisal of the cars value where liability upon default or early termination is based on the value of the leased property, as required by 12 C.F.R. 213.4(g)(14). As discussed in greater detail below, determination of these claims involves a comparison of the printed form, viewed through the eyes of an unsophisticated lay consumer, with the requirements of Regulation M. Such a claim is ideally suited for classwide adjudication. Truth in Lending disclosure claims have frequently been certified as class actions. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974); Adiel v. Chase Fed. S. & L. Assn, 810 F.2d 1051 (11th Cir. 1987); Hughes v. Cardinal Fed. S. & L. Assn, 566 F.Supp. 834 (S.D.Ohio 1983); Fetta v. Sears, Roebuck & Co., 77 F.R.D. 411 (D.R.I. 1977); Bantolina v. Aloha Motors, Inc., 419 F.Supp. 1116, 1122 (D.Haw. 1976); Jones v. Goodyear Tire & Rubber Co., 442 F.Supp. 1157 (E.D.La. 1977). At least seven automobile leasing class actions have been certified or recommended for certification, four by federal district courts in Alabama and Illinois, Simon v. World Omni Leasing, Inc., 146 F.R.D. 197 (S.D.Ala. 1992); Wesley v. General Motors Accept. Corp., 91 C 3368 (Attachment B) [not attached herein]; Kedziora v. Citicorp Natl Services, Inc., 91 C 3428 (Attachment C) [not attached herein]; Johnson v. Steven Sims Subaru and Subaru Leasing, 1993 U.S.Dist. LEXIS 8078 (N.D.Ill., June 9, 1993) (Magistrate Judges recommen-

L.6 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, MEMORANDUM IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION WITH RESPECT TO COUNT I I. INTRODUCTION Plaintiff, Ian Shepherd (Shepherd), submits this memorandum in support of his request that the Court certify a class with respect to Count I of the complaint under Fed.R.Civ.P. 23(b)(3). Count I alleges that a standard printed form of automobile lease used by defendant Volvo Finance North America (VFNA) and serviced by defendant Volvo Car Finance, Inc. (VCFI) fails to comply with the disclosure requirements imposed by the federal Consumer Leasing Act, 15 U.S.C. 1667 et seq., and implementing Federal Reserve Board Regulation M, 12 C.F.R. part 213 (Regulation M), and Staff Commentary, 12 C.F.R. part 213 Supp. I (Commentary). The Consumer Leasing Act, Regulation M and Staff Commentary require extensive disclosures in consumer lease transactions, analogous to those required in the case of credit transactions by the Truth in Lending Act. 15 U.S.C. 1667a. The disclosures must be made clearly, conspicuously, [and] in meaningful sequence, 12 C.F.R. 213.4(a), and must be in a reasonably understandable form. (Commentary, 213.4(a)(1)) Disclosures can be made as part of the lease or in a separate statement; however, all disclosures must be on both sides of a single piece of paper. VFNA elected to incorporate the disclosures in the lease. Count I alleges that VFNAs standard printed form contract/ disclosure statement, form VFNA-82-0888, does not comply with these disclosure requirements. Shepherd alleges that the form fails to comply with the disclosure requirements in the following respects: 1. It does not disclose, in a reasonably understandable manner, [t]he amount or method of determining the amount of any penalty or other charge for delinquency [or] default (12 C.F.R. 213.4(g)(10)) and [a] statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the lease term and the amount or method of determining the amount of any penalty or other charge for

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dation); two by the Circuit Court of Cook County, Illinois, for litigation purposes, Lynch Leasing Co. v. Moore, 90 CH 876 (Attachment D) [not attached herein]; Maryland Natl Bank v. Goodman, 91 M1 157394 (Attachment E) [not attached herein], and another by the Circuit Court of Cook County for settlement purposes, Blank et al. v. Nissan Motor Acceptance Corp., 91 L 8516 (Attachment F) [not attached herein]. (Lynch was also settled, after a partial summary judgment on liability.) Indeed, Congress expressly approved of class actions to enforce the Truth in Lending and Consumer Leasing Acts. The same Public Act that enacted the Consumer Leasing Act in 1976 also increased the statutory damages for class actions in 15 U.S.C. 1640, applicable to both Consumer Leasing and Truth in Lending suits. Pub. L. 94-240 (90 Stat. 257). The legislative history of the amendment clearly states: The chief enforcement tool will continue to be private actions for actual damages and civil penalties. Much of the testimony received in the hearings, and much of the debate in Subcommittee and Committee centered on the adequacy of the recovery ceiling for civil penalties in class actions. . . . . (Sen.R. No. 94-590, 94th Cong., 2d Sess., p. 8, 1976 USCCAN 438) In revising 15 U.S.C. 1640 to expressly refer to class actions, Congress recognized that potential class action liability is an important encouragement to the voluntary compliance which is so necessary to insure nationwide adherence to uniform disclosure. Bantolina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw. 1976). The possibility of class-action exposure is essential to the prophylactic intent of the Act, and is necessary to elevate truthin-lending lawsuits from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance. Bantolina, 419 F.Supp. at 1120, citing the 1972 Federal Reserve Board annual report on the Truth in Lending Act. In determining whether a class action will be allowed, the substantive allegations of the complaint should be taken as true. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989); Sharif by Salahuddin v. New York State Education Department, 127 F.R.D. 84, 87 (S.D.N.Y. 1989). The Court should resolve any doubt regarding the propriety of certification in favor of allowing the class action, so that it will remain an effective vehicle for deterring corporate wrongdoing. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968); accord, In re Folding Cartons Antitrust Litigation, 75 F.R.D. 727 (N.D.Ill. 1977). Finally, the class action determination is to be made as soon as practicable after the commencement of an action brought as a class action, and before any consideration of the merits. Koch v. Standard, 962 F.2d 605, 607 (7th Cir. 1992). II. COUNT I MEETS THE REQUIREMENTS FOR CERTIFICATION A. NUMEROSITY The numerosity prerequisite is satisfied if it is reasonable to conclude that the number of members of the proposed class is greater than the minimum number required for class

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certification, which is about 40. Swanson v. American Consumer Industries, 415 F.2d 648, 653 (4th Cir. 1967) (18 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (1029 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient). In the present case, there are at least 24,756 persons (besides Shepherd) in the class. (Attachment G, pp. 1922) [not attached herein] (Plaintiff has excluded from the class 7,527 New York lessees because a separate action was filed on their behalf; the 24,756 number is the 32,284 on p. 22 of Attachment G minus the 7,527 New York leases disclosed on p. 21 and plaintiffs lease.) There may in fact be more; several of defendants other interrogatory answers suggest that there might be a total of 49,813 leases. (Attachment G, pp. 8, 11) Whichever number is correct, the number clearly meets the numerosity requirement. B. COMMON QUESTIONS AND PREDOMINANCE The commonality requirement is satisfied if there are common questions linking the class members that are substantially related to the outcome of the litigation. Blackie v. Barrack, 524 F.2d 891, 910 (9th Cir. 1975). Common questions predominate if classwide adjudication of the common issues will significantly advance the adjudication of the merits of all class members claims. McClendon v. Continental Group, Inc., 113 F.R.D. 39, 4344 (D.N.J. 1986); Genden v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 114 F.R.D. 48, 52 (S.D.N.Y. 1987); Spicer v. Chicago Board Options Exchange, CCH Fed.Sec. L.Rptr. [198990 Transfer Binder] k94,943, at p. 95,254 (N.D.Ill. 1990); Alexander Grant & Co. v. McAlister, 116 F.R.D. 583, 590 (S.D.Ohio 1987). In this case, Count I presents a single, overriding common questionwhether VFNAs printed form lease complies with the requirements of the Consumer Leasing Act and Regulation M. Not only is this issue common to the entire class sought to be certified, but adjudication of this issue is essentially dispositive of the Count I claim. Indeed, a Truth in Lending or Consumer Leasing disclosure claim is almost an ideal case for a class action. The sorts of individual issues usually invoked by class action defendants are simply not present. There is no requirement of reliance.20 Anyone who received a disclosure statement containing the offending disclosure is entitled to recover statutory damages.21 The only individual issues appear to concern identification of the class members. This requires nothing more than ministerial examination of defendants files. This type of individual issue is not a barrier to class certification. Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989).

20 White v. Arlen Realty & Development Corp., 540 F.2d 645, 648-50 (4th Cir. 1975); In re Perkins, 106 B.R. 863, 864 (Bankr. E.D.Pa. 1989); Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299 (D.Del. 1990); Pearson v. Easy Living, Inc., 534 F.Supp. 884, 890 (S.D. Ohio 1981). 21 See authorities cited in n. 20.

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C. TYPICALITY In Haynes the court likewise noted the need for class actions to prevent violators of the [Truth in Lending] Act from limiting recovery to a few individuals where actual, widespread noncompliance is found to exist (503 F.2d at 1164). Moreover, as noted above, Congress expressly authorized class actions to enforce the Truth in Lending and Consumer Leasing Acts. The facts of this case underscore the need for class action enforcement of the Truth in Lending and Consumer Leasing Acts. Shepherd contends that VFNA uses a printed form lease that threatens consumers with default/early termination charges amounting to thousands of dollars, when defendants neither impose nor can legally collect any such charges. This sort of conduct is inherently misleading and serves no legitimate purpose. This is an appropriate forum for the maintenance of this action. Although defendants lease vehicles in almost all states, only New York and New Jersey have a greater number of leases than Georgia, and New York lessees are being excluded from the class. No significant management problems are anticipated. Plaintiffs claim, presenting a straightforward question concerning the legality of a printed form, is significantly simpler than many claims routinely certified as class actions, such as securities and price-fixing cases. III. CONCLUSION For the reasons stated above, the Court should certify a class with respect to Count I as requested by plaintiff. Respectfully Submitted, [Attorney]

The typicality requirement of Rule 23(a)(3) is satisfied if the representatives claim arises from the same event or practice or course of conduct that gives rise to the claims of other class members and [the representatives and class members] claims are based on the same legal theory. De La Fuentes v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983). In the present case, Shepherds claim and the claims of the class members are legally and factually identical insofar as Count I is concerned. The same violationnoncompliance with the disclosure requirements of the Consumer Leasing Actis asserted on behalf of all. The factual basis for the claimthe existence of a printed form leaseis also the same with respect to everyone. D. ADEQUACY OF REPRESENTATION The adequacy of representation requirement is satisfied if plaintiffs counsel is qualified, experienced, and generally able to conduct the proposed litigation and there are no antagonistic interests between the representative party and the class. Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978); Jordan v. County of Los Angeles, supra, 669 F.2d at 1323; Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 247 (3d Cir. 1975); In re Alcoholic Beverages Litigation, supra. In the present case, plaintiffs counsel have ample experience in prosecuting class actions and actions involving unlawful business practices. An affidavit setting forth their experience is attached as Attachment H [not attached herein]. There are no conflicts between Shepherds interests and those of the class. Shepherd understands the obligations of a class representative and will vigorously assert the claims of the class members. Attachment I [not attached herein]. E. SUPERIORITY OF THE CLASS ACTION The class action mechanism is essential to enforce consumer protection laws. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974); Eshaghi v. Hanley Dawson Cadillac Co., 214 Ill.App.3d 995, 574 N.E.2d 760 (1st Dist. 1991); Vasquez v. Superior Court, 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964 (1971). As the court held in Eshaghi: In a large and impersonal society, class actions are often the last barricade of consumer protection. . . . To consumerists, the consumer class action is an inviting procedural device to cope with frauds causing small damages to large groups. The slight loss to the individual, when aggregated in the coffers of the wrongdoer, results in gains which are both handsome and tempting. The alternatives to the class actionprivate suits or governmental actionshave been so often found wanting in controlling consumer frauds that not even the ardent critics of class actions seriously contend that they are truly effective. The consumer class action, when brought by those who have no other avenue of legal redress, provides restitution to the injured, and deterrence of the wrongdoer. (574 N.E.2d at 764, 766)

L.7 Deceptive Practices Case Vendors Single Interest Insurance (Ortiz)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) CARMEN ORTIZ, et al., ) Plaintiffs, ) ) v. ) ) GMAC, INC. and MIC, INC., ) Defendants. ) ) MEMORANDUM IN SUPPORT OF MOTION TO PROCEED AS A CLASS ACTION I. INTRODUCTION Plaintiff Carmen Ortiz filed this action against defendants General Motors Acceptance Corporation (GMAC) and Motors Insurance Corporation (MIC) individually and on behalf of all persons similarly situated. The complaint is based on defendants business procedures concerning the purchase and

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sale of MIC single interest physical damage insurance when customers, who are having GMAC finance their motor vehicle purchases, experience a lapse of their own insurance policy. Mrs. Ortiz experience with the MIC physical damage insurance policy illustrates the problems created for class members by the defendants contract forms, form letters, and business procedures. When Mrs. Ortiz bought her car on September 18, 1981 her GMAC retail installment sales contract had, in small print on the reverse side, provisions allowing GMAC to purchase physical damage insurance. See a-d reverse side attached at Exhibit A [not attached herein]. When Mrs. Ortiz purchased the car she had Allstate insurance, however, that policy was later canceled. Compl. kk 13, 14. Mrs. Ortiz then received a call from a GMAC employee who told her that her insurance had lapsed, Mrs. Ortiz said she would call Allstate. Ortiz Dep. p. 79-81. A few days later on November 11, 1981 she received a form letter advising her that GMAC had purchased single interest insurance for her and added the $914.00 premium and $170.10 interest to her account. Compl. Exhibits B, C [not attached herein]. Her payments were increased from $185.02 a month to $208.58. On January 28, 1982 Mrs. Ortiz had an accident while driving her car and over $1,900 damage was done to it. Compl. k 27. Shortly after the accident she called GMAC to have the MIC policy repair it and was told by an employee that in order for the MIC policy to pay for damage to the car she would have to return the car to GMAC to be treated as a repossession, leaving her liable for the balance due on the contract, or she could pay to fix the car herself. Compl. k 28. Mrs. Ortiz asked the employee what she could do without a car and asked why she was paying for something (the insurance) that didnt cover her. Ortiz Dep. pp. 107-8, 109-110. She got upset and hung up the phone. Ortiz Dep. p. 110. She paid a friend $350 to make repairs so she could drive the car. Ortiz Dep. pp. 128-9, 133. Later she canceled the MIC physical damage insurance. Ortiz Dep. Exhibit 10. The complaints first count alleges that GMAC and MIC violated the Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121-1/2, 261 et seq. by: concealing the coverage of the policy and its limitations; concealing the name of the insurance company and that the purchase was from a subsidiary; charging an excessive premium for the policy; and failing to pay any sums when the car was damaged unless plaintiff turned the car over to GMAC. The second count of the complaint, also against both defendants, is based on breach of the insurance contract. Count three, against GMAC only, alleges a breach of its fiduciary duty as plaintiffs agent by: purchasing the insurance at an excessively high rate; making profit through a subsidiary; concealing the actual coverage of the policy and failing to purchase through an independent insurance company. The fourth count, against GMAC only, alleges a violation of the Sales Finance Agency Act, Ill. Rev. Stat. ch. 17, 5201 et seq., by: failing to provide a copy of the policy, using misleading forms regarding the type of insurance; and misrepresenting and concealing the terms, benefits and limitations of the policy. II. THE REQUIREMENTS FOR CLASS CERTIFICATION ARE MET.

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A. THE CLASS IS SO NUMEROUS THAT JOINDER OF ALL CLASS MEMBERS IS IMPRACTICABLE. The numerosity requirement is simply that the class be sufficiently large so that it would be impracticable to join the class members. The class in this case is state wide and includes persons who fit the class definitions dating back to December 1, 1980. Defendants attorneys have indicated they will provide a projection of the number of the class members shortly. Plaintiffs will provide that number for the court in the class reply memorandum. At the present plaintiff can make a rough projection of over 800 class members each year. This projection is based on MICs premiums earned of $878,387 in the year ending June 30, 1981 and premiums of $1,211,909 in the year ending 1982.22 Mrs. Ortiz was charged nearly $1,000 for her premium. Assuming that is a typical premium charge, approximately 878 policies were brought in the year ending June 30, 1981 and 1,211 policies the following year ending June 30, 1982. Recognizing that this is a very rough projection, it is still inescapable that the class here numbers several thousand members for the period December 2, 1980 to the present. In Tassem v. United Development Co., 88 Ill. App.3d 581, 410 N.E.2d 902, 913 (1980) the court ruled that 150 people was enough to satisfy the numerosity requirement. The class in this case is sufficiently large to satisfy numerosity. B. THERE ARE QUESTIONS OF FACT OR LAW COMMON TO THE CLASS WHICH PREDOMINATE OVER ANY QUESTIONS AFFECTING ONLY INDIVIDUAL MEMBERS. The second requisite for class certification is that common questions of law or fact predominate over questions affecting only individual members. The Illinois Supreme Court has addressed this requirement on two occasions. In Miner v. Gillette Co., 87 Ill.2d 7, 428 N.E.2d 478 (1981) cert. dismissed 103 S. Ct. 484 (1982), the court, reversing dismissal of a class action, pointed out that this section is couched in the disjunctive and that the predominance requirement was satisfied even where some individual questions regarding class members are present. Miner, supra, 428 N.E.2d at 891, 893. In Steinberg v. Chicago Medical School, 69 Ill.2d 320, 371 N.E.2d 634 (1977) the court also made clear that the predominance requirements was to be construed to permit class treatment although some individual differences in proof between members of the class might be present. In the case before the court common question of both fact and law predominate as defendants business procedures were essentially identical regarding the purchase of single interest physical damage insurance for all class members. All class members had GMAC finance their car purchases. They all signed contracts that, on the reverse side, had a provision allowing GMAC to buy physical damage insurance on the car if the buyer didnt keep such insurance in force. GMAC form contract k 3 (reverse side), attached as Exhibit A [not attached
22 These earned premium figures are from correspondence MIC had with the Illinois Department of Insurance which were provided pursuant to document requests.

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Count III alleges that defendant GMAC breached its fiduciary duty to class members. The common question of law is whether a fiduciary duty was present when the policy was issued. The common questions of fact which give rise to the breach of the fiduciary duty are whether GMAC purchased the insurance at an excessively high rate, made a profit through its subsidiary, concealed the coverage of the policy, or failed to obtain insurance through an independent company. Compl. Count III, k 38. In Count IV the common question of law is whether defendant GMAC violated the Sales Finance Agency Act. The common questions of fact are whether GMAC concealed the terms, benefits and limitations of the policy, failed to provide copies of the policy or used misleading forms as to the type of insurance. Compl. Count IV, kk 36-39. Since all written disclosures to class members were the same (the retail installment contract and notices) these fact questions are essentially identical for each class member. C. PLAINTIFF ORTIZ WILL FAIRLY AND ADEQUATELY REPRESENT THE CLASS. Miner v. Gillette Co., supra, 428 N.E.2d at 482 set a three part test to determine adequacy of representation. The first issue is to determine whether the interests of the named plaintiff are the same as those not joined. In this case the interest of plaintiff is identical to all class membersto recover damages. The second part of the test requires the attorneys representing the plaintiff to be qualified experienced and generally able to conduct the proposed litigation. The attorneys for the Legal Assistance Foundation of Chicago and Cook County Legal Assistance Foundation, Inc., who are of record in this case, have successfully litigated a number of consumer class actions in both state and federal courts. The final requirement, also satisfied here, is that the action not be collusive or friendly. D. THE CLASS ACTION IS AN APPROPRIATE METHOD FOR THE FAIR AND EFFICIENT ADJUDICATION OF THE CONTROVERSY. The facts in this case demonstrate that a class action is an appropriate method for the fair and efficient adjudication of this controversy. A successful class action in this litigation will: allow recovery to all class members subject to the alleged statutory and common law violations by defendants, as well as prevent a multiplicity of suits and adjudicate the practices of defendants in one cause. Certification of a class in this case will best secure economies of time, effort, and expense, and promise uniformity of decision or accomplish other ends of justice . . ., the ultimate ends of Section 57.2, Forde, Class Actions in Illinois, 26 DePaul L. Rev., 211, 225 (1977). Illinois Courts, on several occasions have ruled that class certification is appropriate in cases alleging violation of the Consumer Fraud and Deceptive Business Practices Act, Miner v. Gilette, 89 Ill. App.3d 315, 411 N.E.2d 1092, 87 Ill.2d 7, 428 N.E.2d 484 (1982), cert. denied, 103 S. Ct. 484 (1982); Brooks v. Midas International Corp., 47 Ill. App.3d 266, 361 N.E.2d 815 (1977).

herein]. When insurance cancellation notices on customer accounts were received at GMACs offices a customer representative sent a form letter to the customer. Grummon Dep. p. 28-29. The form letter, is attached as Exhibit C, p. 1 and 2 [not attached herein]. Grummon Dep. Ex. 1, pp. 1, 2. Exhibit Cs reverse side (p. 2) asks the customer to: indicate that they have procured their own insurance, pay the single interest premium by check or have the premium plus interest added to their account. If there is no response to the letter, a call is made by a GMAC customer representative or account representative urging them to get their own insurance and advising them that GMAC will get single interest for their account if they do not. Grummon Dep. p. 30, 32, 45-47. If a customer does not procure their own insurance, GMAC purchases a single interest physical damage insurance policy from MIC. Grummon Dep. pp. 65-66. After the bill is received from MIC, a second form letter is sent to the customer advising them that the insurance has been added to their account. Grummon Dep. pp. 66, 69. The form letter is attached as Exhibit D [not attached herein]. Grummon Dep. Ex. 5. This letter indicates the premium and interest. GMAC does not send copies of the MIC policy to customers at the time the insurance is purchased. Grummon Dep. p. 98. MIC does not send the customer a copy of the policy either. If the customers vehicle is in an accident while the insurance is in force the procedure, set out in the GMAC U.S. branch operations manual, is to first arrange for MIC to inspect the car. After the inspection the customer is told they have the option of repairing the vehicle and continuing the payments or turning the vehicle over to GMAC to be treated as a repossession. The customer is also advised that a deficiency will result and that they will be held liable for the unpaid balance. Exhibit E, Operations Manual 1408-1 [not attached herein]. Neither the contract nor any of the form letters sent to the customers advise them that the insurance will be purchased by GMAC from its wholly owned subsidiary MIC. The common question of law and fact for all class members certainly predominate under all four counts of plaintiffs complaint. In Count I the common question of law is whether the defendants violated the Consumer Fraud Act. The common question of fact are whether defendants concealed the coverage of the policy, the name of the company (and that it was GMACs subsidiary), charged an excessive rate for the insurance, failed to send a copy of the policy, or falsely represented that damage to customers cars was not covered by the policy and failed to pay damages that were covered. Compl. Count I, kk 37, 38. Since defendants procedures, as to the written disclosures made to all class members were identical and all subclass members making claims were told essentially the same thing, it is clear that common questions of fact predominate in Count I. Count II alleges that defendants breached the contract of insurance which is Exhibit A to the complaint. Whether the contract was breached is the common question of law for all class members since the contract of insurance was the same for all of them. The common question of fact for all class members is whether the insurance was in force when their cars were damaged and defendants refused to pay.

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Similarly class actions have been found appropriate for contract claims. Steinberg v. Chicago Medical School, supra; Carillo v. Jam Productions Ltd., 108 Ill. App.3d 126, 438 N.E.2d 1197 (1982) (class of persons who attended fight on closed circuit TV); Carrao v. Health Care Services Corp., 118 Ill. App.3d 417, 454 N.E.2d 781 (1983) (class of persons denied benefits by health care insurer) and Society of St. Francis v. Dulman, 98 Ill. App.3d 16, 424 N.E.2d 59 (1981) (class of persons who brought their dogs to animal hospital for inoculations that were allegedly not given in accord with state law). In Hoover v. May Department Stores Co., 62 Ill. App.3d 106, 378 N.E.2d 762 (1978), revd on other grounds, 77 Ill.2d 93, 395 N.E.2d 541 (1979) the court certified a plaintiff class of retail credit customers who were required to pay undisclosed finance charges in violation of the Illinois Retail Installment Sales Act, Ill. Rev. Stat. ch. 121-1/2, 501 et seq. The court noted: All class members were treated uniformly under defendant Eagles policy. If it was unlawful as to one members transactions, it was unlawful as them all. Hoover v. May Dept. Store Co., supra, at 773. Like Hoover, the plaintiff class members herein were all treated in the same manner by defendants procedures for the purchase of MIC physical damage insurance. III. CONCLUSION For the reasons stated the Court should certify this cause as a class action under all four counts of plaintiffs complaint. Respectfully Submitted, [Attorney]

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tory Finances practice of imposing unlawful prepayment charges on residential mortgages, in violation of Ill. Rev. Stat. ch. 17, k 6409(b)(5). Mrs. Adams is presently requesting certification of a class of all persons who obtained a loan secured by residential property in Illinois, which loan was (a) made or held by Predatory Finance Company and (b) provided for a rebate of interest upon prepayment computed according to a method other than the actuarial method of computing interest. It is believed that all such loans are evidenced by a note in the form represented by Exhibit A, attached [not attached herein]. Certification is sought with respect to both American Funding, which made the loan to Mrs. Adams, and Reckless Savings & Loan Association (Reckless Savings) which purchased Mrs. Adamss loan from American Funding. II. NATURE OF THE ACTION The complaint alleges that American Funding imposed unlawful prepayment charges on residential mortgages, including Mrs. Adamss. American Funding uses a very unusual form of promissory note. Most notes executed in connection with residential mortgages provide that the borrower must repay principal and such interest as is earned through the date the loan is paid off. American Funding, however, uses a note which contains a promise by the borrower to pay an amount consisting of all principal and interest that would be due if the loan were not prepaid. See Exhibit A, attached [not attached herein]. The standard form American Funding promissory note then provides for a rebate of the interest upon prepayment under the Rule of 78s, which means that American Funding retains substantial unearned interest. With respect to the rebate upon prepayment, American Fundings standard form promissory note provides: Upon prepayment of this Note in full or in part or acceleration of maturity, Borrower will receive a rebate of the unearned interest portion of the FINANCE CHARGE computed by the Rule of 78s; no portion of prepaid finance charges will be refunded. Under the Rule of 78s, a borrower who pays off a oneyear loan after 320 days will pay not less than 77/78s (98.72%) of the total interest which would have been paid had the loan be outstanding for a year. Under the actuarial method, the borrower would pay 320/360 (88.89%) of the total interest; i.e., an amount directly proportional to the length of time the borrower had the use of the lenders money. In short, the Rule of 78s is generally more favorable to the lender than the actuarial method. Furthermore, most consumers neither understand what the Rule of 78s is nor examine, when they get their loans, the manner in which interest will be computed upon prepayment. Consumer borrowers who sign mortgage notes containing Rule of 78s prepayment provisions are thus likely to find themselves facing a substantial and unexpected deprivation of their equity if they either seek to prepay their loans or the lender accelerates their loans (the Rule of 78s provision applies to both voluntary and involuntary prepayments).

L.8 State Usury Case (Adams)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION ) ) Plaintiff ) ) v. ) ) MARINE MIDLAND ) BANK and AMERICAN ) FUNDING, LTD., ) Counterdefendants. ) ) PATRICIA ADAMS, PLAINTIFFS MEMORANDUM IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION I. INTRODUCTION Plaintiff, Patricia Adams (Mrs. Adams) brought this action against Reckless Savings & Loan Association (Reckless Savings) and Predatory Finance Company (Predatory Finance) as a class action. The complaint is based on Preda-

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2. There are questions of fact or law common to the class, which common questions predominate over any questions affecting only individual members. 3. The representative parties will fairly and adequately protect the interest of the class. 4. The class action is an appropriate method for the fair and efficient adjudication of the controversy. In determining whether a class action will be allowed, the substantive allegations of the complaint should be taken as true, except to the extent that they are contradicted by evidence. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976). The Court should resolve any doubt regarding the propriety of certification in favor of allowing the class action, so that it will remain an effective vehicle for deterring corporate wrongdoing. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968), cert. denied, 394 U.S. 928 (1969); accord, In re Folding Cartons Antitrust Litigation, 75 F.R.D. 727 (N.D. Ill. 1977). As the court explained in Esplin: Without the class action device, many actionable wrongs would go uncorrected and persons affected thereby unrecompensed. In essence, the class action device is a bona fide method for redressing violations of the . . . laws and for compelling compliance with their mandates. Accordingly, the interests of justice require that in a doubtful case, . . . any error, if there is to be one, should be committed in favor of allowing the class action. Finally, the class action determination is to be made [a]s soon as practicable after the commencement of an action brought as a class action. Code of Civil Procedure 2-802. B. NUMEROSITY The numerosity prerequisite is satisfied if it is reasonable to conclude that the number of members of the proposed class is greater than the minimum number required for class certification, which is about 1840. Cypress v. Newport News General & Nonsectarian Hospital Assn, 375 F.2d 648, 653 (4th Cir. 1967) (18 sufficient); Swanson v. American Consumer Industries, 415 F.2d 1326 (7th Cir. 1969) (40 sufficient). It is not necessary that the precise number of class members be known. McCleery Tire Service, Inc. v. Texaco, Inc., 1975-2 Trade Cas. (CCH) k 60,581 (E.D. Pa. 1975). A class action may proceed upon estimates as to the size of the proposed class. In re Alcoholic Beverages Litigation, 95 F.R.D. 321 (E.D.N.Y. 1982). Attached as Exhibit B [not attached herein] is the report American Funding filed with the Office of the Savings & Loan Commissioner of the State of Illinois, the agency with regulatory jurisdiction over American Funding. This exhibit shows that American Funding made about 300 loans in Illinois during 1986. Clearly, this group of borrowers would satisfy the numerosity requirement. C. COMMON QUESTIONS There is one overriding, central issue raised by the class claim. It is whether the Rule of 78s prepayment provision

In Dechow v. Sho-Fed Credit, 181 Ill. App. 3d 367 (2d Dist. 1989), leave to appeal denied, October 5, 1989, the Appellate Court held that the use of the Rule of 78s in a residential mortgage results in an excessive and illegal charge for prepayment, in violation of Ill. Rev. Stat., ch. 17, k 6404(b)(3). This statutes provides: In any contract or loan which is secured by a mortgage, deed of trust, or conveyance in the nature of a mortgage, on residential real estate, the interest which is computed, calculated, charged, or collected pursuant to such contract or loan, or pursuant to any regulation or rule promulgated pursuant to this Act, may not be computed, calculated, charged, or collected for any period of time occurring after the date on which the total indebtedness, with the exception of late payment penalties, is paid in full. For purposes of this Section, a prepayment shall mean the payment of the total indebtedness, with the exception of late payment penalties if incurred or charged, on any date before the date specified in the contract or loan agreement on which the total indebtedness shall be paid in full, or before the date on which all payments, if timely made, shall have been made. In the event of a prepayment of the indebtedness which is made on a date after the date on which interest on the indebtedness was last computed, calculated, charged, or collected but before the next date on which interest on the indebtedness was to be calculated, computed, charged, or collected, the lender may calculate, charge and collect interest on the indebtedness for the period which elapsed between the date on which the prepayment is made and the date on which interest on the indebtedness was last computed, calculated, charged or collected at a rate equal to 1/360 of the annual rate for each day which so elapsed, which rate shall be applied to the indebtedness outstanding as of the date of prepayment. The lender shall refund to the borrower any interest charged or collected which exceeds that which the lender may charge or collect pursuant to the preceding sentence. . . . Mrs. Adams contends, and the Appellate Court in Dechow held, that the language requires use of the actuarial method in calculating the amount due upon prepayment of a loan. Although the lender in Dechow strenuously argued that the decision of the Appellate Court was incorrect, the Supreme Court concluded otherwise and denied review. III. THE CLASS MEETS THE REQUIREMENTS FOR A CLASS ACTION A. FACTORS TO BE CONSIDERED IN CERTIFYING A CLASS ACTION Section 2-801 of the Illinois Code of Civil Procedure sets forth four prerequisites for a class action: 1. The class is so numerous that joinder of all members is impracticable.

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in American Fundings form document is illegal. Any defenses raised by American Funding are also likely to apply on a classwide basis. The only individual questions concern the amounts of interest provided for by each note, the amount outstanding under each note at the date of judgment, and whether the address of the property on which American Funding recorded a mortgage is the same as that listed as the residence of the borrower. All of these questions can be resolved by a ministerial examination of the loan files, and thus do not militate against class certification. Heastie v. Community of Greater Peoria, 125 F.R.D. 669 (N.D. Ill. 1989). This action is thus similar to a Truth in Lending case or similar case involving a question as to the legality of provision in a form document. Such actions are considered ideal for class certification, presenting few or no individual issues. Haynes v. Logan Furniture Mart, 503 F.2d 1161 (7th Cir. 1974). D. ADEQUACY OF REPRESENTATION The adequacy of representation requirement is satisfied if plaintiffs counsel is qualified, experienced,and generally able to conduct the proposed litigation and there are no antagonistic interests between the representative party and the class. Carillo v. Jam Productions, Ltd., 108 Ill. App. 3d 126, 438 N.E.2d 1197 (1982); Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 247 (3d Cir.), cert. denied, 421 U.S. 1011 (1975); In re Alcoholic Beverages Litigation, supra. In the present case, Mrs. Adams is committed to litigating this matter. She has retained counsel with substantial experi-

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ence in class actions, actions against financial institutions, and actions involving unlawful business practices. Counsel recently obtained certification of a much larger class of borrowers injured by a financial institution, Heastie v. Community Bank of Greater Peoria, supra, 125 F.R.D. 669 (N.D. Ill. 1989). E. APPROPRIATENESS OF CLASS ACTION For two reasons, a class action is the only appropriate means of resolving this controversy. First, most of the affected individuals are relatively unsophisticated. Capitol Funding appears to have specialized in lending in the inner city. Unless they obtain relief through this class action, most of the class members will not obtain relief at all. Second, there is no reason why the courts should be clogged with multiple actions presenting what is essentially an identical legal issue. IV. CONCLUSION As demonstrated above, this is an ideal case for a class action. Each of the prerequisites for a class action is met. Indeed, the nature of the practice complained ofsubverting the rights of large numbers of unsophisticated and generally poor borrowers whose claims are too small to make individual litigation practicableis such as to make a class action essential. An identical class was recently certified by Judge Sheridan in Jones v. Alliance Funding Co., 89 CH 5555. Respectfully Submitted, [Attorney]

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Sample Reply Memoranda in Support of Class Certification

M.1 Fair Debt Collection Practices Act Case (Bauer)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ) ) ) ) ) ) ) v. ) CIVIL ACTION NO: 98) FIRST UNION MORTGAGE ) CLASS ACTION CORPORATION, HUTCHENS, ) McCALLA, RAYMER ) & ECHEVARRIA and ) DAVID MITCHELL, ) Defendants. ) ) GENE C. BAUER, CAROL A. BAUER, on behalf of themselves and all others similarly situated, Plaintiffs, PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF CLASS CERTIFICATION I. INTRODUCTION Plaintiffs filed their Motion for Class Certification on January 8, 1999. On March 19, 1999, defendants Hutchens, McCalla, Raymer and Echevarria (HMRE) and David Mitchell (Mitchell) filed a response consenting to certification of the class defined in the Motion. On March 29, 1999, defendant First Union Mortgage Corporation (First Union) filed a consolidated Memorandum in Opposition to Motion for Class Certification and in Support of Motion for Summary Judgment (the Memorandum).1 In their Motion, plaintiffs sought to represent all persons in the United States who have received written communications substantially in the form of the standard form letters
1 Plaintiffs are filing simultaneously herewith an Opposition to First Unions Motion for Summary Judgment, as well as their own Cross-Motion for Partial Summary Judgment. In addition, plaintiffs are filing a Motion for Leave to Amend Class Action Complaint. None of the issues presented by these other pleadings should have any bearing on this Courts decision on class certification.

(the Letters) attached to plaintiffs Complaint. Discovery to date has shown, however, the Letters were drafted only for mailing to Pennsylvania residents. (Deposition of S. Raines, Exh. G at pp. 3233).2 Discovery has also indicated that approximately 288 individuals were sent the Letters. (First Unions Answers to Plaintiffs First Set of Interrogatories, # 13, Exh. R). As such, plaintiffs seek to represent a class of those Pennsylvania borrowers and hereby modify the proposed definition of the class to the following: All persons in the Commonwealth of Pennsylvania who received letters substantially in the form of Exh. A and Exh. B to the Complaint. Inasmuch as HMRE has consented to an even broader class definition, it cannot reasonably object to the more confined class dictated by discovery. With respect to First Union, class certification should be granted because there are a number of legal and factual issues common to the class, including: 1. Whether the Letters violated the provisions of the FDCPA; 2. Whether First Union is liable under the FDCPA; and 3. Whether First Union is liable for the actions of HMRE and Mitchell. As discussed below, each of these issues is common to the class and justifies class certification. II. REPLY STATEMENT OF FACTS First Union contests very little of the factual statement contained in plaintiffs Motion for Class Certification. First Unions contentions center only on two issues: one, whether First Union is a creditor and two, whether plaintiffs received the Letters from First Union. As discussed below and in plaintiffs accompanying Opposition to First Unions Motion for Summary Judgment, the record is replete with evidence showing that First Unions version of the facts is wrong. In any event, First Unions factual disputes implicate the merits of the case, which are not subject to inquiry at the class certification stage of this case. First Union initially claims it stands on a different footing with plaintiffs because it does not hold plaintiffs loan. First Union contends it is just a loan servicer, and not a creditor, because plaintiffs true creditor is the Federal National Mortgage Association (FNMA). But this purported distinction
2 All references to exhibits herein refer to the exhibits attached to the Declaration of D.A. Reardon (Reardon Declaration) filed simultaneously herewith [not reprinted herein].

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the borrowers owe for late charges (compensation for the use of money) and the costs of collection. Nor can First Union realistically contend that it did not send the Letters to plaintiffs and the class. That contention basically takes refuge in the fact that the Letters all contained HMRE letterhead. That fact alone, however, does not definitively identify the sender.4 As plaintiffs Opposition to First Unions Motion for Summary Judgment recites in detail, and which is incorporated herein by reference, First Union was intimately involved in compiling, designing and furnishing the Letters to HMRE. The collection operations were located on the third floor of First Unions headquarters in Raleigh, North Carolina, within the Delinquency Resolution section of First Union. There was no sign or other demarcation indicating that a separate entity, HMRE, was located or doing business at that location. Instead, the HMRE staff was indistinguishable from First Unions staff, sitting sideby-side in identical cubicle space, using telephones, fax machines and postage supplied and paid for by First Union. There were no HMRE attorneys onsite to review individual borrower files and approve the Letters. Rather, First Unions team leader for Delinquency Resolution Support, not an attorney, reviewed and supplied her written blanket approval of the Letters. First Union facilities, computers and mailing processes were all utilized in sending out the Letters. Money collected in response to the Letters was deposited into First Union accounts, not HMREs. Thus, while First Union denies it sent the Letters, there is significant and substantial evidence developed in the case to date that establishes the contrary. Further, whether First Union sent the Letters to plaintiffs and to class members is, at the very least, a common issue on the merits of the case for a factfinder to resolve. Any dispute in this regard, at this stage of the case, does not preclude class certification. In re Prudential Ins. Co. of Am., 962 F. Supp. 450, 468 n.6 (D.N.J. 1997), affd, 148 F.3d 283 (3d Cir. 1998) (in determining appropriateness of class certification, courts are not to conduct preliminary inquiry into the merits). III. REPLY ARGUMENT This Class of 288 Pennsylvania residents who received the Letters is eminently suited for certification. By definition, each member was mailed a written communication virtually identical to the ones the plaintiffs received and all members claims arise from the same practice and course of conduct giving rise to plaintiffs claims: the mailing of a communication which violated the FDCPA. See Peoples v. Wendover Funding, Inc., 179 F.R.D. 492 (D. Md. 1998) (certifying class treatment of FDCPA claims of persons who received standard notices of intention to foreclose mortgage from a loan servicer); Gammon v. GC Services Ltd. Partnership, 162 F.R.D. 313 (N.D. Ill. 1995) (court certified class of persons who had received same form collection letter).
4 Many cases find FDCPA liability where a creditor sends out collection letters under an attorneys letterhead where the attorney was not actually involved in handling the file. See, e.g., Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232 (5th Cir. 1997); Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996); Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993); Veillard v. Mednick, 24 F. Supp. 2d 863 (N.D. Ill. 1998); Young v. Citicorp, 1997 U.S. Dist. LEXIS 22669 (D. Conn. 1997).

between mortgages held or serviced by First Union makes no difference to class certification. Even assuming First Union was just a servicer, class certification would still be proper for all other loans serviced by First Union which received the Letters. Like plaintiffs, each of the class members (likely the vast majority of recipients) would share the common issue of First Unions creditor status. In addition, in the foreclosure context of this case, First Union is both a creditor and a servicer. The FNMA Servicing Guide, along with the Servicing Contract,3 governs the relationship with FNMAs servicers such as First Union. (Exh. A, pp. 1, 111). Under the Servicing Guide, First Union is required to advance monthly payments to FNMA and then reimburse itself from the collections it obtains from the borrowers. (Id., p. 122). First Union must also advance all costs and expenses incurred in performing its obligations under the Servicing Contract. For example, costs related to the preservation and protection of the mortgaged property, the enforcement of judicial proceedings and the management and disposition of acquired properties are all required to be paid by First Union in the first instance. (Id.). Those advances must then be recovered from the mortgagor . . . or other available sources. (Id.). The Servicing Guide also provides that First Union is allowed to retain late charges and fees charged for special services. (Id., pp. 125, 130). These charges are the very charges First Union sought to collect from the Bauers and members of the class. See Exh. A to Complaint (Exh. K to Reardon Declaration), demanding payment of late charges of $123.44 and NSF check and other charges of $22.25. Without even seeing all the Letters sent to each of the 288 members of the class, it is obvious that First Union also demanded payment of late fees and similar charges in those Letters because the Letters would not have been sent in the first place if the members monthly payment had not been late. By the very nature of mortgage securitization, First Union is necessarily a creditor of mortgage borrowers whenever such borrowers are delinquent or in default on their mortgage payments, because First Union is owed its own debts from the borrowers. First Union also collects servicing fees pursuant to the Servicing Guide and the Servicing Contract, which in most cases are a fractional percentage of the mortgage. (Exh. A, p. 126). First Union can obtain that compensation in several ways: a) deducting the fee from the mortgagors monthly payment; b) writing itself a check from its FNMA custodial account; c) deducting the fee from the amount sent to FNMA when the mortgagor pays off the mortgage; and, d) deducting the fee from the proceeds of a third party foreclosure sale or from the amount remitted to redeem an acquired property. (Id.). All the costs that First Union attempts to recover from mortgagors constitute debts that are owed to First Union. The costs and charges all represent an obligation of a consumer to pay money arising out of a transaction in which the money . . . [is] primarily for personal, family or household purposes, see 15 U.S.C. 1692a(5). The debts are owed to First Union, see 15 U.S.C. 1692a(4), because First Union must cover its advances to FNMA from the contractual obligations
3 Plaintiffs have requested that First Union produce a copy of the Servicing Contract with FNMA, but First Union has not to date complied with the request. See Reardon Declaration.

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While First Union has not contested the numerosity and adequacy of representation requirements of Rule 23(a), it has challenged plaintiffs showing of commonality and typicality. First Union also contends that individual issues predominate, thus defeating certification under Rule 23(b)(3). These arguments will be addressed in turn. A. Commonality and Typicality First Unions Memorandum makes three points in contesting commonality and typicality: that plaintiffs cannot prove they received the Letters from First Union; that First Union has a meritorious defense because of its position that it is not a creditor; and, that a unique defense stems from its allegations that one of plaintiffs counsel, Ross & Marler, P.C. (R&M), is prohibited from representing plaintiffs in this case. None of these contentions should defeat certification. First, as discussed supra, there is substantial evidence in the record from which a reasonable factfinder could conclude that First Union did indeed participate in, if not orchestrate, the sending of the Letters. The very nature of the outsourcing relationship between First Union and HMRE makes First Unions mailing of the Letters a common issue for the class as a whole See Peoples, 179 F.R.D. at 498 ([a]ccordingly, the class shares the common factual issue of receipt of Defendants notices of intent to foreclose, and the legal issue of whether those notices violated the FDCPA); Gammon, 162 F.R.D. at 317 n.4 (fact that same standard letter was sent to all members sufficed to provide common nucleus of operative fact, satisfying commonality). Second, First Unions defense that it is not subject to the FDCPA, is a common defense applicable to virtually all class members as most of the mortgages, if not all, are serviced by First Union. Therefore, plaintiffs claim that First Union is in fact subject to the FDCPA is typical of the class claims. An inquiry into typicality should, of course, focus on whether the named plaintiffs circumstances or their legal theories are markedly different from those of other class members. Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.), cert. denied sub nom Wasserstrom v. Eisenberg, 474 U.S. 946 (1985). Courts will liberally construe the typicality requirement as long as no express conflicts exist between the class representatives and the class. Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998), quoting Friedman v. Lansdale Parking Authority, 1993 U.S. Dist. LEXIS 12019 (E.D. Pa. August 30, 1993). Typicality is satisfied regardless of whether different facts underlie each class members claim, as long as the named plaintiffs and the class members all have overarching claims arising from a uniform practice. Barnes v. American Tobacco Co., 161 F.3d 127, 140141 (3d Cir. 1998); In re Prudential Insurance Company America Sales Practice Litigation Agent Actions, 148 F.3d 283, 311312 (3d Cir. 1998); Baby Neal v. Casey, 43 F.3d 48, 58 (3d Cir. 1994); Williams v. Empire Funding Corp., 183 F.R.D. 428, 439 (E.D. Pa. 1998). Here, the overarching practice is the common outsourcing scheme and the use of the form Letters to imply to Pennsylvania borrowers that a large law firm was about to foreclose on their homes. Because the plaintiffs and the class have suffered the same type of injury (receipt of the misleading and deceptive Letters) based on the same set of facts (sending the Letters) which produces the same legal theory (violation of the FDCPA), typi-

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cality is satisfied. Peoples, 179 F.R.D. at 499; Gammon, 162 F.R.D. at 317 n.4 (typicality satisfied where claim rested on theory that standard collection letter violated FDCPA). Even if the facts of each class members claim differ slightly, that alone does not defeat typicality because the claims all arise from the same conduct and are based on the same legal theory. This is not a case where there are drastic factual differences among class members. Cf. Boley v. Principi, 144 F.R.D. 305, 308 (E.D.N.C. 1992), affd, 10 F.3d 218 (4th Cir. 1993) (typicality not satisfied where due process claims turned on whether notice to each member complied with due process and whether a statute was satisfied as to each class member on differing facts). First Unions desperate challenge to the ability of Plaintiffs counsel to prosecute this case (Memorandum at p. 13, referencing Release Agreement and Covenant Not to Sue (Release), Exh. K thereto) borders on the improper. Under the guise of raising a unique defense, First Union is actually attempting to deprive plaintiffs of counsel of their choice. There are several reasons why this challenge should be rejected. The Release, selectively quoted in the Memorandum, does not say what First Union implies it says. Read in its proper context, paragraph 5 of the Release merely represents the agreement of the Spaulding plaintiffs and R&M not to bring a class action in the future with the Spauldings as participants or as representative parties; in other words, the settlement of the Spaulding litigation was to be a final settlement of those particular plaintiffs claims. Significantly, paragraph 6 of the Release, which First Union conveniently omits from its discussion, states as follows: Notwithstanding the above, nothing herein shall be construed to preclude M.D. Marler and/or his firm, Ross and Marler, P.C., from zealously representing future clients in actions against [HMRE] and/or First Union. Taken together, these two paragraphs simply reflect the parties understanding that while the Spauldings were giving up all rights to future litigation in consideration of the settlement of their claims, R&M was free to represent other clients, such as the Bauers and members of the class, in future FDCPA actions against the same defendants. First Unions purported5 interpretation of the Release would result in an improper and possibly unethical limitation on an attorneys right to practice law and vigorously represent his clients. Further, depriving plaintiffs of the services of R&M would have no bearing on the litigation and the certification of the class. Plaintiffs and the class will continue to be represented by their other counsel, Justin Hunt, LLC, as to whom no challenge has been mounted. There is absolutely no appearance of impropriety presented by R&Ms representation of the plaintiffs. The case cited by First Union, Zlotnick v. Tie Communications, Inc., 123 F.R.D. 189, 194 (E.D. Pa. 1988), involved an attorney representing his father as class representative. Judge Johnson found, under the particular circumstances of that casethe son was the moving force behind the case and stood to gain fees in the event he won the casethat the father was not an adequate
5 The sincerity of First Unions argument in this regard must be questioned in view of the fact that First Union has filed no motion to disqualify R&M and has not objected to R&Ms active participation in depositions or filings in this case to date.

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1 The FDCPA provides the same legal remedy to all class members. 1 First Unions liability, if any, stems from the FDCPA. These common features easily predominate over any individual issues. Peoples, 179 F.R.D. at 498 ([t]he virtually identical nature of the notices, and the scope of the class . . ., vitiate any need to analyze each class members claim). While there may be individual differences in the damages sustained by class members, that does not defeat class certification where common questions as to liability predominate. Prudential, 148 F.3d at 311312. The cases cited by First Union are factually distinguishable. In Lewis v. Jesse L. Riddle, P.C., 1998 U.S. Dist. LEXIS 20465 (W.D. La. 1998), there was a substantial question whether the debts at issue were business or consumer debts; that is not an issue here. The other two cases did not arise under the FDCPA and are totally unhelpful to the analysis here. Blake v. Chemlawn Services Corporation, 1988 U.S. Dist. LEXIS 534 (E.D. Pa. 1988), involved highly individualized causation and damages issues emanating from the spraying of pesticide products. In Zlotnick v. Tie Communications, Inc., 123 F.R.D. at 19495, a shareholder class action, certification was denied due to extraordinarily complex questions of reliance requiring highly individualized proof, including each members knowledge of and experience in the market, an accounting of information, advice or rumors received and testimony as to each members actual state of mind. No such issues are presented in this case. C. A Class Action Is Superior to Other Available Methods of Fair and Efficient Adjudication The superiority requirement of Rule 23(b)(3) is also met. As Judge Robreno of this Court noted in Lake v. First Nationwide Bank, 156 F.R.D. 615 (E.D. Pa. 1994), a mortgage overcharge case: The superiority finding requires at a minimum (1) an informed consideration of alternative available methods of adjudication of each issue, (2) a comparison of the fairness to all whose interests may be involved between such alternative methods and a class action, and (3) a comparison of the efficiency of adjudication of each method. . . . The interests that should be taken into account include those of the judicial system, the putative class, the instant plaintiffs and defendant and their attorneys, and the general public. . . . Furthermore, the four fairness and efficiency criteria in 23(b)(3) should be considered in making the evaluation. 156 F.R.D. at 625 (citations omitted). In concluding that a class action was the superior method for resolving the claims asserted in Lake, the court enumerated the advantages of litigating consumer cases as class actions: The Court has little difficulty in finding that the class action form is the superior method of resolving the claim that the Lakes seek to prosecute. The alternative to pursuing a class action is a series of state court actions by a large number of scattered plaintiffs, an inefficient allocation of judicial and

representative. First Union has presented no evidence that plaintiffs here are not adequate representatives of the class. See Barnes v. American Tobacco Co., 161 F.3d at 141 (determination of adequacy of proposed representative involves (1) whether plaintiffs counsel is qualified, and (2) whether plaintiffs interests are antagonistic). B. Individual Issues Do not Predominate First Unions stretch to come up with purported individualized questions is pure exaggeration and should be rejected by the Court.6 Certification under Rule 23(b)(3) is appropriate when settling the parties differences in a single proceeding serves their interests by achieving economies of time, effort, and expense, and by promoting uniformity of decision as to similarly situated class members without sacrificing fairness. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 2246 (1997) (quoting Rule 23(b)(3) advisory committees note). The Rule lists four factors relevant to determining whether common questions predominate and whether class treatment is the best method of adjudication: the class members interests in pursuing individual actions; the extent and nature of any existing litigation concerning the controversy; the desirability of concentrating the litigation in a particular forum; and, the difficulties of managing a class action. These factors are not exhaustive. Amchem Products, 117 S. Ct. at 2246. This case contains the following common features: 1 Each class member had a mortgage held or serviced by First Union. 1 Each class member received the identical Letters.

6 Plaintiffs seek class certification under all subsections of Rule 23(b). They do so because this case meets the requirements for all three subsections. Nothing in Rule 23 precludes class certification on more than one ground. As a noted commentator has pointed out, for example, if a defendants conduct makes injunctive or declaratory relief appropriate, the full panoply of the courts equitable powers is introduced and monetary relief can be granted on a classwide basis. 1 Newberg on Class Actions 4.14 at 4-46. The commentator goes on to say: When the parties dispute which form of relief is predominant with respect to the appropriateness of Rule 23(b)(2) for any class certification, it is counterproductive for the court to expend time to try to resolve this largely discretionary question, which does not address the merits of the case. Rather, the court should conclude that when the Rule 23(a) prerequisites are satisfied and declaratory or injunctive relief is sought as an integral part of relief for the class, then Rule 23(b)(2) is applicable regardless of the presence or dominance of additional prayers for damages relief for class members . . . [This procedure] substitutes a more efficient and predictable determination that promotes the objectives of Rule 23 and is consistent with the purposes and rational for the creation of the Rule 23(b)(2) class category. 1 Newberg on Class Actions 4.14, at 4-50 to 4-52; see also Williams, 183 F.R.D. at 436 n. 14.

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public resources. Upon the representations of counsel, the actual amount due to each class member is small, amounting to no more than a few hundred dollars per member. Given the relatively small amount recoverable by each potential litigant, it is unlikely that, absent the class action mechanism, any one individual would pursue his claim, or even be able to retain an attorney willing to bring the action. As Professors Wright, Miller, and Kane have discussed in analyzing consumer protection class actions such as the instant one, typically the individual claims are for small amounts, which means that the injured parties would not be able to bear the significant litigation expenses involved in suing a large corporation on an individual basis. These financial barriers may be overcome by permitting the suit to be brought by one or more consumers on behalf of others who are similarly situated. . . . The public interest in seeing that the rights of consumers are vindicated favors the disposition of the instant claims in a class action form. Additionally, there is no indication that other litigation is pending, that there is any strong interest on the part of individual class members to control the proposed litigation interpose, or that concentrating the litigation form is in the least undesirable. 156 F.R.D. at 626 (citations omitted). As in Lake, in this case, there is no other litigation pending. There is no indication that there is any interest on the part of individual class members to control the litigation. Even assuming, arguendo, that First Unions speculation is correct that the class members claims were of sufficient value to make individual actions feasible, which they are not,7 the inefficiency and unfairness of denying class certification on this basis is clear. As one court noted in certifying an FDCPA class, [c]lass actions were designed not only to compensate victimized members . . . but also to deter violations of the law, especially when small individual claims are involved. Gammon, 162 F.R.D. at 321. Speculation that class members would pursue individual claims is just that and is not a sufficient basis to decline to certify a class. Id. at 322. See also Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669, 677 (N.D. Ill. 1989) (superiority requirement met when the individual claims were perhaps larger than in many consumer credit
7 The fact that another FDCPA claimant made his way to one of plaintiffs counsel should not obscure the fact that a class action is a superior vehicle for adjudication of this controversy. Courts have recognized the feature of FDCPA cases that actual damages of each member can often be small; as such, the parties have little incentive to litigate their claims individually. Peoples, 179 F.R.D. at 50102. A class action best resolves this issue by permitting the airing of common grievances in a single proceeding. Id.; Brewer v. Friedman, 152 F.R.D. 142, 144 (N.D. Ill. 1993) (class certified under FDCPA because the class action provides a large group of litigants an opportunity to adjudicate their common claims in a single lawsuit where the costs of discovery, motions and trial would dissuade many of them from asserting their rights).

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class actions, but still relatively small and therefore wellsuited for class action treatment).8 IV. CONCLUSION For all the foregoing reasons, as well as for the reasons stated in plaintiffs opening brief, the proposed class should be certified with the plaintiffs as the named class representatives. Respectfully submitted, ROSS & MARLER, P.C. J.A. Francis M.D. Marler Address Phone Number JUSTIN HUNT, LLC By: M.D. Justin D.A. Reardon Address Phone Number Dated: April 30, 1999 Attorneys for Plaintiffs and Class

M.2 TIL, UDAP, and Breach of Contract CaseCredit Card Issuers Failure to Refund Credit Balance (Coe)
UNITED STATES DISTRICT COURT DISTRICT OF DELAWARE ) ) ) ) ) ) CIVIL ACTION NO. 98) v. ) CLASS ACTION ) ADVANTA NATIONAL BANK, ) Defendant. ) ) GEORGE L. COE, III and JANET R. COE, on behalf of themselves and all those similarly situated, Plaintiffs

8 First Union is obviously aware, but has failed to advise the Court, that if class certification is denied there will be relatively narrow window under the FDCPAs very short statute of limitations for an individual class member to learn about her claims, retain counsel and file an action. Thus, First Unions contention that individual actions are feasible and will be more fair to the class is just a self-interested sham argument.

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As discussed below, each of these issues is common to the class and justifies class certification. Advantas Memorandum of Law in opposition to the Motion (the Memorandum), filed on January 8, 1999, offers several arguments, none of which have merit. Advanta disputes numerosity, but its own witnesses have testified to tens of thousands of credit balance refund requests each year. While Advanta challenges typicality, the record shows that the plaintiffs circumstances and legal theories are identical to those of the class and predominate over individual questions. Advanta contends that the plaintiffs are not adequate class representatives, but has offered nothing but speculation to support that contention. Finally, the class definition is not overbroad or inconsistent with the law; rather, the definition specifically encompasses the class members who were subjected to Advantas uniform practices and policies. Because this case meets the requirements of Rule 23, the Motion should be granted. II. COUNTERSTATEMENT OF FACTS A. Advantas Uniform Policies and Practices Advanta essentially emphasizes two distinct points in the Memorandum that it believes serve as justification for its treatment of the plaintiffs: (a) that plaintiff George Coe did not make a written request for a refund, so that it was under no obligation to refund him his credit balance; and, (b) that it did not consider his wife, plaintiff Janet Coe, anything more than an authorized user of the credit card, so that it was not required to act upon her written or verbal requests for a refund. Both arguments raise legal and factual issues common to thousands of Advanta cardholders because they spring from at least four different uniform policies, practices or procedures followed by Advanta. These will be addressed in turn. 1. Not Treating a Request to Close an Account as a Request for a Credit Balance Refund The primary policy employed by Advanta that affected the plaintiffs and members of the class in this case was the refusal to treat a customers request to close an account as a request for the refund of the resulting credit balance. In other words, if a customer requested to close a credit card account, and that closing resulted in a credit balance (such as was the case with the Coes), Advanta did not immediately begin to process that refund to the customer. Instead, it was Advantas policy and practice to require the customer to specifically request a refund before taking any action.9 (Exhibit A to Motion, p. A42customer service representatives are trained to refund credit balances to customers only upon request) [not reprinted herein]. This policy was confirmed by Bobbie Horton, Advantas quality assurance supervisor:

PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF THEIR MOTION FOR CLASS CERTIFICATION TABLE OF CONTENTS TABLE OF AUTHORITIES I. INTRODUCTION II. COUNTERSTATEMENT OF FACTS A. Advantas Uniform Policies And Practices 1. Not Treating a Request to Close an Account as a Request for a Credit Balance Refund 2. Advantas Contractual Representations in the Cardholder Agreement 3. Taking up to 30 Days to Refund a Credit Balance Requested by Telephone 4. Advantas Common Defense That a Cardholders Spouse May Not Request a Credit Balance Refund, Either Verbally or in Writing B. The Plaintiffs Claims All Arise From Advantas Uniform Policies and Practices III. REPLY ARGUMENT A. Rule 23(a) 1 Numerosity 2. Typicality and Adequacy B. Rule 23(b)(2) and (3) C. The Class Definition Is Not Deficient IV. CONCLUSION I. INTRODUCTION Plaintiffs George L. Coe and Janet R. Coe filed this class action case on May 7, 1998. The Complaint raises claims under the federal Truth in Lending Act, 15 U.S.C. 1601 et seq. (TILA) and Regulation Z, 12 C.F.R. 226, the Delaware Consumer Fraud Act, 6 Del. Code 2511 et seq. (CFA) and common law breach of contract, all arising from the practice of defendant Advanta National Bank (Advanta) of not returning credit balance refunds to its credit card customers in a timely manner. Plaintiffs moved for class certification on December 1, 1998 (the Motion). Class certification should be granted because there are a number of legal and factual issues common to the class, including: 1. Whether Advantas policy of not treating a request to close an account as a request for a credit balance refund violates TILA, the CFA and the Cardholder Agreement; 2. Whether Advantas contractual representation that it will refund a credit balance to a cardholder upon request requires Advanta to provide the refund within the time frame required by Regulation Z, regardless of whether the request is verbal or written; 3. Whether Advantas uniform practice of not acting upon verbal requests for a credit balance refund within the time frame required by Regulation Z violates TILA, the CFA and the Cardholder Agreement; and, 4. Whether Advantas common defense that a spouse of a cardholder may not request a credit balance refund, either verbally or in writing, is meritorious, given the nature of Advantas solicitation of cardholders and its contractual representations.

9 The one exception to that custom, which is not an issue in this case, is that Advanta does have a policy of providing an automatic refund when the balance has been outstanding for three months. (Cardholder Agreement k 21, Exhibit A hereto) [not reprinted herein].

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Q. Given your familiarity, what Im asking is, is the request to close an account a different work flow from a credit balance refund request? A. Yes, it is. Q. Is there any connection between those two work flows, in other words, does the [closure then] kick into the credit balance refund? A. No, it does not. Q. And thats something uniform. Is that right? A. Correct. (Deposition of Bobbie Horton, Exhibit B hereto at p. 29) [not reprinted herein]. Q. When a cardholder requests that an account be closed, its Advantas policy not to send out the credit balance if it happens to be there, unless the cardholder also says, oh, send out my credit balance as well, at the same time that you request closure. Is that correct? A. There is not a policy around when you are taking an account closing request, to go and search for a credit balance refund and send that out. Q. So the work flows are totally separated in this system. Is that correct? A. Yes, that is correct. Q. My question to you is, why is that so? (Objection) A. I dont know. (Id. at pp. 7677). The practice of treating a request to close an account as not being a request for a refund of the resulting credit balance was also confirmed by Belinda Jones, an Advanta customer service manager: A. . . .if a cardholder called to close the account, the associate would go through the closed flow to close that account. Q. Okay. A. Thats what would happen. Q. Would anything happen in addition if there was a credit balance on that account that was being closed? A. No. Q. Was it your understanding that the way the RMS system was set up, that a request to close an account that had a credit balance would not automatically generate a request to refund the credit balance? A. That is not how RMS is set up. Q. So the policy or practice, as reflected in the RMS, is that a request to close the account will not automatically generate a credit balance refund request, correct? A. Thats correct. Q. My question to you is, why not? A. I dont know.

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(Deposition of Belinda Jones, Exhibit C hereto at pp. 5253) [not reprinted herein]. Todd Martin, Vice President of Corporate Audit at Advanta with supervisory responsibility for auditing the credit balance refund process, who testified as a corporate designee for Advanta under Rule 30(b)(6), corroborated that Advanta had no policy to treat a request to close an account as a request for a refund: Q. Sitting here today and knowing that youre a corporate designee you dont have any knowledge one way or the other as to whether a request to close would generate automatically a credit balance refund request? A. My understanding is that would be logical, but I dont- didnt specifically review that policy. Q. Okay. All right. You dont have any understanding as to whether there was a contrary policy? A. No. Q. That a request to close would not generate a credit balance refund. A. Not that Im aware of. Q. You just dont know one way or the other. Correct? A. Not specifically. Q. Generally? A. No, no. (Deposition of Todd D. Martin, Jr., Exhibit D hereto at pp. 8586) [not reprinted herein]. Advantas manager of the settlement area, which accounted for booking transactions and monitoring the overall settlement of who owes what to whom, was Katherine Bell. Ms. Bell testified similarly that Advanta would not refund an existing credit balance without a customers specific request: Q. So nothing is done with credit balance refunds that are just 30 days old? A. Correct. Q. So theres no policy of issuing checks or anything like that? A. Not if the customer has not initiated the request. (Deposition of Katherine Bell, Exhibit E hereto at pp. 89, 25) [not reprinted herein]. The foregoing testimony clearly establishes that Advanta, as a matter of uniform practice, did not treat a request to close an account as a request to refund the resulting credit balance. Rather, it was the practice to require a customer to affirmatively request the refund. Indeed, Advanta does not dispute that such was its practice. Memorandum at 1112 [not reprinted herein]. As such, whether this policy, which was uniformly applied to all Advanta customers, violated TILA, the CFA and the Cardholder Agreement is one of the common questions in this case particularly suited to class-wide determination.

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ment. Boilerplate language differentiating between payment obligations for a joint account holder, as opposed to an authorized user, communicated nothing to the cardholders because the Cardholder Agreement lacked anything additional that identified which individual cardholder was considered by Advanta as having restricted rights. Further, nothing in the Cardholder Agreement drew any distinction between written and oral requests for credit balance refunds. The subject of credit balance refunds was addressed in paragraph 21 of the Cardholder Agreement, which states in its entirety as follows: 21. Credit Balances Any credit balance outstanding on your Account will be applied to any subsequent amounts due. We will refund credit balances of more than $1.00 which are outstanding on your Account either upon your request or automatically if outstanding for more than three months. This provision says nothing about the request being required to be in writing, or that the request could only be made by one of the cardholders. Rather, paragraph 21 constitutes a contractual representation that any cardholder can request, either verbally or in writing, that a credit balance be refunded.11 Ms. Horton, the quality assurance supervisor, confirmed that the Cardholder Agreement meant what it said: Q. Does that say upon request of primary account holder? A. No. Q. Does it say upon request of secondary account holder? A. No. Q. Does it say that it has to be a written request? A. No. ... Q. So if I understand this agreement correctly, you can request a credit balance by phone. Is that correct? A. Yes. It doesnt tell you that, however, it says request. So I guess you could e-mail it , fax it, call it in. Some form of request, yes. ...

2. Advantas Contractual Representations in the Cardholder Agreement Advantas statement of facts in the Memorandum attempts to direct the focus on its practices away from the Cardholder Agreement itself. Most likely, Advanta recognizes that the plain meaning of the terms of the Cardholder Agreement, which Advanta itself drafted and imposed on its customers as a condition of obtaining an Advanta credit card, directly contradicts Advantas position in this litigation because of the express contractual representations made therein by Advanta to its thousands of customers. The Cardholder Agreement is a standard form contract drafted by Advanta for use with its credit card customers. The Cardholder Agreement sent by Advanta to Mr. and Mrs. Coe arrived in the mail with a card carrier addressed by Advanta to both plaintiffs and containing two credit cards. Copies of the Cardholder Agreement and the card carrier are attached hereto as Exhibits A and F, respectively [not reprinted herein]. Nothing in the card carrier or the Cardholder Agreement informed the Coes that they did not have equal status on the account or that one or the others rights were somehow limited. Rather, the Cardholder Agreement, in paragraph 1, referred to both of the addressees as you or cardholders and did not label one as the primary cardholder and the other as a secondary cardholder, or as an authorized user. Bobbie Horton confirmed in her deposition that such was the meaning of the Cardholder Agreement: They were both considered cardholders. (Deposition of Bobbie Horton, Exhibit F hereto at pp. 4445) [not reprinted herein]. The Cardholder Agreement represented that each cardholder was entitled to equality of treatment because nothing therein notified the Coes, or any Advanta customer, that they would be treated differently, or that one of them had more control or authority over the account than the other.10 The only mention of a difference in treatment between a so-called authorized user and a different type of cardholder is in paragraph 7 of the Cardholder Agreement, which states in pertinent part: 7. Payments You promise to pay all amounts due on your Account. If your Account is a joint account, you and your joint account holder each promise to pay and are jointly and individually responsible for all amounts due on the Account. We may also issue additional Cards to other persons you authorize to use your Account if you ask us to do so. However, you and any joint account holder are responsible for all charges made by any person(s) authorized by your Account. (Cardholder Agreement, Exhibit A) [not reprinted herein]. Nothing in this language notified the Coes that Advanta intended to treat Mr. Coe differently from Mrs. Coe because nothing identified one of them as anything other than a cardholder with full rights and obligations under the Cardholder Agree10 The use of the term cardholder in the Cardholder Agreement is consistent with the definition of the term under TILA: any person to whom a credit card is issued. 15 U.S.C. 1602(m).

11 This provision in the contract between the parties is also consistent with TILA: Whenever a credit balance in excess of $1 is created in connection with a consumer credit transaction . . ., the creditor shall . . . (B) refund any part of the amount of the remaining credit balance, upon request of the consumer;. . . . 15 U.S.C. 1666d(B). Thus, TILA, like the Cardholder Agreement, does not require that the request be in writing. Nor does it differentiate among cardholders; it simply empowers the consumer to make the request. Regulation Z defines consumer as a cardholder or a natural person to whom consumer credit is offered or extended. 12 C.F.R. 226.2(a)(11).

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Q. Is there any indication here as to whether the credit balance refund request has to come from a primary account holder, a secondary account holder or an authorized user? A. No. (Deposition of Bobbie Horton, Exhibit B at pp. 66, 68, 70) [not reprinted herein]. Nor did Advanta apparently employ any other written means to inform cardholders that they were considered to be in a different status. For example, another Advanta witness, Laura Brown, a supervisor of customer service representatives, confirmed that Advanta had no policy in place that would provide written notification to a so-called authorized user that he or she could not request a credit balance refund: Q. What youre telling me to the best of your knowledge, Ms. Brown, no letter is generated to the primary cardholder to say, hey, look, this request that we received from your wife, we cant act on it, even though wed like to, could you please send it in, nothing like that ever happens? A. Not to my knowledge. Im not aware of it. Q. And as far as you know, is there any document or anything like that that says we will not acknowledge or do anything to an account for information requested by an authorized user? I mean, is there any document that says that? A. If theyre an authorized user, they only have the privileges to use the account, they have no privileges to make any changes to the account. Q. I know thats what Advanta believes, I know that. Where does Advanta tell its customers that? A. I wouldnt know. (Deposition of Laura Brown, Exhibit G hereto at pp. 7778) [not reprinted herein]. Thus, a standard form contract, drafted by Advanta, contains representations that any cardholder can request a refund of a credit balance, either orally or in writing. Whether these uniform provisions were violated by Advanta as to the Coes and the class is a determination eminently appropriate for class-wide treatment. 3. Taking up to 30 Days to Refund a Credit Balance Requested by Telephone As set forth in paragraph 21 of the Cardholder Agreement, Advanta undertook to refund credit balances to its customers upon your request. (Cardholder Agreement, Exhibit A) [not reprinted herein]. As discussed supra, the Cardholder Agreement does not set forth the manner of the request or a time frame in which the refund must be provided, although Regulation Z indicates that seven business days is appropriate for written requests. 12 C.F.R. 226.11(b). Discovery in this case has shown that it was Advantas practice in general, and as occurred in the case of the Coes, to take up to 30 days, or even more, to refund a credit balance that is requested by a customer over the telephone.12 Whether this practice violates
12 This is the procedure described to Mrs. Coe in January 1998 by a customer service representative. (Complaint k 18;

Appx. M.2

TILA, the CFA and the Cardholder Agreement is a class issue. According to Todd Martin, the Vice President of Corporate Audit at Advanta, internal audits found that credit balance refunds were not always processed in a timely fashion: Q. Okay. During the course of performing your audits of areas such as credit balance refunds at least from 1995 through 1996 you determined that credit balance refunds were not always processed within the policy time frame set by Customer Service. Right? (Objection). Q. You had responsibility for auditing credit balance refund processes. Is that right? A. I had supervisory responsibility, yes. Q. And as part of that supervisory responsibility you made some general observations during this time frame about what was happening in the processing. Correct? A. Yes. Q. All right. At least from the testing there was a conclusion was there not, if you can recall, that credit balance refunds were not always processed within the procedural time frame that Customer Service established. Correct? (Objection). A. Yes. ... Q. Okay. Now, on the last page 0168 of Martin-4 there is a note there. I take it this is taken from the prior year. Credit balance refunds are not always processed timely in accordance with the CFS Customer Service policies and procedures and potentially Reg Z. Is that what you are checking for this year? A. That is correct. Q. And thats per a discussion item? A. Yes. (Deposition of Todd D. Martin, Jr., Exhibit D at pp. 4445, 78 and Martin-4 at A0168) [not reprinted herein]. Advantas policy of delaying refunds requested by telephone apparently emanated from its legal department. According to Mr. Martin, the Advanta legal department had defined 30 days as a reasonable time for responding to telephone requests for credit balance refunds: Q. Well, there was some understanding that the auditors had obtained from the Legal Department at Advanta that 30 days was something that was determined would be reasonable to process telephonic requests in? A. Yes. My understanding would be that our auditors would have talked to management about practice and policy, which isour responsibility in Audit is to audit against policy not necessarily audit against the Reg.
deposition of Janet Coe, Exhibit H hereto at pp. 3839) [not reprinted herein].

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The above described policies and procedures demonstrate Advantas practice of not honoring verbal requests for refunds within the time frame of seven days mandated by Regulation Z, 12 C.F.R. 226.11(b). Again, a classic class-wide issue is presented as to whether Advantas uniform practice, which resulted in the Coes unsuccessful efforts to obtain their credit balance refund within a reasonable time, violates TILA, the CFA and the Cardholder Agreement. 4. Advantas Common Defense That a Cardholders Spouse May Not Request a Credit Balance Refund, Either Verbally or in Writing Advanta has attempted to defend against this action by asserting what it labels as defenses unique to the Coes. Those very defenses are, in fact, not at all unique; they will arise in every case where a cardholders spouse, also a cardholder, seeks a credit balance refund. This case thus presents the class-wide issue whether Advantas defenses have any merit, given the provisions of the Cardholder Agreement, discussed supra, as well as the nature of the standard solicitation of every Advanta cardholder by Advanta representatives. Because the Memorandum makes much about the distinction drawn by Advantas policy between the terms authorized user and primary cardholder (Memorandum at p. 4) [not reprinted herein], one might expect that Advanta would take pains to ensure that its representatives would convey that distinction to applicants for credit cards. Instead, Advanta deliberately omits that explanation from the script its representatives use when taking applications. The standard script followed by Advanta customer service representatives in taking credit card applications is attached hereto as Exhibit I [not reprinted herein]. The script is nine pages in length. At Question 12, the script prompts an inquiry whether the applicant would like an additional card for an authorized user. If the answer is yes, the representative is only instructed to ask for the name and social security number of the authorized user. Nowhere does the script inform the applicant that authorized user is a term of art, at least in Advantas view, or that such a user would have different responsibilities or different rights under the account. Also, nowhere in the script is there any mention of the term primary cardholder which Advanta relies upon in its attempt to distinguish the Coes situation from others. (Prescreened Gold Inbound Script, Exhibit I hereto [not reprinted herein]). Thus, although Advanta no longer has the tape13 of the telephone conversation where Mr. Coe was solicited for a credit card, the script produced by Advanta in discovery unequivocally supports Mr. Coes testimony that he was not furnished with any explanation or information about the different statuses Advanta intended for him and for his wife when he accepted the representatives offer to supply a card for her as well. Because the script, Exhibit I [not reprinted herein], is a standardized presentation that Advantas customer service representatives all were required to follow, presumably no customer who applied for an Advanta credit card was provided with an explanation of the terms authorized user and pri13 Advantas counsel has informed plaintiffs counsel that tapes of telephone conversations from January 1997, the time when Mr. Coe was first telephoned by Advanta and solicited for a card, no longer exist.

Q. So the 30 days was something that somebody had come up with from the Legal Department. Is that what youre telling me? A. I cantI dont have firsthand knowledge of where the 30 days originated. Q. Lets go back to Martin-3, I think it is. In that general note thats written there although its somewhat difficult to read there is a description. Starting on line 17 it says, CBRs are also governed by Regulation Z for timely processing. Written requests must be processed within seven business days and phone requests in a reasonable time period. I think that says, parenthesis Legal defines this as 30 days. Do you see that? A. Yes. Q. Was that your understanding as to what you were going to audit these things for? A. Yes, its my understanding that we would audit, again, against policy. (Id. at pp. 6263 and including Martin-3, at A0155) [not reprinted herein]. Mr. Martin himself was under the impression that the 30 days was not a requirement of Regulation Z, but he acknowledged that it was an internal procedure and that internal audits found that there were times when Advanta failed to process requests even in that length of a period: Q. All right. Mr. Martin, can you tell me what Martin-6 is? A. This is what we call a Process Narrative, which would explain the credit balance refund process during the period of the audit. Q. All right. Now, in here, again, we see the reference to if the request was made over the phone, the credit balance must be refunded within 30 business days. These time frames are required by Regulation Z. Thats, once again, something we see in these documents, but its your testimony today that that wasnt something that was required by Reg Z. It was just an internal procedure. A. Thats been my understanding that its not required by Reg Z. It is an internal procedure and these statements are inaccurate in the work papers. Q. In your experience performing the audit function at Advanta had you observed any credit balance refund requests that were not processed within 30 days? A. Yes. Q. And youre looking at something to refer to that. Where is that on this document? Just read it for me. A. Four of the eleven requests were 66 days over the required time frame. (Id. at pp. 8283 and Martin-6 at A0171Based on Corporate Audits review it appears that 11 refund requests were not processed within 7 (written) / 30 (phone) business days of the cardholders request. Four of the eleven requests were 66 days over the required time frame.) [not reprinted herein].

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mary cardholder or told that Advanta may later treat cardholders differently based on that undisclosed distinction. The Cardholder Agreement is a standard form contract and the solicitation script is an equally uniform practice of Advanta. Both those documents rebut Advantas assertion that spouses of cardholders may not request, orally or in writing, credit balance refunds. Thus presented is another common question appropriate for class determination. B. The Plaintiffs Claims All Arise From Advantas Uniform Policies and Practices The Coes supplied a broad outline of the facts alleged in the Complaint in their Motion, and those factual averments are incorporated by reference as if fully set forth herein. Plaintiffs will point out here additional details that are relevant to the issues raised by Advanta in its opposition to class certification. The material facts are that plaintiffs, at all times, acted consistently with their understanding of their rights as disclosed to them by Advanta, but that their reasonable and legitimate attempts to obtain a credit balance refund in a timely manner were thwarted by practices and procedures employed by Advanta, on a uniform basis, as to all its customers. The account with Advanta originated when Mr. Coe was solicited by Advanta over the phone and he agreed to apply for a credit card. At that time, Mr. Coe requested that his wife, Janet, be a joint account holder. Mr. Coe was not aware of any distinction between the terms authorized user and a joint account holder when he applied for the credit card. His understanding was that either he or his wife could deal with Advanta concerning the account. (Affidavit of George L. Coe, III, attached hereto as Exhibit J) [not reprinted herein].14 In November, 1997, the Coes decided that they wanted to close their credit card account with Advanta. At the request of George Coe, First U.S.A., another credit card issuer, issued a check to Advanta that paid more than Coes outstanding balance, resulting in a credit balance of $822.75. What happened next is detailed in the Complaint and in the deposition testimony of both George and Janet Coe, attached hereto respectively as Exhibits K and H [not reprinted herein]. In essence, that testimony shows repeated, unsuccessful attempts by both Mr. and Mrs. Coe to get Advanta to refund the credit balance: 1 In early December, 1997, George Coe telephoned Advanta and requested that the amount be closed and the credit balance be forwarded to First U.S.A. 1 Mr. Coe was informed in response by Advantas customer service representative that no refund could be issued15
14 Mr. Coe acknowledges in his Affidavit, Exhibit J [not reprinted herein], that he testified in his deposition that his wife was an authorized user on the account. As the Affidavit explains, however, Mr. Coe did not understand the distinction made by defense counsel in the deposition. Neither the standard script used by Advantas representatives who take credit card applications, nor the Cardholder Agreement between the parties, discussed supra, make any such distinction. 15 Apparently, Advantas computer system was set up so that a cardholder was not permitted to close an account and direct that the credit balance be sent to another credit card

Appx. M.2

without First U.S.A.s written authorization. 1 When Mr. Coe was told by First U.S.A. that it could not provide that written instruction, he called Advanta again and requested that the credit balance be refunded directly to him. Advanta refused because the account had been closed and told him the request had to be in writing. 1 Mr. Coe then requested assistance from his wife, Janet, an attorney, because I knew she could write the letter, and I had no more conversation with Advanta after that point. I was pretty upset. (Deposition of George L. Coe, III, Exhibit K hereto at p. 23) [not reprinted herein]. 1 Continuing in December, 1997 and on into January and February, 1998, Janet Coe telephoned Advanta and repeatedly requested that the refund be issued. 1 In her first phone call to Advanta, Mrs. Coe was told the refund would be issued. When it did not arrive, she called again and the Advanta representative suggested if she were to write a letter, she would probably have a better chance of getting it back more quickly. 1 On January 5, 1998, Janet Coe sent a letter to Advanta requesting the refund. (Exhibit B to Complaint) [not reprinted herein]. 1 When the refund still did not come, Mrs. Coe again telephoned Advanta. This time she referred the customer service representative to the legal requirement that the refund be issued within seven days. She was told by the Advanta representative that Advanta followed Delaware law, not federal law. The representative further advised that Advanta receives thousands and thousands of credit balance transfers a month, which usually result in excess credit balances to the cardholders, that it was Advantas policy and practice for any credit refund in excess of $100 to search for the check which usually takes fourteen days, and then, Advantas policy and practice was not to issue the refund check for another seven to ten days. Thereafter, she stated, a customer can expect additional delay due to the time for mailing and receipt.

company. Carol Spencer, a customer service representative, testified: Q. So I guess its possible for a customer to request that the account be closed and that the credit balance be transferred to another credit card company? A. No. Q. Why not? A. Because you cannot do a balance transfer on a closed account. Q. That would be why? I dont understand that. I mean, if Im closing my account and money is owed to me, why cant I tell you where I want it sent? A. Its the procedures and the rules that we have to follow. We cannot send a balance transfer on a closed account. The computer wont process it. (Deposition of Carol Spencer, Exhibit L [not reprinted herein] hereto at pp. 3839). However, that policy is not communicated to the customer. (Deposition of Katherine Bell, Exhibit E at pp. 6364).

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thing else; it represented that any cardholder could request a credit balance refund and that the request could be verbal or in writing. 1 Refunds pursuant to telephone requests would be delayed for up to 30 days or more instead of the 7 days required by Regulation Z. 1 The card carrier addressed to more than one cardholder did not differentiate between an authorized user and any other type of cardholder. 1 Cardholders were solicited to apply for credit card accounts without an explanation of what Advanta meant by the term authorized user or that Advantas position was that an authorized user was not entitled to request a credit balance refund. The cases cited by Advanta are all distinguishable. In each case, a class was not certified because the plaintiff could only produce evidence of isolated instances of the challenged conduct. Here, the plaintiffs have produced uncontroverted evidence of a number of uniform practices of Advanta that contradict its position that it complies with applicable law. Or, put another way, Advanta cannot enter into contracts with its customers that create certain expectations and obligations that are beyond the minimum statutory rights of the customers, and then attempt to avoid enforcement of those obligations by taking refuge in those very statutes. In re Porter, 961 F. 2d 1066, 1077 (3d. Cir. 1992) (TILA does not forbid giving borrowers more rights than are in statute). Thus, it is not plaintiffs burden to identify each Advanta customer who failed to receive a credit balance refund in a reasonably timely manner. Rather, the proof of Advantas practices that are inconsistent with their contractual undertakings is sufficient to show that thousands of cardholders were affected. 2. Typicality and Adequacy The typicality requirement of Rule 23(a) tends to merge with the commonality requirement. Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994). Although Advanta has, significantly, not disputed that plaintiffs have established commonality, it argues that plaintiffs claims are subject to a unique defense that renders those claims atypical and prevents them from adequately representing the Class.16 However, it is that very defense raised by Advanta that makes this case appropriate for class treatment.
16 While Advanta raises Mrs. Coes professional association with a law firm that had previously represented plaintiffs in the case as an adequacy issue, it offers no evidence to support its baseless assertion that she is therefore an inadequate class representative. Mrs. Coe fully explained in her deposition the tragic circumstances that led to the dissolution of her former firm and her decision to become of counsel to the firm of [Law Firm] as well as the fact that her new firm then withdrew from the case and will not receive any fees. (Deposition of Janet Coe, Exhibit H, [not reprinted herein] pp. 632). Nor is the Coes adequacy as class representatives impacted by the nature of Mrs. Coes profession. This Court has recently ruled that there is nothing inherently problematic with an attorney serving as a class representative. Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998).

1 Ultimately, a refund check dated February 3, 1998 was finally sent to the Coes, two full months after it was first requested by Mr. Coe. (Exhibit A, page P1, to Motion). (Complaint, kk 1419; deposition of George L. Coe, III, Exhibit K at pp. 1326; deposition of Janet Coe, Exhibit H at pp. 83102) [not reprinted herein]. All of these facts establish that the Coes are more than adequate class representatives, their claims are typical and the common issues are appropriate for class treatment. III. REPLY ARGUMENT A. Rule 23(a) 1. Numerosity Plaintiffs class consists of all persons who, from May 6, 1994 had a credit card account with Advanta with a credit balance in excess of one dollar ($1.00) and as to whom Advanta failed to refund the credit balance within a reasonable time. Due to the number of credit card accounts administered by Advanta, numerosity is hardly an issue. Advanta contends that plaintiffs have not met the numerosity requirement because the internal documents and the testimony of its employees show that it is Advantas policy to issue credit balance refunds within the time required by TILA and Regulation Z. (Memorandum at 14). However, Advanta made that argument prior to the depositions of the employees whose testimony was described above and prior to production of all the documents requested in discovery by the plaintiffs. Ralph Dim, Advantas manager of customer service, estimated that Advanta had approximately 7 million cardholders. (Deposition of Ralph Dim, Exhibit M hereto at p. 70) [not reprinted herein]. Each of those cardholders was subject to the Cardholder Agreement that failed to disclose the credit balance refund policies that Advanta has sought to raise as a bar to this action. Mr. Dim also testified that there were approximately 500600 daily requests for credit balance refunds in 1997. (Id.). Todd Martin testified that there was on average approximately 80,000 to 100,000 requests for credit balance refunds a year in 1995 and 1996, 85%90% of which were over the telephone. (Deposition of Todd Martin, Exhibit D at pp. 53-55). Katherine Bell estimated that her settlement department issued approximately 1,5002,000 credit balance refunds daily. (Deposition of Katherine Bell, Exhibit E at p. 95) [not reprinted herein]. Clearly, thousands and thousands of people were subject to Advantas credit balance refund policies. Advantas own witnesses and documents establish that the following practices and procedures were applied to those thousands of cardholders: 1 Requests for closing an account, resulting in a credit balance, were not treated as requests for refunds; rather, the Advanta computer was only programmed, and customer service representatives trained, to process a credit balance refund if that refund was specifically requested by the customer. 1 The Cardholder Agreement did not identify a specific individual cardholder as an authorized user or as some-

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Advanta describes its defense as two-fold: 1) Mr. Coe, who Advanta characterizes as a primary cardholder, did not make a written request for the refund, and 2) Mrs. Coe, who did make a written request, was a so-called authorized user who was not entitled to request a refund at all. (Memorandum at pp. 19-20). As explained above, that defense is not available to Advanta, as to either the Coes or the class. Advanta entered into a contract with the Coes and with class members which was a contract that Advanta drafted itself, the Cardholder Agreement. That contract does not identify who is an authorized user and does not provide that only a primary cardholder17 can request a credit balance refund, or that the request has to be in writing. Basic principles of waiver and estoppel now operate to preclude Advanta from asserting a defense outside the contract that it imposed on its customers. See, e.g., Restatement (Second) of Contracts 90 (1981) (A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise). An inquiry into typicality should focus on whether the named plaintiffs circumstances or their legal theories are markedly different from those of other class members. Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.), cert. denied sub nom Wasserstrom v. Eisenberg, 474 U.S. 946 (1985). Courts will liberally construe the typicality requirement as long as no express conflicts exist between the class representatives and the class. Spark v. MBNA Corporation, 178 F.R.D. 431 (D. Del. 1998), quoting Friedman v. Lansdale Parking Authority, 1993 U.S. Dist. LEXIS 12019 (E.D. Pa. August 30, 1993). Typicality is satisfied regardless of whether different facts underlie each class members claim, as long as the named plaintiffs and the class members all have overarching claims arising from a uniform practice. Barnes v. American Tobacco Co., 161 F.3d 127, 140141 (3d Cir. 1998); In re Prudential Insurance Company America Sales Practice Litigation Agent Actions, 148 F.3d 283, 311312 (3d Cir. 1998); Baby Neal, 43 F.3d at 58; Williams v. Empire Funding Corp., 183 F.R.D. 428, 439 (E.D. Pa. 1998). In the case at bar, Advanta has been shown to have employed, on a uniform basis, numerous practices and policies that interfered with plaintiffs and class members rights to a timely credit balance refund. Plaintiffs contracted with Advanta for a credit card pursuant to certain representations and containing certain provisions about their rights to obtain a credit balance refund. Thousands of class members entered into the identical contract. Class members were also all affected by Advantas policies to not refund a credit balance resulting from the closing of the account, unless the customer specifically asked for the refund, and the policy of delaying refunds requested over the telephone. Plaintiffs claims that these policies deprived them of their right to a timely refund are clearly typical of the claims of class members. Advanta has no defense unique to Mr. and Mrs. Coe; whatever defense it might have is equally applicable to any customer who obtained a credit card pursuant to the terms of the Cardholder Agreement.
17 In fact, the term primary cardholder does not even appear in the Cardholder Agreement. (Exhibit A).

Appx. M.2

Thus, this case is critically different from the cases cited by Advanta. In Marian Bank v. Electronic Payment Services, Inc., 1997 U.S. Dist. LEXIS 21021, *52 (D. Del. Dec. 30, 1997), the court found a unique defense where the named plaintiff did not have the authority to pursue claims and causes of action. In Zhang v. Haven-Scott Assocs., 1996 U.S. Dist. LEXIS 8738, *16 n.4 (E.D. Pa. June 21, 1996), the court, in dicta, pointed out that the time in which to file a class certification motion had lapsed, and did not reach the issue. The other cases are similarly inapposite. This is not a case where the presence of even an arguable defense peculiar to the proposed representative may destroy typicality. Irvin E. Schermer Trust v. Sun Equities Corp., 116 F.R.D. 332, 33637 (D. Minn. 1987). Rather, while Advantas defenses, assuming they have merit, might affect the Coes ultimate right to recover, they do not affect the presentation of the case on the liability issues for the class. See 1 Newberg on Class Actions, 3.16 at 3-90 (3d ed. 1992). B. Rule 23(b)(2) and (3) Plaintiffs seek class certification under both Rule 23(b)(2) and (b)(3). They do so because Advanta has acted or refused to act on grounds generally applicable to the class and because questions of law or fact common to the class predominate over questions affecting only individual members. Nothing in Rule 23 precludes class certification on both grounds. As a noted commentator has pointed out, if a defendants conduct makes injunctive or declaratory relief appropriate, the full panoply of the courts equitable powers is introduced and monetary relief can be granted on a class-wide basis. 1 Newberg on Class Actions 4.14 at 4-46. The commentator goes on to say: When the parties dispute which form of relief is predominant with respect to the appropriateness of Rule 23(b)(2) for any class certification, it is counterproductive for the court to expend time to try to resolve this largely discretionary question, which does not address the merits of the case. Rather, the court should conclude that when the Rule 23(a) prerequisites are satisfied and declaratory or injunctive relief is sought as an integral part of relief for the class, then Rule 23(b)(2) is applicable regardless of the presence or dominance of additional prayers for damages relief for class members . . . [This procedure] substitutes a more efficient and predictable determination that promotes the objectives of Rule 23 and is consistent with the purposes and rational for the creation of the Rule 23(b)(2) class category. 1 Newberg on Class Actions 4.14, at 4-50 to 4-52; Williams, 183 F.R.D. at 436. Plaintiffs also satisfy the predominance requirement of Rule 23(b)(3). The common questions of law and fact discussed above are broad and overriding, so there is no need for an individualized inquiry into each class members situation. The elements of plaintiffs claimsthe failure to treat a request to close an account as a request for the refund, the uniform contractual representations of the Cardholder Agreement that

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any cardholder can request a refund, verbally or in writing, the refusal to treat verbal requests as requiring refunds within the time frame established by Regulation Z and the uniform representations contained in the solicitation scriptare applicable to all class members and predominate over whatever individual issues there may be. Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669, 67475 (N.D. Ill. 1989) (elements necessary to establish fraudulent scheme were all common issues). Even if this were a close case on predominance, which it is not, it should still be resolved in favor of class certification. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968), cert. denied, 394 U.S. 928 (1969) (the interests of justice require that in a doubtful case, . . . any error, if there is to be one, should be committed in favor of allowing the class action). C. The Class Definition Is Not Deficient While Advanta complains that the proposed class definition is deficient, Advanta has only its own documents and practices to blame for the phrasing of the definition. It is true that neither TILA nor Regulation Z uses reasonable time as the measurement by when a credit balance should be refunded. However, as discussed throughout this brief, the regulatory standard establishes what the bank regulators consider reasonable and sets a presumptive reasonableness standard. That Advanta chose to accept both verbal and written requests on an equal basis in its Cardholder Agreement, and thus subject itself to the 7 day requirement, is the common question. What is more, the evidence establishes that Advanta did not even comply with its own undisclosed reasonableness standard of 30 days for verbal requests. Hence, the reasonable time definition properly embraces both Advantas violation of the federal standard and its violation of its own undisclosed policy. (Deposition of Todd D. Martin, Jr., Exhibit D at pp. 44-45, 62-63 and including Martin-3) [not reprinted herein]. Finally, the proposed class period of May 6, 1994 to the present is consistent with the four year statute of limitations that is applicable to actions brought under the Delaware CFA. 6 Del. C. 2-725. IV. CONCLUSION For all the foregoing reasons, plaintiffs George and Janet Coe respectfully request that the Motion be granted and that the proposed class be certified. Respectfully submitted, By: BALDWIN & BALDWIN Address Phone Number JUSTIN HUNT, LLC M.D. Justin D.A. Reardon Address Phone Number Date: Attorneys for Plaintiffs and the Class

M.3 TIL Rescission and Deceptive Practices CaseHome Improvement Contract (Mount)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION MATTHEW MOUNT and LESLIE MOUNT, on behalf of themselves and all others similarly situated, Plaintiffs, v. LASALLE BANK LAKE VIEW, ) ) ) ) ) ) ) ) ) ) ) Defendant. ) )

REPLY MEMORANDUM IN SUPPORT OF PLAINTIFFS MOTION FOR CLASS CERTIFICATION Plaintiffs Matthew Mount and Leslie Mount (the Mounts) have moved this Court to enter an order pursuant to Rule 23 of the Federal Rules of Civil Procedure that Counts IIII of the Amended Complaint may proceed against defendant LaSalle Bank Lake View (LVB) as a class action. In its response to the Mounts motion, LVB argues that a class should not be certified in this action because: A. The class is not sufficiently numerous; B. The class definition is overbroad; C. The Mounts claims are atypical. LVB also argues that this case cannot be certified under Rule 23(b)(2). As discussed below, LVBs positions on each of the issues are without merit and the motion for class certification should be granted. I. THE CLASS DISCOVERY Early in this litigation, plaintiffs requested copies of class members documents. LVB resisted producing the records. At one point, to lessen the burden on the defendant, plaintiffs counsel suggested that a sample of documents be produced only the documents of putative class members whose last names begin with R. LVB continued to resist, and faced with a motion to compel, agreed to stipulate that the class plaintiffs sought to certify was numerous. In its response to the motion for class certification, LVB changed its position and itself reviewed the documents of class members whose last names began with the letter R. LVB argues that review of those files reveals that the class definition is overbroad and the class is not sufficiently numerous. Def. Mem. at 57 and 1112. The documents were produced to plaintiffs counsel on October 1. Plaintiffs review of the documents reveals that the LVBs conclusions are unsupported. See, Declaration of Cathleen M. Combs, attached as Appendix A [not attached herein].

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II. THE CLASS IS NUMEROUS Ninety-one files were produced to plaintiffs. Plaintiffs counsel found that eight of those files contained dealer contracts dated before the LVB retail installment contracts were signed, not six as LVB asserts. Appendix A LVB has responded to discovery requests asserting that LaSalle has a total of 1292 files. Appendix B [not attached herein]. By extrapolation, if 91 files contain 8 transactions with dealer contracts dated before the retail installment contracts, then 170 of the 1942 would contain that violation. A class of 170 borrowers is sufficient to meet the numerosity requirement. Swanson v. American Consumer Industries, 415 F.2d 1326 (7th Cir. 1969)(18 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (1029 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient). Further review of the files indicated that, 33 of the remaining files contained dealer first contracts with penalty clauses or confession of judgment clauses. Appendix A. Those dealer first contracts included forms with penalty or confession of judgment clauses from nine dealers in addition to the 23 that plaintiffs had identified in the their opening memorandum. Pl. Mem at 910. (A & W Aluminum & Construction Co., Appendix C [not attached herein]; First Chicago Builders, Appendix D [not attached herein]; First Choice Remodeling, Appendix E [not attached herein]; First Metropolitan Builders, Inc., Appendix F [not attached herein]; Hometown Builders & Supply Co., Appendix G [not attached herein]; House of Beauty Builders, Appendix H [not attached herein]; Pacific Construction Co., Inc., Appendix I [not attached herein]; Tri City Builders, Inc., Appendix J [not attached herein]; Windy City Exteriors, Inc.; Appendix K [not attached herein]. Plaintiffs also found 12 files which did not contain dealer first contracts, but which were issued by dealers which use first contracts containing penalty or confession of judgment clauses. Appendix A. Included in that group is a transaction that was originated by Alard Home Improvements Corp., a dealer not listed by LVB as one with which it does business (Pl. Mem., Exhibit N), but one which plaintiffs counsel was aware used a first contract with a penalty clause and a confession of judgment clause. Appendix L [not attached herein]. Hence, 53 of the 91 files have documents which indicate that the borrowers rescission rights were compromised. If LVB has 1292 files, a fair estimate of the number of borrowers in LVBs entire portfolio whose rescission rights were violated would be 750. A class of 750 is numerous. Furthermore, the remaining 38 loan files could also contain violations. Many of the files do not contain the first contract. In other cases, they contain copies of only parts of the first contracts. Plaintiffs are entitled in discovery to establish that the dealers involved in those transaction also used practices which compromised the borrowers right to rescind. This might be accomplished by reviewing additional LVB loan files which do contain first contracts or by subpoenaing documents of the dealers. Indeed of the 91 files, the only ones in which it was clear that no violations exist were two: one in which no loan was made and one which was a home equity line of credit. These files are not representative of the other 89 and appear to have been produced in error.

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III. THE CLASS DEFINITION IS NOT OVERBROAD LVB argues that the class definition is overbroad in that it encompasses persons who do not have a cause of action. Def. Mem at 6. LVB is wrong. Moreover, the entire matter is completely immaterial to the issue of whether a class should be certified. It is well established that on a motion for class certification, the issue is whether plaintiffs allegations, if assumed to be true and to state a valid cause of action, are suitable for class resolution. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975); In re Bank of Boston Corporation Securities Litigation, 762 F.Supp. 1525 (D.Mass. 1991); Sharif by Salahuddin v. New York State Education Department, 127 F.R.D. 84, 87 (S.D.N.Y. 1989); Ventura v. New York City Health & Hospitals Corp., 125 F.R.D. 595, 598 (S.D.N.Y. 1989); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989). A court should not consider the merits, but instead determine whether the claim articulated by plaintiffs, assuming that it has merit, is of a type suitable for class treatment. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78 (1974); Eagleston v. Chicago Journeymen Plumbers Local Union No. 130, 657 F.2d 890, 895 (7th Cir. 1981); Issen v. GSC Enterprises. Inc., 508 F.Supp. 1298, 1299 (N.D.Ill. 1981); Steiner v. Equimark Corp., 96 F.R.D. 603, 606 (E.D.Pa. 1983). The court must not prejudge the merits of the case in order to make a class certification decision. In re Corrugated Container Antitrust 80 F.R.D. 244, 251 (S.D.Tex. 1978). Thus, [t]he determination whether there is a proper class does not depend on the existence of a cause of action. A suit may be a proper class action, conforming to Rule 23, and still be dismissed for failure to state a cause of action. Kahan v. Rosensteil, 424 F.2d 161, 169 (3d Cir. 1970). A. DATING RETAIL INSTALLMENT CONTRACTS LVB first argues that the class should be limited to those persons whose retail installment contract bears a date subsequent to the signing of the dealer first contract. Def. Mem. at 7. LVBs definition is overly narrow. As described above, it excludes persons whose rescission rights have been compromisedpersons who were purportedly bound to dealer first contracts containing cancellation or confession judgment clauses. It is quite clearly a violation to inform a borrower that he will owe money upon cancellation or is subject to having a judgment entered against him by confession. Federal Reserve Board Regulation Z, issued to implement TILA, provides (12 C.F.R. 226.5(h), Imposition Of Nonrefundable Fees: Neither a creditor nor any other person may impose a nonrefundable fee in connection with an application [for credit] until three business days after the consumer receives the disclosures and brochure required under this section. The FTC Home Solicitation Sales Regulation, 16 C.F.R. 429.1, states: In connection with any door-to-door sale, it constitutes as unfair and deceptive act or practice for any seller to: . . . (b) fail to furnish each buyer, at the

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from an unspecified third party. Subsequently, the broker altered the arrangement and made the loan itself on the same terms. The court held that the transaction was consummated, and disclosures were required to be made, i.e. when there was a definite source of credit. Since the consumer had not been given until three days after that date to rescind the deal, her rescission rights had not been complied with, and she was allowed to rescind the transaction several years later. In the present case, each consumer was given a credit application bearing the name of LVB. The retail installment contract was provided either at the same time as the credit application (if one accepts LVBs contention that the contracts were accurately dated) or later (if, as appears to be the case, the retail installment contracts were often backdated18). On its face, the retail installment contract states that payment will be made at the offices of LVB. The documents, which contemplated payment to LVB, could not be used without alteration if the transaction was disapproved by LVB and financed by the dealer. The unmistakable inference that the reasonable consumer would derive from being presented with a credit application is that he or she was applying for credit, and that a credit transaction would exist if the application were approved. Most importantly, the evidence will show that the dealers did not in fact extend credit if LVB did not. Rather, the dealers would attempt to either arrange credit with someone else (who would use their own documentation) or enforce the first contract. Consequently, the class is appropriately defined to include all persons who signed a cash contract and a retail installment contract with LVB , and whose loan was approved by LaSalle after the date of the installment loan contract. Of the 91 files produced by LaSalle, all but one or two are included. Appendix A. IV. THE MOUNTS CLAIMS ARE TYPICAL LVB argues that the claims of the Mounts are not typical of the claims of the rest of the class because: 1. The Mounts needed financing to pay for their new construction; 2. The Mounts were unhappy with the construction work done on their home; 3. The Mounts refused to sign a completion certificate;
18 The files contain clues that documents were frequently backdated. For example, the file of Edgar and Maria Ramos (Appendix O) [not attached herein] contains two contracts purportedly dated 10/17/87. However, one of them has a note that states This contract & trust deed are void-new contract w/3rd party signing was recd. Indeed, that contract has Maria and Edgar Ramos as buyers and only their signatures appear. The second contract, also dated 10/17/ 87, contains the name of Mayra Ramos Salgado above the Ramos names as buyers, and all three signatures appear. It seems unlikely that both of these contracts were signed on the same day. The file of Domingo and Edna Rios shows a dealer contract and a retail installment contract both dated March 8, 1986. Appendix P. However the handwriting on each of the documents is different, again raising the question as to whether the documents were both actually dated the same date.

time the buyer signs the door-to-door sales contract or otherwise agrees to buy consumer goods or services from the seller, a completed form in duplicate, captioned . . . NOTICE OF CANCELLATION, which shall contain . . . the following information . . . YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE BUSINESS DAYS FROM THE ABOVE DATE . . . (g) fail or refuse to honor any valid notice of cancellation by a buyer. . . . This includes failing to refund all payments made, failing to return any goods or property traded in, and failing to cancel and return any negotiable instrument executed by the consumer in connection with the contract or transaction. 16 C.F.R. 429.1(b), (g). B. DATE OF CREDIT APPROVAL BY LVB LVB further argues it is inappropriate to include in the class definition the date of credit approval by LVB. Def. Mem. at 67. LVB argues that if a particular contract is not accepted by LVB, the dealer would have to carry the paper. Id. This analysis is faulty. The reason that dealers finance paper through LVB is that they do not have the financial resources to carry the paper themselves. Further, the most likely reason for LVB turning a deal down is lack of credit worthiness, in which case is difficult to believe the dealers would carry the risk. From a legal standpoint, a consumer is required to be given notice of his right to rescission upon consummation of the transaction. When a seller arranges credit for his purchaser from a third party, and the documents presented show that the approval of the third party is required for the arrangement to take effect as written, consummation does not occur until that approval is given. Clark v. Troy & Nichols, Inc., 864 F.2d 1261, 1264 (5th Cir. 1989); Jackson v. Grant, 876 F.2d 764 (9th Cir. 1989); Baxter v. Sparks Oldsmobile, Inc., 579 F.2d 863, 864 (4th Cir. 1978); Gary v. W. T. Grant, CCH Consumer Credit Guide [197480 Transfer Binder] k98,550 (N.D.Ga. 1975) (where approval of a transaction by a third party is contemplated transaction is not consummated prior to approval); Hartford Fed. S. & L. Assn v. Green, 36 Conn.Sup. 506, 412 A.2d 709 (App.Div. 1979); Evans v. Graves Pontiac-BuickGMC Truck, Inc., 576 So.2d 1025, 1029 (La.App. 1991); State of New York v. Dartmouth Plan, Inc., CV-91-1579 (N.D.N.Y. 1992) attached as Appendix N [not attached herein]. For example, in Hartford Fed. S. & L. Assn v. Green, 36 Conn.Sup. 506, 412 A.2d 709 (App.Div. 1979), a home improvement contractor entered into an installment agreement with a consumer on June 17, 1971, providing for 96 installments of $43.87 each. The parties contemplated that the transaction would be submitted to Hartford for approval and purchase. On August 20, 1971, Hartford agreed to purchase the obligation, the note was dated, and the dates for payment of the installments were inserted. The court held that the transaction was consummated on August 20, 1971, not on June 17, 1971. Similarly, in Jackson v. Grant, 876 F.2d 764 (9th Cir. 1989), a loan broker undertook to arrange credit on specified terms

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4. The Mounts have excessive finance charges; 5. The Mounts have elected to rescind; 6. Under Count III, the Mounts must demonstrate reliance, which destroys typicality. LVBs position is without merit. The Mounts claims are typical of the class. A plaintiff is an appropriate representative if the facts and legal theories he or she must establish are similar to the facts and legal theories that the class members must establish. When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is met irrespective of varying fact patterns which underlie individual claims. Edmonson v. Simon, 86 F.R.D. 375, 381 (N.D.Ill. 1980). There is no requirement that all of the circumstances of each class members claim must be common. The test is whether the questions of fact or law common to the classthat is, the factual and legal elements of the causes of action alleged predominate. Common questions predominate if there is a common nucleus of operative facts relevant to the dispute. E.g., Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968); Blackie v. Barrack, 524 F.2d 891, 90508 (9th Cir. 1975); Bisgier v. Fotomat Corp., 62 F.R.D. 113 (N.D.Ill. 1972); Steiner v. Equimark Corp., 96 F.R.D. 603, 607 (W.D.Pa. 1983). In making the class determination, the Court looks to the operative facts on which the plaintiffs legal claims are based, not the interesting, but legally irrelevant, stories about how the named plaintiffs or class members came into contact with the defendant. Edmonson v. Simon, supra, 86 F.R.D. 375, 381 (N.D.Ill. 1980) (court looks to the nature of the claim or defense of the class representative and not to the specific facts from which it arose or to the relief sought). Very few if any class actions could ever be certified if there were some sort of requirement that the circumstances surrounding everyones dealings with the defendant had to be the same. For example, in Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989), the court certified a class in a case in which a bank was alleged, as here, to have acted in concert with a number of home improvement contractors to utilize a two contract procedure whereby low-income homeowners were induced to sign binding contracts before legallyrequired disclosures of financing terms were provided, with the purpose and effect of locking consumers into interest rates materially higher than rates available elsewhere and of making it difficult or impossible for consumers to reconsider and cancel their contracts. Like this case, there was enormous variety in the details of the 6,000+ individual home improvement transactionsthe consumers dealt with different contractors and contracted for different repairs on unique properties, and each of the transactions was individually negotiated. A large percentage of the class members had construction problems. (The case has settled, an arbitration procedure set up to handle defect claims and about 800 defect claims are filed.) However, the court was concerned only with the specific elements of the causes of action alleged by plaintiffs. Plaintiffs in Heastie alleged, as here, (i) that certain provisions in standard form documents were unlawful and (ii) that there was a practice of executing certain standard form documents in a sequence that resulted in consumers being obligated before required disclosures were furnished. Those facts were common

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the first was the subject of a classwide summary judgment, 727 F.Supp. 1133 and 1140 (N.D.Ill. 1989), and the second could be established on a classwide basis by testimony and documents showing what the banks standard loan origination practice was and by the dates of papers in transaction files. The fact that each of the class members might have a different story to tell was not material. Under the applicable legal standard, LVBs arguments are without merit. 1. LVBs argument that the Mounts claims are not typical because they needed financing to pay for the construction to the loan is silly. All of the putative class members received financing for the construction to their homes. The Mounts, with their income level, are quite possibly the most affluent of the persons who ended up having their home construction loans financed by LVB. Many of the persons in the sample files produced by LVB had were persons who had Spanish surnames. Appendix A Nearly all of the loans are for smaller amounts than the Mounts. Id. This, of course, illustrates the need for a class action in this matter since few of the class members would have the resources necessary to pursue the claim individually. 23. The fact that the Mounts were unhappy with the construction work done on their home, refused to sign the completion certificate and received some money from the dealer for work improperly completed, likewise does not make their claim atypical. They merely have additional individual claims. One of the reasons that home improvement transactions were singled out for rescission rights was to give consumers an additional opportunity to investigate the contractor and avoid problems of this sort. 4. The fact that the Mounts finance charges were in excess of the amount that they were told they would be required to pay is also not atypical. On the contrary, their claim is illustrative of the problems with the practices of LVB and its dealers. The purpose and effect of trapping borrowers into contracts before they have had an effective three day cooling off period is to increase the cost of debt. In Heastie, plaintiffs expert estimated that costs were increased by several percentage points. The practice tends to increase the cost of credit irrespective of whether there are specific financing terms in the first contract. Presence of the financing terms dramatically illustrates the abusewhy would anyone agree to an increase in the interest rate. The proof at trial would involve having an expert compare rates at financial institutions which service similar borrower populations but have lower rates. It is a little like an antitrust suit, where and anticompetitive practice plus a super competitive price equals proof of injury. 5. LVB argues that the Mounts must demonstrate that there are numerous persons within the class who want to rescind the contract and their failure to do so means that their claim is atypical. Def. Mem. at 89. This conclusion is without merit. The procedure of declaring class members right to rescind has been expressly adopted by both state and federal courts in Illinois. Smyth v. Kaspar American State Bank, 6 Ill.App.2d 64, 127 N.E.2d 149 (1st Dist. 1955), affd, 9 Ill.2d 27, 136 N.E.2d 796 (1956). The complaint in Smyth sought rescission of the surrender of certain certificates, allegedly induced by fraud. The court endorsed a procedure whereby the trial court would declare that each former certificate holder was entitled to

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fully interfered with and given a choice of whether or not to rescind is appropriate. Logically then a class representative who seeks rescission on his own behalf can represent persons who when notified of their right to rescind, chose not to rescind. Hence, the Mounts here can appropriately represent class members who may ultimately decide not to rescind and need not establish now what class members choices will be. Bryan v. Amrep Corp., 429 F.Supp. 313 (S.D.N.Y. 1977). 6. LVB argues that Count III, a common law fraud count which seeks rescission for LVBs practice of causing or permitting dealers to misstate dates by which rescission rights had to be exercised, requires the showing of oral representations which destroys typicality. Def. Mem. at 910. LVB also argues that plaintiff must also show the extent of reliance by class members on the representation, which also purportedly destroys reliance. Id. In fact plaintiffs proof of the practice consists of documentary evidence produced by LVB in its business records. Plaintiffs do not rely on any oral representations. Hence this case is distinguishable from the factual allegations in Spencer v. Central States Pension Fund, 778 F. Supp. 985 (N.D.Ill. 1991), cited by LVB, where the plaintiffs claims hinged solely on oral representations made by union officials and fund trustees at 27 different local union meetings. V. RULE 23(b)(2) CERTIFICATION IS APPROPRIATE LVB argues that certification under Rule 23(b)(2) is not appropriate here because the Mounts request for the relief of rescission is simply a predicate for a money judgment. Def. Mem. at 12. LVB further argues that rescission is not appropriate because the parties can not be placed in the same position they were in before the financing occurred. Id. LaSalle cites Puskar v. Hughes, 533 N.E.2d 962 (Ill.App. 2 Dist. 1989) for the proposition that the class members cannot rescind because the parties cannot be placed in the positions they were in before the financing occurred. This does not actually do justice to the language of Puskar. Citing the Restatement, 2d of Contracts, the case states if a party has received land, goods or other property he is expected to return it. The fact that he has benefitted from possession of them does not preclude restitution since he can compensate the other party in money for this benefit. Puskar cites a case, Williams v. Dunas, 40 Ill.App.3d 782, 352 N.E.2d 266 (1976) in which the court held that the purchaser had to put the seller in the position he was in at the beginning of the contract by paying the reasonable rental value of the land for the period when he had possession. The case actually seems to say that rescission is allowed when the consideration is returned or the benefits received are offset. The slant put on Puskar by LaSalle thus is too narrow. Indeed, U.S. Minerals and Mining, Inc. v. Licensed Processors, Ltd., 194 Ill.App.3d 428 (Ill.App. 5 Dist. 1990) cites Puskar for the proposition that rescission requires the return of consideration and the accounting for any benefits received. If the party claims costs that do not represent any benefit conferred, they are disallowed. Furthermore, in a later case, Felde v. Chrysler Credit Corp., 580 N.E.2d 191, 199 (Ill.App. 2 Dist. 1991), Puskar is cited for the proposition that rescission requires a return of consider-

rescind the surrender if he desired, and which will require the filing and proving of claims by the individual holders who have surrendered their certificates,within a time and in a manner fixed by the court. 6 Ill.App.2d at 83. The class judgment would merely . . . establish by decree a condition precedent to the right of themselves and each member of Group II, at his election, to assert his claim against the common fund. Id. at 84. It was recently applied by the Illinois intermediate appellate court to a class action under the state Blue Sky law. Hess v. I.R.E. Real Estate Income Fund, 1993 Ill.App. LEXIS 263 (Ill.App., 1st Dist., Feb. 26, 1993). Similarly, in Tcherepnin v. Franz, 461 F.2d 544 (7th Cir. 1972) the Court of Appeals affirmed a classwide judgment providing that the plaintiffs and their class had been defrauded within the meaning of the anti-fraud provisions of the Securities Exchange Act and that [a]s defrauded purchasers of securities, they had a right to rescind their purchase agreements and, upon the rescission, were entitled to assert a claim against [certain funds]. The procedure of issuing a judgment declaring that the class members have the right to rescind has been applied on numerous occasions in cases arising under the securities laws, which also provide a statutory rescission remedy. Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909 (9th Cir. 1964) (reversing denial of class certification in securities case over objection that counts 2 and 3 seek rescission and return of consideration as to those investors who still own the securities and damages as to those who do not); Pistoll v. Lynch, 96 F.R.D. 22 (D.Haw. 1982) (certifying class in 10b-5 case where relief sought was, in the alternative, money damages or rescission for each class member). Other TILA cases have approved of the procedure of entering a classwide declaration establishing the class members right to rescind. Anderson v. Federal National Mortgage Assn., 87-0236-R (E.D.Va.); Ried v. North Jersey Home Energy Center, L-084324-85 (Passaic Co., New Jersey, Superior Court, Jan. 13, 1989); Security Pacific v. Jefferson, No. 88 CH 9268 (Circuit Court of Cook County, Illinois, May 17, 1989) (rejecting lenders argument on motion to dismiss that TILA claim was inappropriate for class treatment). The same option-to-rescind procedure has been followed under other state and federal consumer protection statutes. Richmond v. Dart Industries, Inc., 29 Cal.3d 462, 629 P.2d 23, 174 Cal.Rptr. 515 (1981) (expressly endorsing option procedure and rejecting argument that rescission claim can never be maintained on class basis); Vasquez v. Superior Court, 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964 (1971) (relief sought was judgment permitting class members to rescind their contracts); Olive v. Graceland Sales Corp., 61 N.J. 182, 293 A.2d 658 (1972) (permitting a class action for relief including rescission to be maintained, as long as each class member was specifically asked if he or she desired rescission); Bryan v. Amrep Corp., 429 F.Supp. 313 (S.D.N.Y. 1977) (class certified in case arising under the antifraud provisions of the Interstate Land Sales Full Disclosure Act despite objection that relief sought for each class member was either damages or rescission, as that person might elect); OQuinn v. Beach Associates, 272 S.C. 95, 249 S.E.2d 734 (1978); Lonsdale v. Chesterfield, 99 Wash.2d 353, 662 P.2d 385 (1983). Hence, a class action seeking a procedure whereby class members are notified of their right to rescind, which was wrong-

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ation and setoff of benefits received. In contrast to LaSalles interpretation, these cases do not preclude rescission when the benefits are setoff or returned. Here, since the work has already been done, the minimal benefits received by the Mounts (because the work was so shoddy) can be offset. VI. CONCLUSION For the reasons stated above and in our initial memorandum, the Court should certify a class as requested by plaintiffs. Respectfully Submitted, [Attorney]

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M.4 TIL Untimely Disclosure Case (Diaz)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) WESTGATE LINCOLN ) MERCURY, INC., ) Defendant. ) ) SALVATOR DIAZ, on behalf of himself and all others similarly situated, Plaintiff, PLAINTIFFS REPLY IN SUPPORT OF MOTION FOR CLASS CERTIFICATION Plaintiff, Salvator Diaz (Diaz), respectfully submits this reply in support of his motion for an order that this action may proceed as a class action against defendant Westgate Lincoln Mercury, Inc. (Westgate). INTRODUCTION Plaintiff alleges that Westgate violated the Truth in Lending Act, 15 U.S.C. 1601 et seq., through the use of a printed form which purports to bind consumers to car purchases on credit, without providing the disclosures required by the Truth In Lending Act (TILA). (Complaint, kk 811) The printed form is a note obligating the consumer to pay the entire balance of the purchase price, plus interest at 20%. (Exhibit A) [not attached herein] The form also provides for a confession of judgment against the consumer. For years, the use of confession of judgment clauses in consumer contracts has been outlawed by Federal Trade Commission regulations, 16 C.F.R. part 444; however most consumers do not know this.19
19 The fact that a contract may not be valid does not affect the applicability of TILA. Madewell v. Marietta Dodge, Inc., 506 F.Supp. 286, 287 n. 1 (N.D.Ga. 1980).

The natural effect of Exhibit A, and most likely its purpose, is to attempt to lock the consumer into a binding credit contract without providing disclosure of the financing terms as required by the Truth in Lending Act. By the time substitute financing terms are disclosed, the consumer is already party to a purportedly binding contract obligating him to purchase on credit and pay a high rate of interest, and which can supposedly be enforced in court against the consumer without notice or an opportunity to be heard. Plaintiff brought suit on behalf of a class of all persons who, within the one-year limitations period, signed the same printed form as Exhibit A with Westgate, without previously or simultaneously receiving Truth in Lending disclosures. Defendant admits that it has used a contract in the form of Exhibit A in over 400 transactions (Affidavit of John Moroni, k3) and therefore admits that the numerosity element of Rule 23 is satisfied. (Def.Mem.Opp. Class Cert., p. 2). Defendant further admits that there is a common question of law presented: whether the printed form violates TILA. (Def.Mem.Opp. Class Cert., p. 5; Def.Mem.Opp. Sum.J., p. 12) Defendant nevertheless argues that a class should not be certified. DEFENDANTS ARGUMENTS Defendant contends that the class should not be certified because (a) Mr. Diaz has only made a claim for statutory damages; (b) some class members may have actual damages that exceed the statutory damages which they might recover as a result of this class action, creating a purported conflict of interest between Diaz and those class members; and (c) individual issues predominate because the extent of actual damages will differ among those class members. (Def.Mem., pp. 34) Defendant additionally argues that the relatively small recovery for the individual class members while exposing defendants to large administrative costs and requiring substantial amounts of court time for supervision means that a class action is not a superior or efficient method of adjudication of this controversy. (Def.Mem., p. 4) Defendants arguments against class certification are wrong. I. TRUTH IN LENDING ACT DISCLOSURE CLAIMS ARE APPROPRIATE FOR CLASS CERTIFICATION, EVEN IF ONLY STATUTORY DAMAGES ARE REQUESTED Truth in Lending disclosure claims have frequently been certified as class actions. Goldman v. First Nat. Bank, 532 F.2d 10, 16 (7th Cir. 1976); Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974); Adiel v. Chase Fed. S. & L. Assn, 810 F.2d 1051 (11th Cir. 1987); Simon v. World Omni Leasing, Inc., 146 F.R.D. 197 (S.D. Ala. 1992)(Truth in Leasing Act); Hughes v. Cardinal Fed. S. & L. Assn, 566 F.Supp. 834 (S.D.Ohio 1983); Fetta v. Sears, Roebuck & Co., 77 F.R.D. 411 (D.R.I. 1977); Bantolina v. Aloha Motors, Inc., 419 F.Supp. 1116, 1122 (D.Haw. 1976); Jones v. Goodyear Tire & Rubber Co., 442 F.Supp. 1157 (E.D.La. 1977). Since they usually involve a straightforward question regarding the legality of a written instrument, and there are no issues of reliance, causation, or the like, they are almost ideal class actions. Defendant cites Parker v. George Thompson Ford, Inc., 83 F.R.D. 378 (N.D.Ga. 1979), and Watkins v. Simmons and Clark,

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total time sales price, rather than deferred payment price as required by the regulations). Watkins, 618 F.2d at 403 n. 10. The Sixth Circuit held that class certification of TILA actions was not mandatory, and that there had been no abuse of discretion in denying class certification for such a trivial violation. Significantly, however, the court noted the dramatic reversal of the judicial trend against the certification of classes in Truth-in-Lending actions since the passage of amendments specifying class remedies under TILA (Id. at 402). The court further stated that class certification in TILA actions is desirable and to be encouraged. Id. at 404. In fact the Watkins court said that it may well have certified a class had the matter been up on de novo review. Id. Here, the violations are most assuredly not technical or trivial. Westgate is attempting to evade the key purpose of TILA. The plain purpose of getting consumers signature on a judgment note is to use the threat of interest at 20% and a confession of judgment to coerce people into taking substitute credit terms that they might not take if they could simply walk away from the deal. The purpose of [the two-note] procedure is only to allow a salesman to get a floor commitment from the buyer that can be used to counteract the buyers remorse while he awaits clearance in the credit office. Since most of the sellers sales are on credit, the salesman knows when he gets the customers signature on the purchase order the likelihood of a credit transaction is great. Disclosure is of little help to a buyer who is told in the credit office that he has a choice of either signing the [retail installment contract] or of having collection procedures instituted against him because he is unable to come up with the cash. Gonzales v. Schmerler Ford, 397 F.Supp. 323, 327 (N.D.Ill. 1975). The facts of the Candia case amply demonstrate how defendants use of Exhibit A results in the attempted (and probably most often successful) binding of consumers to a credit transaction without prior disclosure of financing terms as required by TILA. Defendant contends that the customer is not bound by Exhibit A if financing is unattainable, and may simply return the vehicle to defendant. (Def.Mem. p. 3; Moroni Affid., k4) However, if financing is attainable, but at a previously undisclosed annual percentage rate or monthly payment amount the customer is not willing to accept, he or she is bound by the terms of Exhibit A to accept either the substitute financing offered by defendant, or the 20% rate in the note. Or, as in the Candia case, defendant may refuse to return the customers trade-in vehicle, and tell the customer that he or she is legally bound to purchase a vehicle from defendant. (Candia counterclaim, k23, Def.Mem. Exhibit 2); (Diaz affid., k 8, Pl.Mem. Exhibit E[not attached herein]). Defendant contends that a class should not be certified because plaintiff suffered no actual damages, since the purchase was never consummated and his trade in vehicle was returned to him. (Def.Mem., p. 3) In fact, the trade in vehicle was not returned to Mr. Diaz until after two written requests, the second from his attorney. Obviously, a consumer who did not hire an attorney would have a much harder time getting his or her vehicle back from defendant. The practice complained of is clearly harmful and detrimental to consumers. The practice inflicts harm in terms of diminished bargaining power and diminished ability to shop for

Inc., 618 F.2d 398, 402 (6th Cir. 1980), for the proposition that a class action is not appropriate in this case. Defendants position is not well taken. A. THE DAMAGE CAP IN 1640 CANNOT BE RELIED UPON AS AUTHORITY FOR DENYING CLASS CERTIFICATION Parker held that a TILA class action was not a superior method of adjudication because the statutory damages cap means that class members will recover less as members of a class than they could as individuals in separate actions. Because in almost all TILA class actions the recovery for each class member will be less than in an individual action, the Parker decision in effect works a judicial repeal of the specific authorization for TILA class actions contained in 15 U.S.C. 1640. As demonstrated in plaintiffs opening memorandum, class actions are the principal enforcement mechanism of TILA. Watkins, 618 F.2d at 403 n. 9. [P]otential class action liability is an important encouragement to the voluntary compliance which is so necessary to insure nationwide adherence to uniform disclosure. The possibility of class-action exposure is essential to the prophylactic intent of the Act, and is necessary to elevate truth-in-lending lawsuits from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance. Bantolina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw. 1976). Congress expressly approved of class actions to enforce the Truth in Lending and Truth in Leasing Acts. In 1976, Congress increased the statutory damages for class actions in 15 U.S.C. 1640. Pub. L. 94-240 (90 Stat. 257). The legislative history of the amendment clearly states: The chief enforcement tool will continue to be private actions for actual damages and civil penalties. Much of the testimony received in the hearings, and much of the debate in Subcommittee and Committee centered on the adequacy of the recovery ceiling for civil penalties in class actions. . . . . (Sen.R. No. 94-590, 94th Cong., 2d Sess., p. 8, 1976 USCCAN 438) Recognizing that Congress expressly authorized class actions notwithstanding the damages cap, most decisions hold that the appropriate remedy is simply to include explanation of the right to bring an individual action in the notice to the class. Serafin v. Sears Roebuck, Inc., 73 F.R.D. 585 (N.D.Ill. 1977); Brame v. Ray Bills Finance Corp., 85 F.R.D. 568 (N.D.N.Y. 1979). A contrary result requires a holding that a fact present in virtually all TILA class actions requires denial of class certification. Since Congress clearly contemplated that a large number of TILA cases could be certified, such a holding would be highly inappropriate. B. A CLASS ACTION CANNOT BE DENIED ON THE GROUND THAT ANY VIOLATION IS TRIVIAL Watkins v. Simmons, supra, cited by defendant, involved rather trivial, technical violations that had no potential for actual damages on a classwide basis (for example, using the term

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creditthe central purpose of TILA. 15 U.S.C. 1601(a) (It is the purpose of this title to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit. . . .) While the damages are difficult or impossible to quantify, that is precisely why Congress created the remedy of statutory damages. If the fact that the harm is difficult to quantify justifies denial of a class, the Congressional intent of private enforcement of TILA through class actions is effectively thwarted. See, Watkins, supra, 618 F.2d 403 n. 9. II. A CLASS ACTION IS A SUPERIOR METHOD OF ADJUDICATING THIS TRUTH IN LENDING DISCLOSURE CLAIM A. THERE IS NO BASIS FOR THE CONTENTION THAT CLASS TREATMENT OF THIS ACTION WILL RESULT IN HIGH ADMINISTRATIVE COSTS Defendant contends that class treatment of this action would not be superior, requiring substantial amounts of court time for supervision of this action. Defendants assertion that there would be high administrative costs or that substantial court time would be required is totally unsubstantiated and untrue. In fact, this would be a relatively simple class to administer all that is needed is the identity of the class members: Westgate customers who signed a form substantially similar to Exhibit A to the complaint, who did not receive TILA disclosures at the same time as they signed Exhibit A. The necessary information is available from a ministerial inspection of Westgates files. Since Westgate in effect concedes that no one received TILA disclosures at the time they signed Exhibit A, all that is required is to prepare a list of the people that signed it. Indeed, defendant has already identified many of the class members (Moroni Affid., k 3) B. ANY CLASS MEMBER WHO WANTS TO SUE INDIVIDUALLY CAN OPT OUT Defendant also contends that the class should not be certified because some class members may have actual damages which exceed the statutory damages claimed here. Defendant contends that this creates a situation where the named plaintiff has interests antagonistic to those of the class. (Def.Mem., p. 4). This is simply not trueas noted in Section I above, the solution is to inform the class members through the notice that they may opt out and bring their own action for actual damages if they find it necessary or desirable to do so. Serafin v. Sears Roebuck, Inc., 73 F.R.D. 585, (N.D.Ill. 1977). Defendant cites Zeltzer v. Carte Blanche, 76 F.R.D. 199, 203 (W.D.Pa. 1977), for the proposition that the potential differences in actual damages among class members will result in the necessity of individual trials, making a class action inappropriate. (Def.Mem., p. 4). In Zeltzer, the court refused to certify a class on the grounds that the fact that some potential class members were commercial customers (to whom TILA does not apply) created the purported necessity of individual trials. The Seventh Circuit has rejected this reasoning, specifically holding that the fact that some potential class members may

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be commercial customers does not defeat a finding of commonality nor does it preclude class certification. Haynes, supra, 503 F.2d 1165 n. 4. More significantly, the Seventh Circuit held that the possibility of individual suits for actual damages does not detract from the predominance of issues common to the class. Id. Class members who feel that they might be entitled to recover on additional grounds, or who have actual damages, can opt out and bring their own cases. It is highly unlikely that many will actually will do so, as it is not economical. See Haynes, supra, 503 F.2d at 1165 (the inability of the poor or uninformed to enforce their rights and the improbability that large numbers of individuals will possess the necessary initiative to litigate individually makes TILA claims suitable for class treatment). The Candia suit, pleadings of which are attached to both parties briefs here, is feasible only because a legal services agency represents him. Mr. Diaz has demonstrated, here and in his opening brief, that all the requirements for class certification have been met. Congress intended that TILA be enforced through private class actions. There is no legally valid reason to deny a class here. CONCLUSION For the foregoing reasons, this Court should grant plaintiffs motion for class certification. Respectfully Submitted, [Attorney]

M.5 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, PLAINTIFFS REPLY IN SUPPORT OF CLASS CERTIFICATION ON COUNT I Defendants (Volvo) opposition to class certification is based largely on misrepresentation of plaintiffs deposition testimony and the assertion of legal positions which are inconsistent with controlling authority. None of Volvos arguments have any merit.

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2. Shepherd uses the $400 to float other expenses, and does not use it for the lease payments on the Volvo wagon. (Shepherd Dep., p. 20) Once he used it to rent a car for a week. (Shepherd Dep., p. 32) 3. At pp. 10809, Shepherd stated that he did not have a separate bank account for business and household expenses. 4. Document VS 59, the credit application executed in connection with the lease, lists the total annual income of Mr. and Mrs. Shepherd ($85,000). The $400/month was of course included. Nothing in the document suggests that any particular income would be used to make the payments on the Volvo wagon. Again, there is no evidence from which a court or jury could plausibly find that the Volvo wagon was used primarily for business purposes. On the contrary, elsewhere in his deposition Shepherd testified: 1. He did not claim any tax deduction for unreimbursed business expenses associated with the Volvo wagon. (Shepherd Dep., p. 30) The relevant part of his tax return is Shepherd Deposition Exhibit 4, and it shows no deduction for vehicle expense. 2. If any car stayed at the airport [while Mr. Shepherd was on a business trip], it would be the green Volvo, the 82. (Shepherd Dep., p. 31) 3. He leased a station wagon [b]ecause sometimes when you go in to town, especially with your wife and shes on a buying spree, you need storage space. (Shepherd Dep., p. 39) The pressing need was for a station wagon. (Id.) In his declaration (Appendix A, attached) [not attached herein], Shepherd explains that the car was in fact used as an ordinary family car and was not used predominantly for business purposes. Volvos fabrication of a claim that plaintiff used the leased vehicle as something other than an ordinary family car is but the latest in a series of outlandish fabrications. Thus, the Answer and Counterclaim of Defendant Volvo Finance North America, Inc. assert (p. 9) that Shepherd willfully and intentionally refused to continue performance of his obligations under the lease agreement in order to manufacture a claim and that Shepherd is guilty of fraudulent conduct because he did not return the leased Volvo until 10 days after filing this action. All of these assertions are totally spurious. II. SHEPHERD HAS STANDING TO REPRESENT CLASS MEMBERS WHO ARE SEEKING ACTUAL DAMAGES Volvo claims that Mr. Shepherd lacks standing to represent class members who have claims for actual damages because he has not yet paid Volvos charges for voluntary early termination (pay $25,000 for a defective $22,000 car) or early termination by default (pay all of the remaining lease payments). Volvo is wrong. Shepherd has indisputably returned the leased car and refused to make payments in accordance with the lease. As a result, he has incurred liability under the lease. The fact that Volvo has not yet enforced that liability does not mean that plaintiff has not suffered legal injury from its existence. As Magistrate Judge Bucklo explained in Johnson v. Steven Sims Subaru, 1993 U.S.Dist. LEXIS 11694 (N.D.Ill., August 20, 1993)

I. THERE IS NO BASIS FOR VOLVOS ASSERTION THAT SHEPHERD USED THE LEASED VEHICLE PREDOMINANTLY FOR BUSINESS PURPOSES Volvos first, and presumably strongest, argument, is that Shepherd has no standing to sue under the Consumer Leasing Act (CLA) because the leased vehicle was used primarily for business purposes. (Def.Rsp., Point I) The argument is a total fabrication. Volvo cites (Def.Rsp., p. 6) pages 5, 7, and 1316 of the Shepherd deposition for the purported proposition that Shepherd, as the principal driver of the leased Volvo, drove the car for business travel; his other use of the car was negligible. In fact, Shepherd testified to the exact opposite. (We refer to the leased vehicle as the Volvo wagon, as Shepherd also owned a 1982 Volvo sedan.)20 1. Page 5: Shepherd said nothing about the use of the Volvo wagon. He said that he was moving and that he was Regional Manager for New York Seltzer, a soft drink company. 2. Page 7: Shepherd stated that the drivers in his family were himself and his wife. Nothing was said about use of the Volvo wagon for business travel. 3. Pages 1314: Shepherd testified that between May 1992 and May 1993 his wife, a registered nurse, would use the Volvo wagon to drive to and from her place of employment, St. Marys Hospital in Athens, Georgia. Use of a car to commute to and from work is not a business use. 4. Page 15: Shepherd testified that the only time he would ever use the Volvo wagon in connection with work was if he had to drive to Atlanta to visit a certain distributor, which he visited twice a month. His primary vehicle for doing that would be the 82 Volvo, but sometimes his wife was using it and he would take the Volvo wagon. 5. Page 16: Shepherd testified that when he flew on business, he would normally take the 1982 Volvo or a shuttle to the airport. I would never leave the Volvo wagon overnight, if I could avoid it. 6. There is no testimony that Shepherds nonbusiness use of the Volvo wagon was negligible. In short, the cited pages of Shepherds deposition state the exact opposite of what Volvo claims. The leased vehicle was primarily used as an ordinary family car. Volvo next claims that Shepherd received a $400 monthly car allowance from his employer New York Seltzer, which accounted for about 60 percent of Shepherds monthly lease payment, as well as 12c per mile for travel, that Shepherd specifically disclosed his business car allowance as income for consideration of his lease, and that Shepherd deposited the car allowance into the checking account he used to pay the monthly lease payments. (Def.Rsp., p. 6 and n. 5) The purported basis for these statements is pp. 1921 and 10809 of Shepherds deposition and a document, VS 59. The actual testimony was: 1. New York Seltzer pays Shepherd the sum of $400/month, denominated a flat car allowance. Shepherd puts it into the general budget, the family budget. (Shepherd Dep., p. 20)
20 All pages of the Shepherd deposition cited herein are in Appendix G [not attached herein].

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(Appendix B, attached) [not attached herein], in rejecting a contention that a lessee who had not yet paid early termination charges had not sustained damage within the meaning of a state consumer protection statute: [A] plaintiff who has not yet paid, but will incur a liability or obligation as a result of the defendants fraud, suffers actionable damages. 37 C.J.S. Fraud, 41(f) (1943) (the fact that actual monetary loss has not yet occurred will not preclude recovery for fraud if such loss is inevitable, as where the defrauded party has incurred a binding legal obligation). It follows that under the [Illinois Consumer Fraud Act], a defrauded consumer who cannot afford to pay expenses which result from the defendants deceptive conduct still suffers actionable damages. See Gent v. Collinsville Volkswagen, Inc., 72 Ill.Dec. 62, 67, 451 N.E.2d 1385, 116 Ill.App.3d 496 (5th Dist. 1983) (consumer was entitled to damages for rental vehicle expenses when newlypurchased car was inoperative, even though no rental was in fact made). In the instant case, Ms. Johnson alleges that she sought to terminate the lease, but cannot afford the allegedly unreasonable and unlawful early termination charges. [citation] A defrauded party can continue to incur actionable damages under a contract, even after fraud is discovered, if it would be economically unreasonable to terminate the relationship. [citations] The same principle was implicitly applied under the CLA by the class certifications in Wesley v. GMAC and Kedziora v. Citicorp Natl Services (Attachments B and C to plaintiffs opening memorandum in support of class certification [not attached herein])in each case, the plaintiff is a person who was threatened with early termination charges but had not yet paid them, but the class includes persons who have paid early termination charges. If one were to prepare a financial statement for Mr. Shepherd in accordance with GAAP, the lease obligation would have to be disclosed as a contingent (albeit disputed) liability. Economically, there is no difference between adding a positive item to ones balance sheet and deleting a negative one. It should make no difference from a legal standpoint, either. III. SHEPHERD IS AN APPROPRIATE CLASS REPRESENTATIVE A. SHEPHERD IS NO MORE SOPHISTICATED THAN THE AVERAGE LESSEE OF A VOLVO Volvo asserts that Shepherd is a sophisticated businessman. (Def.Rsp., p. 1) Actually, as noted previously, he is a sales manager for a soft drink company, and his wife is a nurse. There is nothing to suggest that Shepherd is not a typical Volvo lessee. Volvos sell for about $18,000 to $35,000. NADA Official Used Car Guide (July 1993), pp. I-92 to I-95 (sticker prices on 1992 Volvos varied from $21,495 to $34,655 plus

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options). The average consumer who leases one is probably a middle-class individual who is not dissimilar to Mr. Shepherd and his wife. Furthermore, Volvo does not explain why the degree of sophistication of a lessee has any relevance to the claims and defenses asserted. Reliance is not an element of a claim under the Truth in Lending Act (TILA) or CLA. Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299 (D.Del. 1990); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa. 1987).21 Volvo offers no explanation of why the degree of sophistication of the named plaintiff has the slightest relevance to a claim or defense under the CLA. B. SHEPHERDS MOTIVE FOR TERMINATING THE LEASE DOES NOT AFFECT HIS ABILITY TO REPRESENT THE CLASS Volvo claims that Shepherd is not an appropriate representative because his motive for terminating the lease was that he was [u]nhappy with the Volvos mechanical system. (Def. Rsp., p. 2) Volvo also refers to the fact that he had a similar problem with a Ford. There is nothing unusual about a lessee desiring to terminate a lease early because of problems with the vehicle. Indeed, the published literature indicates that a principal reason lessees seek to terminate early is dissatisfaction with the vehicleit may be sick and need expensive repairs. U. S. News & World Report, July 29, 1991, p. 56 (Appendix C) [not attached herein]. According to the Attorney General of New York, up to 80% of leases are terminated early. UPI Dispatch, June 19, 1989 (Appendix D) [not attached herein] A plaintiff is an appropriate representative if the facts and legal theories he or she must establish are similar to the facts and legal theories that the class members must establish. When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is met irrespective of varying fact patterns which underlie individual claims. Edmonson v. Simon, 86 F.R.D. 375, 381 (N.D.Ill. 1980). There is no requirement that all of the circumstances of each class members claim must be common. The test is whether the questions of fact or law common to the classthat is, the factual and legal elements of the causes of action alleged predominate. Common questions predominate if there is a common nucleus of operative facts relevant to the dispute. E.g., Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968); Blackie v. Barrack, 524 F.2d 891, 90508 (9th Cir. 1975); Bisgier v. Fotomat Corp., 62 F.R.D. 113 (N.D.Ill. 1972); Steiner v. Equimark Corp., 96 F.R.D. 603, 607 (W.D.Pa. 1983). In making the class determination, the Court looks to the operative facts on which the plaintiffs legal claims are based, not the interesting, but legally irrelevant, stories about how the named plaintiffs or class members came into contact with the defendant. Edmonson v. Simon, supra, 86 F.R.D. 375, 381 (N.D.Ill. 1980) (court looks to the nature of the claim or defense of the class
21 The alleged sophistication of the named plaintiff is sometimes raised in securities cases, as part of a claim that the plaintiff is atypical because he or she relied on something other than the integrity of the market in deciding to purchase a security.

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the chicken house. (Eggleston v. Chicago Journeyman Plumbers Local Union No. 130, 657 F.2d 890, 895 (7th Cir. 1981)) In any event, Volvos objection lacks merit. As a matter of federal law, a class representative need not be responsible for more than his or her pro rata share of litigation expenses. Rand v. Monsanto Co., 926 F.2d 596, 601 (7th Cir. 1991); County of Suffolk v. Long Island Lighting Co., 710 F.Supp. 1407, 141315 (E.D.N.Y. 1989), affd, 907 F.2d 1295 (2d Cir. 1990); In re Oracle Securities Litigation, 136 F.R.D. 639, 643 (N.D.Cal. 1991) (To require recoupment of litigation expenses from the class representative is at odds with Rule 23, and the notion of a class representative who is willing to bear the entire cost is a preposterous charade); Lai v. Anthony, CCH Fed.Sec.L.Rptr. k96,174, p. 90,946 (D.Haw. 1991); South Carolina Natl Bank v. Stone, 139 F.R.D. 325, 329 (D.S.C. 1991) (the named plaintiffs willingness, or lack thereof, to advance the full costs of the litigation or of class notice is irrelevant); Scholes v. Stone, McGuire & Benjamin, 143 F.R.D. 181, 186 (N.D.Ill. 1992). In Rand v. Monsanto, the leading case on the issue, the Court of Appeals first noted that Rule 5-103(B) of the Model Code of Professional Responsibility, which Volvo relies upon, does not require the named plaintiff in a class action to be responsible for all of the costs: We doubt that DR 5-103(b) of the Model Code [of Professional Responsibility] . . . indeed requires the representative plaintiff to pick up the entire tab. DR 5-103(B) says that lawyers may advance costs but that the client ultimately bears responsibility for them. In a class action, the client is the class. It may be that if the action fails the classs debt to the lawyer is not collectible, but DR 5-103(B) does not ensure that lawyers always will be able to collect. If it did, no lawyer could take any case on behalf of a poor person, for collecting costs from such a client is problematic. (926 F.2d at 600) More importantly, the Monsanto court held that even if some state or federal district purported to require the named plaintiff to bear all of the expenses personally, the requirement would be inconsistent with Fed.R.Civ.P. 23 and hence invalid. [I]f [a local rule] indeed requires the representative plaintiff to underwrite all costs personally, it is inconsistent with Fed.R.Civ.P. 23 because it would cripple the class action device that rule creates. (926 F.2d at 600) The court explained: Rule 23 is designed for the nation as a whole. Slavishly following the different state rules on the allocation of costs would balkanize litigation. The appendix to this opinion shows the magnitude of the problem. Investors throughout the world traded in Monsantos stock between July 23 and October 4, 1985. Rands trade was executed in New York. Lead counsel are based in Pittsburgh; Rands other lawyers maintain offices in Chicago and New York. Rand could have filed this suit in the federal courts of Pennsylvania without encountering a problem

representative and not to the specific facts from which it arose or to the relief sought). Very few if any class actions could ever be certified if there were some sort of requirement that the circumstances surrounding everyones dealings with the defendant had to be the same. For example, in Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989), the court certified a class in a case in which a bank was alleged to have acted in concert with a number of home improvement contractors to utilize a two contract procedure whereby low-income homeowners were induced to sign binding contracts before legally-required disclosures of financing terms were provided, with the purpose and effect of locking consumers into interest rates materially higher than rates available elsewhere and of making it difficult or impossible for consumers to reconsider and cancel their contracts. There was enormous variety in the details of the 6,000+ individual home improvement transactionsthe consumers dealt with different contractors and contracted for different repairs on unique properties, and each of the transactions was individually negotiated. However, the court was concerned only with the specific elements of the causes of action alleged by plaintiffs. Plaintiffs alleged (i) that certain provisions in standard form documents were unlawful and (ii) that there was a practice of executing certain standard form documents in a sequence that resulted in consumers being obligated before required disclosures were furnished. Those facts were commonthe first was the subject of a classwide summary judgment, 727 F.Supp. 1133 and 1140 (N.D.Ill. 1989), and the second could be established on a classwide basis by testimony and documents showing what the banks standard loan origination practice was and by the dates of papers in transaction files. The fact that each of the class members might have a different story to tell was not material. In the present case, the motive of plaintiff or a class member for terminating a lease is not an element of any claim or defense. Further, the fact that plaintiff was dissatisfied with the mechanical condition of the leased vehicle is a typical reason for wanting to terminate a lease early. Volvos argument is nothing more than another unfounded ad hominem attack on plaintiff. C. PLAINTIFF IS NOT OBLIGATED TO BEAR MORE THAN HIS PRO RATA SHARE OF COSTS, WHICH HE HAS ALREADY PAID Volvo complains that plaintiff is not bearing the entire cost of prosecuting the action himself. Other courts have noted the curiousness of defense arguments that the plaintiffs should be more adequately funded: [I]t is often the defendant, preferring not to be successfully sued by anyone, who supposedly undertakes to assist the court in determining whether a putative class should be certified. When it comes, for instance, to determining whether the representative parties will fairly and adequately protect the interest of the class, or the plaintiffs ability to finance the litigation, it is a bit like permitting a fox, although with pious countenance, to take charge of

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under DR 5-103(B). . . . No useful purpose would be served by telling Rand to refile this suit in another district, or by encouraging counsel to recruit a different plaintiff to file in another district. Indeed, so far as we can tell DR 5-104(B) itself serves no good purpose. The ABA has jettisoned, and the states are in the process of replacing, this relic of the rules against champerty and barratry. Monsanto does not contend that the application of DR 5-103(B) to class actions would produce any discernible benefit. We conclude that DR 5-103(B) is inconsistent with Rule 23 and therefore may not be applied to class actions. . . . (926 F.2d at 600)22 The Court also noted that The very feature that makes class treatment appropriatesmall individual stakes and large aggregate onesensures that the representative will be unwilling to vouch for the entire costs. Only a lunatic would do so. A madman is not a good representative of the class! (926 F.2d at 599) This Court has already recognized that expenses in a class action are borne by the lawyers. In In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. 297, 353 (N.D.Ga. 1993), this Court stated that attorneys fees in class actions should provide the financial incentive necessary to induce experienced and well-qualified counsel to take on complex and timeconsuming cases for the benefit of the public and for which they may never be paid or even reimbursed for considerable out-of-pocket expenses. Obviously, there was no way in which the expenses of prosecuting that case were going to be borne by the representative plaintiffs. The Monsanto conclusion applies with particular force to this case because Congress expressly provided for class actions in 15 U.S.C. 1640, the civil remedies section applicable to both TILA and CLA. The same Public Act that enacted the CLA in 1976 also increased the statutory damages for class actions in 15 U.S.C. 1640. Pub. L. 94-240 (90 Stat. 257). The legislative history of the amendment clearly states: The chief enforcement tool will continue to be private actions for actual damages and civil penalties. Much of the testimony received in the hearings, and much of the debate in Subcommittee and Committee centered on the adequacy of the recovery ceiling for civil penalties in class actions. . . . . (Sen.R. No. 94-590, 94th Cong., 2d Sess., p. 8, 1976 USCCAN 438) In revising 15 U.S.C. 1640 to expressly refer to class actions, Congress recognized that potential class action liability is an important encouragement to the voluntary compliance which is so necessary to insure nationwide adherence to uniform disclosure. Bantolina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw. 1976). The possibility of class-action exposure
22 The Monsanto Courts comment about conflicting state rules is equally apposite here. Plaintiffs lead counsel are from Illinois, which permits expenses to be contingent. (926 F.2d at 600) Defendants are located in New Jersey, which also permits expenses to be contingent. (926 F.2d at 602)

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is essential to the prophylactic intent of the Act, and is necessary to elevate truth-in-lending lawsuits from the ineffective nuisance category to the type of suit which has enough sting to insure that management will strive with diligence to achieve compliance. Bantolina, 419 F.Supp. at 1120, citing the 1972 Federal Reserve Board annual report on the Truth in Lending Act. If some state were to pass a statute providing that a litigant who wished to file a class action under 15 U.S.C. 1640 (or alleging civil rights violations, or some other federal cause of action frequently enforced through the class action mechanism) had to post security in an amount calculated to deter any rational individual from filing such an action, it would be patently invalid under the Supremacy Clause. States cannot insulate defendants from liability under federal law by making the federal right impossible to enforce. Putting the requirement in the Code of Professional Responsibility and rephrasing it a bit does not make it any more valid. With respect to Shepherds obligation under Monsanto and its progeny, Shepherd testified that he already has paid an amount for expenses that exceeds his pro rata share. (Shepherd Dep., p. 79) (The $120 paid by plaintiff multiplied by 40,000 class members is $4,800,000.) Consequently, no valid objection can be raised to plaintiff on that score. Volvo does not suggest that counsel will not fund whatever notice costs are involved. D. VOLVOS CLAIM THAT SHEPHERD HAS NO ACTIVE ROLE IN THIS CASE IS FALSE Volvo asserts (Def.Rsp., p. 18) that Shepherd has effective abdicated any supervising role in this litigation to his counsel. Volvos claim is based on a misleading ellipsizing of plaintiffs testimony. Shepherd in fact testified as follows: Q. Mr. Shepherd, I think I was asking you, before we broke, what your understanding was of your duties and responsibilities as class representative. A. Simply put, I would represent the class and I would act in their behalf. Q. And what do you understand you will be called on to do to act in the classs behalf if the class were certified in this case? A. In this particular case, I would outline the grievance at hand. Q. You mean, by testimony? A. Whatever the medium would be, to bring it to a resolution, yes, sir. Q. Do you feel you have any obligation to supervise the lawyers? A. I have retained them, I dont think I supervise them. Q. Do you feel you have any responsibility to oversee how they conduct the litigation? A. I think thats their responsibility. Q. So that from your standpoint, how the litigation is conducted is solely up to the lawyers? A. Precisely why I go to an attorney. Q. And do you feel that you have any right or ability to question what they do. A. Certainly.

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and offensive. Most of the allegations of Count I concern disclosure of liability for default and early termination. While some disclosure requirements may seem technical, these are not. 1989 New York Attorney General report (Plaintiffs Motion for Class Certification, Attachment A) Indeed, the Attorney General of New York described the practices at issue here as a massive ripoff. UPI Dispatch, June 19, 1989 (Appendix D) [not attached herein]. The complaint also alleges failure to properly disclose the consumers warranty rights. The legislative history of the CLA emphasizes the importance of this disclosure requirement: Since the bulk of consumer leasing activity involves automobiles, the committee also included a requirement that express warranties made either by the manufacturer or by the lessor be identified in the lease disclosure. The Committee does not intend that the full content of such warranties necessarily be spelled out in the lease disclosure, but does expect that any such warranty will be referenced in such a way that the lessee will know whether essential warranty protections are included in the agreement. . . . . (S. Rep. No. 94-590, 1976 USCCAN 431, 4345; emphasis added) Dealers often use ambiguities regarding warranty coverage to sell consumers grossly overpriced and unnecessary extended warranties. (Appendix E) [not attached herein] Volvos cases are simply not apposite. In Shroder v. Suburban Coastal Corp., 729 F.2d 1371 (11th Cir. 1984), the principal violation was that the terms annual percentage rate and amount financed were printed with equal conspicuousness, whereas TILA requires that annual percentage rate be more conspicuous. In Wilson v. American Cablevision of Kansas City, 133 F.R.D. 573, 577 (W.D.Mo. 1990), plaintiff sought $1,000 statutory damages for each of 198,000 class members, even though neither plaintiff nor any member of the alleged 198,000 person class, in fact suffered any economic, pecuniary, or out of pocket financial loss, injury or damages. Here, plaintiff alleges that Volvo imposes unreasonable charges which are not accurately disclosed. Volvos charge for voluntary early termination requires that plaintiff pay $25,000 for a defective $22,000 car. Volvos charge for early termination by default is that plaintiff must pay all of the lease payments ($23,400) plus interest at 12%. A requirement that a lessee pay over $20,000 to get out of a lease because he is not satisfied with the vehicle is not a game to the average working man or woman. As noted above, the fact that Shepherd has not yet paid Volvos charges for voluntary early termination or early termination by default does not mean that he has not been damaged. Johnson v. Steven Sims Subaru and Subaru Leasing, supra, 1993 U.S.Dist. LEXIS 11694 (N.D.Ill., August 20, 1993). The obligation exists. Volvo also states that it has ceased the practices complained of. However, nothing is offered in support of this statement except a conclusory affidavit that VCFI has taken over the leasing of Volvos and that [t]he standard lease form utilized by VCFI differs substantially from the Lease form 82088 previously used by VFNA. The new lease form is not

Q. And do you intend to exercise that right? A. I will question anything I dont understand. Q. But in terms of the day-to-day conduct of the litigation, who do you think has the responsibility for that? You or A. All of us do. I stay in contact with the attorneys. Q. How often have you meet with your attorneys in this case? A. What is the definition of meet with? Physically sitting at a table or maintaining communications? Q. Lets try the first one first. How often have you been in the same room with your counsel to discuss this lawsuit? A. I would use the term numerous. And that would be ambiguous, but I havent counted them. But [about] eight? (Shepherd Dep., pp. 7576) It is well established that plaintiff is entitled to rely on the expertise and experience of her counsel for their advice and guidance in the matter. . . . Wells v. HBO & Co., CCH Fed.Sec. L.Rptr. [1991 Transfer Binder] k96,009, p. 90,054 (N.D.Ga. 1991). Accord, Surowitz v. Hilton Hotels, 383 U.S. 363 (1966); Hernandez v. United Fire Ins. Co., 79 F.R.D. 419, 426-7 (N.D. Ill. 1978); Heastie v. Community Bank, 125 F.R.D. 669 (N.D.Ill. 1989); Aguirre v. Bustos, 89 F.R.D. 645 (D.N.M. 1981); Georgia State Conference v. State of Georgia, 99 F.R.D. 16, 34 (S.D.Ga. 1983); Scholes v. Stone, McGuire & Benjamin, supra, 143 F.R.D. at 186; In re AM International, Inc. Securities Litigation, 108 F.R.D. 190, 197 (S.D.N.Y. 1985) (a great deal of reliance on the expertise of counsel is to be expected). The record shows that plaintiffs participation in the litigation is more than adequate. He understands the claims asserted, keeps in frequent contact with counsel, and questions anything they do which he does not understand. Nothing more is required. E. COORDINATION WITH THE NEW YORK ACTION DOES NOT IMPACT ON ADEQUACY OF REPRESENTATION Grasping at straws, Volvo claims that Shepherd has inexplicably elected to leave the absent New York members of the putative class unrepresented. (Def.Rsp., p. 20) In fact, plaintiffs counsel worked out an agreement with the attorney bringing the New York action, who believe that they can obtain damages equivalent to those available under the CLA under New York law. Volvo cites no case suggesting that a class representative must bring suit on behalf of as many people as possible, or that coordination with other litigation covering some of the same people is not appropriate. On the contrary, the Manual for Complex Litigation, 2d ed., 31.31, states that in the event of overlapping federal and state cases, [t]he attorneys should . . . confer and develop ways to avoid conflicts and duplication. Should the Court not approve of a class definition excluding New York lessees, plaintiff requests that they be included, in which case alternative arrangements will be made with counsel in the New York case. IV. THE VIOLATIONS ALLEGED ARE NOT TRIVIAL OR UNIMPORTANT Volvos characterization of CLA disclosure requirements as a TILA game of gotcha (Def.Rsp., p. 3 n. 2) is unfounded

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provided, and there is no basis from which one might conclude that it conforms to the requirements of law. Indeed, the omission of the new lease form strongly suggests that it does not. Moreover, Volvo is continuing to enforce the old leases against the lessees who signed them. This is not a case, such as Shroder, where issuing new forms prevents further harm to the public. V. VOLVOS CHALLENGE TO PREDOMINANCE IS NOTHING LESS THAN AN ARGUMENT THAT NO TRUTH IN LENDING OR CONSUMER LEASING ACT CASE IS SUITABLE FOR CLASS CERTIFICATION As noted previously, Congress contemplated that the private class action would be the principal enforcement mechanism for the TILA and CLA. Consequently, it is not open for Volvo to argue that no TILA or CLA claims are suitable for class certificationCongress has expressly determined otherwise. Volvos assertion that individual issues predominate is nothing more than a thinly-disguised argument that considerations inherent in all TILA and CLA cases make them inappropriate for class adjudication. Both TILA and the CLA are limited to non-business transactions. With certain exceptions, both are limited to transactions under $25,000. Volvo claims that a class action cannot be maintained because it would be necessary to ascertain whether each transaction is really for personal purposes and is under $25,000. (Def.Rsp., pp. 2224) A. PERSONAL TRANSACTION REQUIREMENT In Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161, 165 n. 4 (7th Cir. 1974), the Court of Appeals held that a TILA class action should not be denied on the ground that TILA only applies to non-business transactions if the defendants records indicate which transactions are consumer transactions. The same principle applies under the CLA. Simon v. World Omni Leasing Inc., 146 F.R.D. 197, 200 (S.D.Ala. 1992). Since it is always possible that some transactions were for business purposes, accepting Volvos argument that the need to exclude business transactions always defeats a TILA or CLA class action would effectively repeal the specific Congressional authorization for class actions in 15 U.S.C. 1640. Volvo states that the customers statement of purpose is not conclusive. (Def.Rsp., p. 22, n. 15) However, we are not dealing with the customers statement of purpose, but with the statements of Volvo and its dealer-agents in Volvos business records. Volvo and its dealers have other information available to them besides the customers statement of purpose. For example, the credit application shows whether the customer is an employee or engaged in a business. The customer must also furnish insurance information, which should also indicate the use of the vehicle. Further, to the extent Volvo and its dealers rely on the lessees statement, a lessee has no incentive to falsely state that his or her lease is for consumer purposes if it is in fact for business purposes. Lease payments are tax-deductible to the extent that the leased vehicle is used for business purposes, but not if the leased vehicle is used for consumer purposes. (Indeed, the deductibility of lease payments on a business

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lease is one of the best selling points a car dealer has for a lease.) A lessee who intends to deduct the lease payments obviously is not going to invite an IRS investigation by stating on the lease form that the lease is for consumer purposes. There is no economic incentive to state that the lease is for consumer purposes if it is not true. Volvo cites no case in which a business which not merely makes the disclosures required by TILA or CLA but states in its documents that the transaction is for nonbusiness purposes has been allowed to challenge its contemporaneous statements. The decisions cited on this point by Volvo23 are all cases where it was impossible to tell from the defendants records whether the transaction was for a business purpose. Volvos suggestion that its business records may be false is the type of specious individual issue that courts have not allowed to impede class certification. Class action rules do not allow a defendant to avoid class certification automatically . . . by dreaming up a theoretical defense requiring individual inquiries, for which there is little basis in fact. Hurt v. Midrex Division, 556 P.2d 1337, 1339 (Ore. 1976).24 If a defendant could defeat certification by baldly stating that its business records listing information about its customers transactions might be false, no class action would ever be certified. The need to inspect lease files and note whether the personal use box is checked is ministerial in nature, and hardly precludes class certification. Heastie v. Community Bank of

23 Parker v. George Thompson Ford, Inc., 83 F.R.D. 378 (N.D.Ga. 1979) (purchases of trucks and other vehicles, apparently undocumented as to purpose); Berkman v. Sinclair Oil Corp., 59 F.R.D. 602 (N.D.Ill. 1973) (credit card purchases of gasoline); Zeltzer v. Carte Blanche Corp., 76 F.R.D. 199 (W.D.Pa. 1977) (purchases of airline tickets with Carte Blanche cards, as likely to be for a business trip as for personal pleasure); Rodriguez v. Family Publications Services, Inc., 57 F.R.D. 189 (C.D.Cal. 1972) (subscriptions to publications). Rollins v. Sears, Roebuck & Co., 71 F.R.D. 540, 544 (E.D.La. 1976), found that this objection to class certification was not valid where it could be readily resolved. George v. Beneficial Finance, 81 F.R.D. 4 (N.D.Tex. 1977), does not address this objection at all. Moreover, in all of the cases finding a problem in this regard except Zeltzer the reference to the purpose of each transaction appears to have been thrown in after the court determined to deny a class on other grounds, such as the potentially annihilating liability that would result from awarding Truth in Lending statutory damages to each member of a large class, prior to the amendment capping statutory damages in a class action. 24 For example, in a securities fraud action, the unrealistic possibility that defendants would engage in the futile exercise of attempting to prove nonreliance by specific class members does not defeat class certification. In re LTV Securities Litigation, 88 F.R.D. 134, 143 n. 4 (N.D.Tex. 1980); accord, Weinberger v. Jackson, 102 F.R.D. 839 (N.D.Cal. 1984) (same; court held that the conjecture of disparate reliance by the putative class members furnished no basis for a finding that common issues did not predominate); Martino v. McDonalds System, Inc., 86 F.R.D. 145 (N.D.Ill. 1980) (in franchisee class action, speculative need to examine the circumstances of each individual franchise no basis for denying class certification).

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Similarly, in Haynes v. Logan Furniture Mart, Inc., supra, 503 F.2d 1161, 1165 n. 4 (7th Cir. 1974), the court held that the possibility that counterclaims will be filed with respect to delinquent accounts did not bar a class action, noting the need for class actions to prevent violators of the Act from limiting recovery to a few individuals where actual, widespread noncompliance is found to exist. Id., 503 F.2d at 1164. Accord, Simon v. World Omni Leasing, supra. B. CONGRESSIONAL INTENT Allowing the threat of counterclaims to defeat a class action would make the class action device unavailable in all TILA and CLA cases, contrary to the intent of Congress. Any business which has enough customers to warrant a class action is likely to be owed money by at least a few of the customers. Notwithstanding this, Congress decided that the private class action should be the principal enforcement mechanism for TILA and CLA. Volvo is again arguing that an inherent characteristic of all TILA and CLA class actions precludes class certification. Accepting such an argument would do violence to the Congressional authorization of class actions in 15 U.S.C. 1640. It should therefore be rejected. C. ABSENT CLASS MEMBERS ARE NOT PARTIES Although a few early cases held otherwise, the current view is that strong reasons support a determination that Rule 13 governing counterclaims is inapplicable in class action suits based on the language of Rule 13 as well as its underlying policies. 1 Newberg and Conte, Newberg on Class Actions (3d ed.), 4.34, p. 4146. Most recent authority holds that absent class members are not parties subject to counterclaims.28 One commentator has noted that allowing counterclaims against absent class members is fundamentally inconsistent with the basic policies underlying Rule 23. J. Steinman, The Party Status of Absent Plaintiff Class Members: Vulnerability to Counterclaims, 69 Georgetown L. J. 1171, 1214 (1981). Professor Steinman suggests that courts should exercise their authority under Fed.R.Civ.P. 23(d) to prohibit counterclaims against individual members of a plaintiff class unless the defendant demonstrates (1) that specific and substantial judicial economies will result from allowing the proposed counterclaims, (2) substantial prospective economies to the defendant from adjudicating the proposed counterclaims with the class litigation, (3) substantial prejudice to defendants if not permitted to assert their claims as counterclaims, (4) proof that the
28 Roberts v. Heim, 130 F.R.D. 416, 422 (N.D.Cal. 1988); In re Sugar Industry Antitrust Litigation, 73 F.R.D. 322, 349 (E.D.Pa. 1976) (absent class members are not parties for purposes of Rule 13 counterclaims); Donson Stores, Inc. v. American Bakeries Co., 58 F.R.D. 458, 489 (S.D.N.Y. 1973) (since Rule 23 contemplates an adversary contest involving only the representative members of the class, with all other members of the class being permitted passively to await the outcome of the principal suit, the absent class members are not parties for purposes of Rule 13); Hill v. A-T-O, Inc., 1975-1 CCH Trade Cas. k60,235 (S.D.N.Y. 1975) (same); Serpa v. Jolly King Restaurants, Inc., 1974-2 CCH Trade Cas. k75,301 (S.D.Cal. 1975) (same); Dennis v. Saks & Co., 1975-2 CCH Trade Cas. k60,396 (S.D.N.Y. 1975) (same).

Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989).25 Indeed, the business/consumer classification is one of the fields of Volvos computer system, and we believe that the computer can print out lists of the consumer and business lessees.26 B. AMOUNT LIMITATION The need to determine whether the contractual obligation is less than $25,000 is also present in all TILA and CLA cases. It is a simple matter of computation. Again, the need to inspect documents is not the sort of individual issue that precludes class certification. Heastie, supra. VI. VOLVOS THREAT TO ASSERT COUNTERCLAIMS DOES NOT PRECLUDE A CLASS ACTION Volvo asserts that it will bring counterclaims against class members and that this bars a class action. For multiple reasons, the contention is without merit: A. CONTROLLING AUTHORITY Volvos contention is inconsistent with controlling authority, which it fails to disclose. The Court of Appeals has held that certification of a TILA class action should not be denied on the ground that counterclaims might be filed. Roper v. Consurve, Inc., 578 F.2d 1106, 1116 (5th Cir. 1978), affd, 445 U.S. 326 (1980).27 In Roper, the district court alluded to the potential problem of counter-claims in denying a class. The Court of Appeals held that the court went beyond the bounds allowed for the exercise of its discretion (578 F.2d at 1111). With reference to the threatened counterclaims, the court held that even if the counterclaims were allowable, the court has the continuing authority under Rule 23 to issue a supplemental order excluding counter-claim defendants from the plaintiff class or separating and severing the class into two different classes, one with counter-claims and one without counterclaims. (578 F.2d at 1116) The court endorsed the statement of another district court that The potential assertion of counter claims against these few members of the proposed class cannot be allowed to defeat an otherwise valid class action when to do so would effectively deprive thousands of class members of the relief to which they are entitled. (Id.)
25 Securities fraud cases are routinely certified notwithstanding the need for each class member to show that he or she purchased and/or sold the security in question on dates within the class period, and the amounts of the transactions. E.g., Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1976). Antitrust cases are routinely certified notwithstanding even more complex individual issues relating to proof of purchase and damages. In re Corrugated Container Antitrust Litigation, supra, 80 F.R.D. 244, 256 (S.D.Tex. 1978). 26 Although plainly relevant to class certification issues such as this, Volvo has refused to produce its manuals, which would identify the fields that can be searched by the computer. After attempting to deprive plaintiff of the information needed to respond, Volvo then argues that it would be too difficult to determine whether a given lease is a consumer lease. Volvos refusal is the subject of plaintiffs pending motion to compel. 27 Since this decision was issued prior to 1980, it is binding precedent within the Eleventh Circuit.

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counterclaims are not asserted as a tactic to take undue advantage of absent class members, as a stratagem to reduce the number of claimants or to defeat certification, or for other purposes at odds with the policies of rule 23, (5) that allowance of the counterclaims will not render the plaintiffs class action unmanageable or otherwise provide a ground not to certify the plaintiff class, or that defendants need justifies this extreme loss, and (6) that allowing the counterclaims would not seriously threaten the vindication of substantive policies or the deterrence of wrongful conduct. 69 Georgetown L. J. at 121819; emphasis added. The decisions cited by Volvo often assume that counterclaims may be asserted against unnamed class members without significant, or indeed any, discussion of the issue. Often, the discussion concerns whether the counterclaims are compulsory or permissive, not on whether class members are parties. All of the cases cited by Volvo predate the Court of Appeals decision in Roper that the assertion of counterclaims is not a reason for denying class certification. D. IF PLAINTIFF IS RIGHT, VOLVO HAS NO COUNTERCLAIMS Volvos counterclaims would be largely based on the default and early termination provisions of the leases. If Shepherd prevails, Volvo has no such counterclaims. The counterclaims seek to inflict the damage which plaintiff seeks to recover or eliminate. Volvos citation of cases involving counterclaims based on alleged liabilities which would not be extinguished by the successful prosecution of the class claims, such as George v. Beneficial Finance, 81 F.R.D. 4 (N.D.Tex. 1977), is at best misleading. Anticipating this, Volvo asserts that the alleged CLA violations neither invalidate the leases nor prevent VFNA from enforcing its rights under the leases. (Def.Rsp., p. 24) While a violation of CLA disclosure obligations does not render the affected lease null and void, Adams v. Trust Co. Bank, 426 S.E.2d 36, 38 (Ga.App. 1992), plaintiff has never contended that this is the case. Rather, plaintiffs position is, and has always been, that (i) the imposition of a charge which is not accurately and comprehensibly disclosed causes a consumer actual damage in an amount equal to the charge, and (ii) if a lease specifies an unreasonable early termination charge, it is not enforceable.29 Most violations of TILA and CLA disclosure requirements take one of two forms: (i) inaccurate numerical disclosures; (ii) required disclosures of key contract terms are either omitted or incomprehensible. In the context of incorrect numerical disclosures, TILA explicitly provides that a consumer may not be held liable for an amount or rate of finance charge in excess of that specified. 15 U.S.C. 1640(b).30 Since civil liabil29 The unreasonable portion is clearly not collectible. Moreover, state courts confronted with unreasonable liquidated damages provisions in contracts decline to enforce them rather than rewrite contracts to provide for reasonable liquidated damages. 30 A creditor or assignee has no liability . . . for any failure to comply with any requirement imposed under this chapter or chapter 5, if within sixty days after discovering an error . . . and prior to the institution of an action under this section or the receipt of written notice of the error from

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ity under the CLA is also based on 15 U.S.C. 1640, the same principle should apply. The decisions hold that the imposition of charges at an amount or rate exceeding that disclosed inflicts damage and entitles the consumer to restitution of the overcharge. Goldman v. First Natl of Chicago, 532 F.2d 10, 15 (7th Cir. 1976) (if in fact a finance charge was imposed and an interest rate applied when proper disclosures not made, actual damages would result); First Acadiana Bank v. FDIC, 833 F.2d 548 (5th Cir. 1988) (affirming FDIC order directing restitution of fee imposed by Bank that should have been, but was not, disclosed as part of finance charge); Sentinel Fed. S. & L. Assn v. OTS, 946 F.2d 85 (8th Cir. 1991) (same); Ransom v. S & S Food Center of Florida, 700 F.2d 670, 677 (11th Cir. 1983), affg Civ.A. 76-383-H (S.D.Ala., Sept. 11, 1979) (Appendix F) [not attached herein] (affirming award of actual damages under Truth in Lending equal to the additional finance charge paid by each class member which exceeded the legally permissible finance charge); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa. 1987) (same principle used in governmental enforcement actions such as Sentinel and Acadiana governs determination of whether there are actual damages under Truth in Lending Act); In re Stewart, 93 B.R. 878, 883, 886 (Bankr. E.D.Pa. 1988) (the failure to disclose an excess finance charge imposed in the transaction gives rise to an additional claim for actual damages in that amount under 15 U.S.C. 1640(a)(1)).31 It is not necessary for the consumer to prove that he or she could have gotten credit at a rate less than that actually imposed. TILA and CLA also require disclosure of certain key contract terms. Where these disclosures are either omitted or incomprehensible, courts have held that the improperlydisclosed terms cannot be enforced against the consumer. Preston v. First Bank of Marietta, 16 Ohio App.3d 4, 473 N.E.2d 1210 (1983). In Preston a lender failed to disclose a variablerate feature as required by TILA. The court held that such a violation would inflict actual damage equal to the amount of the excess interest over the original contract terms, and that instead of enforc[ing] the contract to require the mortgagors to pay the excess interest and then grant[ing] the mortgagors actual damages equal to the sum it just ordered them to pay, the court could restrain enforcement of the improperlydisclosed term with respect to future interest increases. (473 N.E.2d at 1215) Accord, First S. & L. Assn v. Kern, 55 Ill.App.3d 838, 370 N.E.2d 1326, 1330 (1977) (where TILA statement disclosed lesser charges than provided for in note, disclosure estopped the plaintiff from demanding the larger payment which was set forth in the note).
the obligor, the creditor or assignee notifies the person concerned of the error and makes whatever adjustments in the appropriate account are necessary to assure that the person will not be required to pay an amount in excess of the charge actually disclosed, or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower. 31 The Uniform Guidelines for Enforcement of Regulation Z, issued before Congress adoption of the policy of restitution, provide that [w]hen there is an understated finance charge and the APR is correct, the creditor shall reimburse the overcharge (the difference between the actual and the overstated finance charge). 44 F.R. 1222 (Jan. 4, 1979).

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*** In sum, to the extent that Volvos threatened counterclaims are based on the challenged early termination and default provisions, they pose no problem because the validity of such claims will necessarily be adjudicated by adjudication of plaintiffs complaint. The Court should enter an order providing, pursuant to Fed.R.Civ.P. 23(c)(4), that any other threatened counterclaims are not being adjudicated in this litigation. This will preserve the rights of both Volvo and the class members with respect to any such disputes and be equitable to all concerned. VII. A CLASS ACTION IS NOT MERELY SUPERIOR BUT ESSENTIAL TO PROTECT THE PUBLIC Volvo argues (Def.Rsp., p. 14) that a class action is not superior because attorneys fees are available under the CLA. This is unfounded. Antitrust class actions are certified even though attorneys fees are available and the individual class members claims are often much larger. The issue is not the abstract size of the claim, but whether it is economical to pursue the claims given the time and energy required. Skelton v. General Motors Corp., 1985-2 Trade Cas. (CCH) k66,683, at p. 63,218 (N.D.Ill. 1985). The volume of paper that this case has already generated establishes that individual claims are not economically feasible. A holding that Volvos leases violate the CLA or imposes unreasonable penalties would affect thousands of transactions through the operation of collateral estoppel. Volvo therefore would defend an individual action with equal vigor. No private attorney is going to deliberately undertake a case in which he gets paid the value of his time if he succeeds and convinces a court to allow a fee petition enormously larger than the recovery for his individual client. Furthermore, if individual actions are feasible, the courts will be burdened with multiple actions based on the same facts and presenting the same legal issues. There is no reason for this. Ingram v. Joe Conrad Chevrolet, Inc., 90 F.R.D. 129, 133 (E.D.Ky. 1981). What we obviously are looking for is achieving the maximum bang for the judicial buck. Skelton v. General Motors Corp., supra. What Volvo really wants is to pick off each lessee in piecemeal fashion. This is exactly what class actions are intended to prevent. Weeks v. Bareco Oil Co., 125 F.2d 84, 90 (7th Cir. 1941). CONCLUSION For the reasons stated above and in our initial memorandum, the Court should certify a class as requested by plaintiff. Respectfully Submitted, [Attorney]

The imposition of improperly-disclosed terms is thus treated in the same manner as the imposition of improperly-disclosed finance chargesthe creditor or lessor can get what was properly disclosed, and no more. This rule is the only economically justifiable one. Early termination charges under a consumer automobile lease typically amount to several thousand dollars. (Report of the Attorney General of New York, Attachment A to plaintiffs opening memorandum in support of class certification) Since up to 80% of lessees terminate early, UPI Dispatch, June 19, 1989 (Appendix D) [not attached herein], the termination liability is effectively a component of the price. Where, as here, success on the class claim would defeat the existence of the alleged obligation, courts have found no problem in certifying classes, even where the class claim is asserted as a counterclaim to an action to enforce the obligation.32 Significantly, the Cook County Circuit Court case in which plaintiffs counsel successfully prosecuted a CLA class action (Plaintiffs Motion for Class Certification, Attachment D) involved a class counterclaim in an action seeking to enforce the early termination liability; the action was ultimately settled (after a contested class certification and summary judgment) by an agreement that Lynch Leasing would not collect early termination charges from Joyce Moore or anyone else against whom they had been assessed but not collected, and would refund 2/3 of the charges to everyone from whom they had already been collected. E. EVEN IF COUNTERCLAIMS MAY BE ASSERTED, THE COURT NEED NOT ENTERTAIN THEM Volvo cites Parker v. George Thompson Ford, Inc., 83 F.R.D. 378, 381 (N.D.Ga. 1979), and Carter v. Public Finance Corp., 73 F.R.D. 488 (N.D.Ala. 1977), for the proposition that it would be unfair to the class defendant to decline to entertain counterclaims against class members because this would result in the counterclaims being barred. Volvo fails to disclose that the United States Supreme Court subsequently held that a judgment in a class action bars only those claims expressly included in the class action. Cooper v. Federal Reserve Bank, 467 U.S. 867 (1988). Fed.R.Civ.P. 23(c)(4) specifically authorizes the court hearing a class action to include or exclude particular matters from the class litigation. Cooper holds that what is excluded is purely a matter of judicial administration and that matters excluded by the court are not barred by res judicata.

32 Weston Instruments, Inc. v. Systron-Donner Corp., 203 USPQ 318 (N.D.Cal. 1978) (suit brought for patent infringement; counterclaim alleging that patent was invalid certified as class action); United States v. Davis, 756 F.Supp. 1162 (E.D. Wis. 1991) (counterclaim/third-party complaint alleging that the debts sought to be enforced by the Government were unenforceable, and seeking declaration to that effect on behalf of defendant and all other debtors similarly situated); Fidelity Financial Services v. Hicks, 214 Ill.App.3d 398, 574 N.E.2d 15 (1st Dist. 1991) (suit brought to enforce note; class counterclaim alleged that note and others similarly situated were usurious and debtors did not owe money); Luster v. Jones, 70 Ill.App.3d 1019, 388 N.E.2d 1029 (1st Dist. 1979) (suit brought to enforce lien for certain charges relating to condominium; class counterclaim alleged that charges were fraudulent and that none of debtors owed money).

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Appx. M.6

M.6 Deceptive Practices Case Vendors Single Interest Insurance (Ortiz)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) CARMEN ORTIZ, et al., ) Plaintiffs, ) ) v. ) ) GMAC, INC. and MIC, INC., ) Defendants. ) ) PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF CLASS CERTIFICATION I. INTRODUCTION Defendants, seeking to prevent class certification, argue two elements of Section 2-801 of the Illinois Code of Civil Procedure are not met. They claim that common questions of fact do not predominate and that Mrs. Ortiz is not an adequate class representative. Defendants arguments are based on their misstatement of: the class definitions and claims; the applicable legal standards for class certification; and the gist of Mrs. Ortiz deposition testimony. II. COMMON QUESTIONS OF FACT OR LAW PREDOMINATE The class in Count I is made up of all persons who: (a) financed purchases of motor vehicles for their own personal and/or household use through GMAC; (b) purchased the vehicle from an automobile dealer located within the state of Illinois; and (c) had single interest physical damage insurance purchased from them by GMAC through MIC after December 2, 1980. There is also a subclass of plaintiffs who also: (d) had that motor vehicle damaged while the MIC policy was in force and either received no payment or credit from the MIC insurance policy or were required to surrender the automobile to GMAC in order to receive the payment or credit. Compl. Count I, k 3. In order to support their argument that common questions of fact do not predominate, defendants have misstated the class definition. Defendants claimed the class was composed of persons who thought single interest would repair their cars and were supposedly deceived by the nature of single interest coverage. Defendants Memorandum In Opposition To Class Certification (p. 2). Their definition is not the one before the court. While Mrs. Ortiz deposition testimony shows she did believe single interest insurance would repair her car, Count I of the complaint is based on the Illinois Consumer Fraud and Deceptive Business Practices Act, (Consumer Fraud Act) Ill. Rev. Stat. ch. 121-1/2, 261 et seq., which provides that deceptive acts are unlawful whether any person has in fact been misled, deceived or damaged thereby. Ill. Rev. Stat.

ch. 121-1/2, 262. Brooks v. Midas International Corp., 47 Ill. App.3d 266, 361 N.E.2d 815, 819 (1977). It is the intent of the seller and his conduct, and not reliance or belief of the consumer, which is the pivotal point on which an action arises. Id at 819. In Count II the breach of contract claim is based on construction of the insurance policy. The breach of fiduciary duty claim, in Count III, turns on the facts surrounding the relationship between class members and GMAC and the Sales Finance Agency Act (SFA), Ill. Rev. Stat. ch. 17, 5201 et seq. claims in Count IV raise the issue as to whether defendants conduct violated the SFA. Code of Civil Procedure 2-801(2) requires that common questions of fact or law predominate over any questions affecting only individual members. Ill. Rev. Stat. ch. 110, 2-801(2). The predominance requirement is to be construed to permit class treatment although some individual differences in proof between class members might be present. Steinberg v. Chicago Medical School, 69 Ill.2d 320, 371 N.E.2d 634, 709-10 (1977) (class of medical school applicants alleging breach of contract regarding school admission policies certified over objection that there would be some differences in proof elements for class members); Miner v. Gillett Co., 87 Ill.2d 7, 428 N.E.2d 478, 891-893 (1981) cert. dismissed 103 S. Ct. 484 (1982) (class certified over defendants objection that common questions of fact under Consumer Fraud act did not predominate.) Similarly, in Luster v. Jones, 70 Ill. App.3d 1019, 388 N.E.2d 1029, 1040 (1979), a common law fraud action, a class of condominium purchasers were allowed to proceed as a class action over the defendants contention that there were individually negotiated transactions which defeated the predominance requirement. In Spirek v. State Farm Mutual Auto Insurance, 65 Ill. App.3d 440, 382 N.E.2d 111, 119 (1978), the court allowed a class action to proceed while rejecting the insurers claim that individual negotiations prevented class certification. In the case before the Court defendants subjected all class members to the same GMAC business procedures. They all: received the same documents concerning single interest insurance; had the same policy purchased by GMAC from MIC; were charged for the insurance premium and interest; and were denied coverage if they made claims to have their cars repaired (unless they turned their car over to GMAC to be treated as a repossession). The common question of fact and law for all class members under each count of the complaint are set out in plaintiffs opening class memorandum at pp. 7-10. Although there may have been variations in phone conversations between some class members and employees at GMAC, those conversations do not prevent a finding that common questions of fact or law predominate in this case.33 Defendants have cited Goetz v. The Village of Hoffman Estates, 62 Ill. App.3d 233, 378 N.E.2d 1276 (1978) which held that common questions of fact did not predominate in a negligence action. There is no negligence count in plaintiffs complaint. In Goetz the plaintiff filed suit against the defendants for negligently selecting, installing, and inspecting electrical wiring in the
33 Carl Grose, Dealer Relations Manager, at GMACs Lombard Office guessed that about half of the customers who have MIC insurance added to their contract by GMAC are not contacted by phone prior to the purchase by GMAC. Crose Dep. pp. 11516, 186.

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people with the same problem she had (Ortiz Dep. p. 15); individually and on behalf of all others similarly situated meant she was fighting for herself and others (Ortiz Dep. pp. 15-16); she represented a class; her general obligation as a class representative was to help others; and as class representative she had to bear the costs of the lawsuit and that one of those costs was notice to the class. Ortiz Dep. p. 188-9. Defendants attorneys deposition tactic, in anticipation of making arguments that plaintiff was not an adequate class representative, was to ask plaintiff about her personal knowledge of the underlying facts and theories of the complaint. They have cited portions of the deposition in which Mrs. Ortiz was asked, what led her to believe the complaints allegations, Upon information and belief, the premium charged for the insurance was excessive for the actual coverage. was true. Another question was, Is there anything that leads you to believe that GMAC profited on the insurance by obtaining it from its subsidiary. Her lack of specific knowledge of all underlying facts and theories of the complaint does not make her an inadequate class representative. Hernandez v. United Fire Insurance, 79 F.R.D. 419, 426-7 (N.D. Ill. 1978). In Surowitz v. Hilton Hotel, 383 U.S. 363 (1966) the court held that the named plaintiffs lack of first hand information of the details of the claims in a securities case did not prevent her from being an adequate class representative. The class representative does not normally do class research and discovery as this is the function of his or her attorneys. In Hernandez v. United Fire Insurance Company, supra, 79 F.R.D. at 425, Judge Bua, finding the class representatives adequate, certified a class of consumer purchasers of fire insurance over objections nearly identical to those of defendants in this case.36 Two other cases denying class certification which defendant has cited (In re Hotel Telephone Charges, 500 F.2d 86 (9th Cir. 1974); Cotchett v. Avis Rent-A-Car System, Inc. 56 F.R.D. 549 (S.D.N.Y. 1972)) were ones in which the court concluded the suits were attorney inspired, the potential recoveries for each individual class member was minuscule or nonexistent (while the potential attorneys fees were enormous), and the classes unmanageable. In both cases the courts pointed out that the named plaintiffs were also the attorneys acting as counsel for the class thereby raising a substantial conflict regarding their representation of the interests of other class members. The second basis on which defendants argue Mrs. Ortiz is not an adequate class representative is that the facts on which her own case rests are not typical of those of other class members. The historical and practice notes to Code of Civil Procedure 2-801, Ill. Rev. Stat. ch. 110, 2-801 point out that the typicality requirement of Federal Rule 23(a)(4) is not found in 2-801 but is replaced by subsections (3) and (4) of the Illinois provi36 In Massengill v. Board of Education, 88 F.R.D. 181 (N.D. Ill. 1980), a case cited by defendants, the court held that the statements by the child plaintiff and his mother, in a case where they were challenging the schools disciplinary procedures, showed a lack of concern toward the childs education and a lack of responsibility for the rest of the class. The court also based its decision on issues of commonality and numerosity. In contrast Mrs. Ortiz has shown she is a responsible class representative in her deposition testimony by stating her understanding of the class device, the complaint and her responsibilities as a class representative.

home of the named plaintiffs and the proposed class. The court denied class certification stating that proof of negligence in wiring one home would not prove similar negligence in another. Significantly, the Goetz court (378 N.E.2d at 1279) distinguished Brooks v. Midas International Corp., 477 Ill. App.3d 266, 361 N.E.2d 815 (1975), a class action suit for violation of the Consumer Fraud Act based on defendants charging of excess amounts for the installation charge for the replacement of a muffler. One of Mrs. Ortiz Consumer Fraud Act claims is that defendants charged an excessive rate for the insurance. Defendants cited one case (Rice v. Snarlin, 131 Ill. App.2d 434, 266 N.E.2d 843 (1970)) which did deny class certification based on a Consumer Fraud Act claim. Rice lies in the graveyard of pre-Illinois class statutory provision cases which the Illinois Supreme Court described as corpses regarding their precedential value on the predominance requirement. Steinberg v. Chicago Medical School, supra, 371 N.E.2d at 643. Defendants also cited three cases decided in other jurisdictions which denied class certification against insurers based on contract claims arising out of the contract of insurance.34 However, Illinois courts have taken the opposite view in such class cases. Van Vactor v. Blue Cross, 50 Ill. App.3d 709, 365 N.E.2d 638 (1977) (class of all persons whose claims for dental benefits were denied based on the medically necessary requirement of contract); Carrao v. Health Care Service Corp., 118 Ill. App.3d 417, 454 N.E.2d 781 (1983) (class of persons whose medical claims were denied as not medically necessary). III. MRS. ORTIZ IS AN ADEQUATE CLASS REPRESENTATIVE The three part test regarding adequacy of representation requires that: (1) there are no antagonistic interests between plaintiff and the class members, (2) the attorneys representing the class be qualified and able to conduct the class litigation and (3) the action not be collusive or friendly. Miner v. Gillett, 87 Ill.2d 7, 428 N.E.2d 484 (1982), cert. denied 103 S. Ct. 484 (1982). These requirements are met in the present case. Defendants have attacked Mrs. Ortiz personally as an inadequate class representative by citing some snippets of the full day of deposition testimony they took from her. The deposition transcript is 231 pages long.35 Their characterization of Mrs. Ortiz lack of knowledge of the lawsuit or her duties as a class representative is wrong. Mrs. Ortiz was able to state in answer to questions that: a class action was a lawsuit for all
34 Johnson v. Travelers Ins. Co., 515 P.2d 68 (Nev. 1973); Calabria v. Associated Hospital Service, 60 F.R.D. 498 (S.D.N.Y. 1973); Gordon v. Aetna Life Insurance, 467 F.2d 717 (D.C. Cir. 1971). 35 Defendants attorney, knowing Mrs. Ortiz education consisted of completing high school (Ortiz Dep. p. 8), sought to make Mrs. Ortiz deposition difficult for her by often asking questions about legalese in the complaint. What does individually and on behalf of all other similarly situated mean? Ortiz Dep. p. 15. Do you understand what the relief requested in the complaint is? Dep. p. 15. What do you understand by the term pattern and practice, if anything? Ortiz Dep. 182. What leads you to believe that the defendants have engaged in a pattern and practice of deceptively concealing and representing the actual coverage of the physical damage insurance? Dep. p. 178.

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sion. Ch. 110, S.H.A. 2-801 p. 92. The duty to represent fairly and adequately will not be confused with a similarity in claims or secondary inquiry about common interests but will focus on the degree the plaintiff, taking all aspects of their case and their situation as individuals into consideration, will be able to adequately represent the class. Id. Even if Illinois had expressly adopted the typicality requirement of Federal Rule 23, Mrs. Ortiz claims satisfy that requirement.37 IV. A RULING ON CLASS CERTIFICATION SHOULD BE MADE PRIOR TO A RULING ON THE MERITS Defendants have asked the court to rule on their motion for summary judgment before ruling on class certification. However, a court may not conduct a preliminary inquiry into the merits in order to determine whether a suit should be maintained as a class action. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S. Ct. 2140, 40 L.Ed.2d 732, 748-49 (1974). Eirhart v. Libby-Owens-Ford Co., 89 F.R.D. 424, 429 (N.D. Ill. 1981). The two cases cited by defendants are not to the contrary. In Garcia v. Rush-Presbyterian-St. Lukes Medical Center, 80 F.R.D. 254, 267 (N.D. Ill. 1978), the court recognized the mandate of Eisen but felt that ruling didnt prevent disposition of a summary judgment motion that related to scope of the Title VII race discrimination claim first. Simmons v. Drew, 716 F.2d 1160 (7th Cir. 1983) does not contain a word of discussion on the issue as to whether summary judgment should be ruled on prior to class certification. It would appear that in Simmons no class motion was filed before summary judgment was moved for and rule on. V. CONCLUSION Plaintiff has satisfied all the requisites of class certification under Code of Civil Procedure 2-801. A class action should be certified under all counts of plaintiffs complaint. Respectfully Submitted, [Attorney]

Appx. M.7

M.7 Hospital Collection Case (Albino)

) ) ) ) ) ) v. ) ) The CITY OF CHICAGO; the ) BOARD OF HEALTH OF ) THE CITY OF CHICAGO; ) HUGO H. MURIEL, M.D., ) Commissioner of Health; DR. ) LEROY P. LEVITT, President ) of the Chicago Board of Health; ) DR. DONALD DYE, ) Administrator of Project 502 ) for the Board of Health of ) the City of Chicago ) Defendants. ) ) MARIA ALBINO, on her own behalf and on behalf of all others similarly situated, Plaintiffs, PLAINTIFFS REPLY MEMORANDUM IN SUPPORT OF CLASS CERTIFICATION Defendants make two principal arguments against class certification in their memorandum.38 First, defendants argue that persons against whom judgments have not been entered by Cook County Hospital for their delivery services cannot be class members since they have suffered no injury. Exclusion of these individuals, defendants assert, would defeat plaintiffs showing of compliance with the numerosity requirement of Rule 23(a). Second, defendants argue that if the class includes members who have not been sued, it fails to satisfy the typicality and commonality tests for class certification. Each of these arguments is wrong. I. THE PROPOSED CLASS IS PROPERLY DEFINED AND CAN CHALLENGE DEFENDANTS FAILURE TO PAY FOR CARE RENDERED AT COOK COUNTY HOSPITAL

37 In Borowski v. City of Burbank, 101 F.R.D. 59, 62 (N.D. Ill. 1984) Judge Bua stated the typicality requirement is satisfied unless the named plaintiffs present unique claims personal to them which are likely to be the major focus of the litigation. The typicality requirement is met: if the named representatives claims have the same essential claims as the claims of the class at large . . .; if they arise from the same course of conduct giving rise to the claims of other class members . . .; even if factual differences between the plaintiffs claims and claims of other class members are present. Swanson v. Wabash Inc., 577 F. Supp. 1308, 13234 (N.D. Ill. 1983). Typicality does not require that claims or defenses be perfectly co-extensive, substantial similarity is sufficient. Allen v. Isaac, 99 F.R.D. 45, 54 (N.D Ill. 1983). The deposition testimony defendants argue shows that Mrs. Ortiz facts are not typical of those of other class members is unpersuasive. The complaint alleges that defendants concealed the coverage of the physical damage insurance from Mrs. Ortiz. The deposition testimony cited by defendants (Defendants Memorandum In Opposition To Class Certification pp. 78) merely reinforced that complaint.

A. DEFENDANTS CONFUSE PLAINTIFFS CLAIM IN THIS CASE AND THE CLASS SOUGHT In this case plaintiff and class members seek the benefits to which they are entitled under Title V of the Social Security Act, known as the Maternal and Child Health Act, 42 U.S.C. 701 et seq., namely payment of the hospital charges for the delivery of their high risk infants. The defendants in their
38 Defendants do make certain other arguments which involve procedural questions and the merits of this case. Defendants seem to make an abstention or collection estoppel argument, Def. Mem. at 910, however, they cite no authority to support their position. Also defendants raise as an affirmative defense that certain class members chose to go to Cook County Hospital. These issues are not appropriate to consideration of a class motion. No inquiry into the merits of the suit can be made on a motion for class certification. Hochschuler v. Searle & Co., 82 F.R.D. 339, 343 (N.D. Ill. 1978); Helfand v. Cenco, 80 F.R.B. 1.6 (N.D Ill. 1977).

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been upheld by the Seventh Circuit. Alliance to End Repression v. Rochford, 565 F.2d 975 (7th Cir. 1977) (Class certified as all persons who engage in lawful political, religious, educational or social activities and have been, are now or may be subjected to or threatened by alleged infiltration, physical or verbal coercion, photographic, electronic or physical surveillance, summary punishment, harassment or dossier collection); Vergara v. Hampton, 581 F.2d 1281 (7th Cir. 1978). B. THE PLAINTIFF CLASS HAS SUFFERED CONCRETE INJURY AND NOT PROPERLY LIMITED TO JUST THOSE WOMEN AGAINST WHOM JUDGMENTS HAVE BEEN ENTERED The injury plaintiff and class members have suffered is denial of the benefits under Title V to which they are entitled. The courts of this Circuit have frequently found class actions to be appropriate in cases where benefits under Social Security Act programs were denied. Jimenez v. Weinberger, 523 F.2d 699 (7th Cir. 1975), cert. denied, 427 U.S. 912 (1976); Winter v. Quern, 490 F. Supp. 788 (N.D. Ill. 1980), affd 676 F.2d 276 (7th Cir. 1982). Defendants contention that only women who have had a judgment entered against them for their care at Cook County Hospital can be class members is meritless. The Supreme Court in Schlesinger v. Reservist Committee to Stop the War, 418 U.S. 208, 220 (1974), stated that a person has standing to sue whenever he suffers an injury that is actual or threatened. Here, the plaintiff class satisfied both types of injury. The women participating in the defendants Title V program whose Cook County Hospital bills have not been paid suffer actual injury in the denial of the benefits to which they are entitled. In addition they suffer financial injury to the extent that they are wrongfully compelled to make payments to Cook County Hospital for their delivery services, and if they do not make payments, their credit ratings are jeopardized by their large, unpaid hospital bills. Moreover, class members face the real threat of collection actions being filed by Cook County Hospital and having any wages which they earn garnished, as happened to plaintiff Albina. These injuries more than satisfy established standing requirements. As noted in Southern Mutual Help Association, Inc. v. Califano, 574 F.2d 518, 523 (D.C. Cir. 1977): While the injury cannot be abstract, (citation omitted), it need not be significant; and identifiable trifle will suffice. United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 689 n. 14, 93 S. Ct. 2405, 37 L.Ed. 2d 254 (1973). The injury which plaintiff and class members have suffered and continue to suffer is both actual and significant.40

Memorandum in Opposition to Certification of a Plaintiff Class (Defs. Mem.) admit referring women with high risk pregnancies to participating project hospitals, which defendants then were to pay for the delivery services rendered. Id. at 1-2. Moreover, defendants admit that they referred high risk women to Cook County Hospital for delivery of their babies. Id. at 2; Def. Answer, k 13. The plaintiff and class members seek a declaratory judgment of their rights under Title V and an order requiring the defendants to pay for the delivery services provided under the Title V program operated by the defendants. Because the relief sought takes the form of both an injunction and damages, plaintiff seeks class certification under both Rules 23(b)(2) and 23(b)(3). Certification under Fed. R. Civ. P. Rule 23(b)(2) is appropriate for that portion of the class whose hospital bills have not yet been paid. Branham v. General Electric Co., 63 F.R.D. 667 (M.D. Tenn. 1974) (Class meeting both (b)(2) and (b)(3) requirements certified under Fed. R.Civ.P. 23(b)(2)). In any event, plaintiff has satisfied the requirements for both (b)(2) and (b)(3) certification. See plaintiffs Memorandum in Support of Class Certification at 6-7. Plaintiffs proposed class includes all women at Lakeview Clinic who were affected by defendants policy against reimbursing Cook County Hospital. Specifically, the plaintiff class is defined as: All women who, on or after October 1, 1977 and before October 1, 1981, were determined eligible for free hospital services under Project 502, were enrolled at the Lakeview Clinic in that program, were referred by the Chicago Board of Health or its agents to Cook County Hospital, and received pregnancy-related treatment at Cook County Hospital which Project 502 has failed to pay for. Contrary to defendants assertion, Def. Mem. at 2, plaintiff never included the term high risk in this definition. Plaintiff did drop the term low income from the original proposed class definition but only because defendants do not employ income standards in certifying women as eligible for free hospital services. See Deposition of Dr. Donald Dye at 33. Plaintiff never has contended that all women who receive prenatal care are class members, see Def. Mem. at 2. In fact, plaintiff has already identified the 273 class members who meet the criteria in the proposed definition. If defendants patient records are accurate, these women, and no others, were assigned to Cook County after certification as high risk. Defendants have not reimbursed any of them for out-ofpocket payments to Cook County Hospital, nor have defendants paid Cook County Hospital for care provided class members who were referred to Cook County Hospital through the defendants Title V program. Deposition of Dr. Donald Dye at 60, 116.39 Thus, the class sought in this case is defined and identified with much greater specificity than other classes which have
39 Defendants persist in misreading plaintiffs claim for payment, Def. Mem. at 3. Women who paid their own hospital bills make claim for reimbursement; other women seek payment to Cook County Hospital so that their debt is extinguished. Plaintiff has used the term received payment for both groups of women.

40 Defendants have also raised a numerosity argument predicated on the success of their standing argument, i.e. if only women with judgments entered by Cook County Hospital have standing, the class is not sufficiently numerous. As discussed above, the standing argument is frivolous. Moreover, in this district a class of 25 to 50 is sufficient to satisfy the numerosity requirement, Helfand v. Cenco, 80 F.R.D. 1, 6 (N.D. Ill. 1980). Plaintiff has identified 273 class members.

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II. THE PLAINTIFF CLASS MEETS THE TYPICALITY AND COMMONALITY REQUIREMENTS OF RULE 23 Defendants assert that Maria Albinos claim is atypical because she, unlike many class members, was subjected to suit for collection of her Cook County Hospital bill. Def. Mem. at 7. Defendants apparently believe that class certification requires that the facts of each class member be similar in every respect. Defendants argument has been repeatedly rejected by the courts considering this issue.41 In Edmonson v. Simon, 86 F.R.D. 375, 381 (N.D. Ill. 1980), the court held: Typicality refers to the nature of the claim or defense of the class representative and not to the specific facts from which it arose or to the relief sought. Factual differences will not render a claim atypical if the claim arises from the event or practice or course of conduct that gives rise to the claims of the class members . . . See also, Penn v. San Jan Hospital, 528 F.2d 1181, 1189 (10th Cir. 1975); Bucha v. Illinois High School Association, 351 F. Supp. 69 (N.D. Ill. 1972). The commonality test duplicates the typicality requirement. See Plaintiffs Memorandum in Support of Class Certification, at 8. Here the common question of lawwhether defendants violated the Social Security Act and implementing regulations by failing to pay for plaintiffs care in Cook County Hospitalis clearly an issue which is amenable to class treatment. See, e.g., Simer v. Rios, 661 F.2d 655 (7th Cir. 1981). The common questions of factwhether defendants referred plaintiffs to Cook County Hospital for free hospital services and whether defendants have a policy of not furnishing such care in Cook County Hospitalalso can be adjudicated for all class members. These common issues predominate over any individual issues. The defendants seek to raise an affirmative defense which would apply to individual class members, i.e., that some class members chose to receive care at Cook County Hospital knowing that delivery would be costly while care in another hospi41 The cases defendants cite for the proposition that Maria Albinos claims are atypical and that common questions do not predominate are far afield from this case. In In re Transit Co. Tire Antitrust Litigation, 57 F.R.D. 59 (W.D. Mo. 1975), the court held that the differences in the products sold, and the marketing practices by different defendants as to different plaintiffs, were so great that common questions did not predominate. In addition, the geographic dispersion of plaintiff class members made consolidated class litigation less desirable than separate individual litigation. In Crawford v. Western Electric Co., 614 F.2d 1300 (5th Cir. 1980), the Fifth Circuit held simply that employees could not represent non-employees unless a similarity in their claims were demonstrated. In Williams v. Page, 60 F.R.D. 29 (N.D. Ill. 1973), the court found that a class was inappropriate because of the imprecise definition of the class which failed to specify who was sought to be included and for what dates. Neither problem exists in this case since plaintiff has identified the 273 individuals included in the class. Finally, in Greenhouse v. Greco, 617 F.2d 408 (5th Cir. 1980), the court does not even discuss the typicality requirement as applied to a plaintiff class.

Appx. M.7

tal would be free.42 If indeed this is a defense, it can be tried individually later after common questions are adjudicated. Technograph Printed Circuits Limited v. Methode Electronics, 285 F. Supp. 714 (N.D. Ill. 1968) (Patent infringement issues tried separately after determination on merits of class claim). The existence of individual defenses thus does not defeat plaintiffs motion for class certification. Hochshuler v. Searle & Co., 82 F.R.D. 339 (N.D. Ill. 1978) (court in securities fraud class action notes that if individual issues arise it is empowered at any time subsequent to the initial certification to amend or dissolve the class based on facts which later develop.) In addition to arguing that Maria Albinos claim is atypical because she was sued and other class members were not, defendants appear to argue that she is a poor class representative precisely because she was sued. Def. Mem. at 10-11. Courts have held, however, that a named plaintiff is an adequate representative if: 1) there is no conflict between the interests of the named plaintiff and the interests of other class members and 2) he will vigorously prosecute the class claims. Hernandez v. United Fire Insurance Co., 79 F.R.D. 419, 425 (N.D. Ill. 1978). Here, defendants have not contended plaintiff or her counsel will be lax in pursuing relief for the class, nor have defendants cited any antagonistic interest which divides class members or renders Maria Albino an inadequate representative. In order to disqualify a class representative, defendants bear the burden of demonstrating a serious conflict of interest which renders Maria Albino unable to adequately represent the class. Ohio Sealy Mattress Mfg. Co. v. Kaplan, 90 F.R.D. 21, 25 (N.D. Ill. 1980). III. CONCLUSION The Seventh Circuit has held that Rule 23 must be liberally interpreted and read to favor maintenance of class actions. King v. Kansas City Southern Industries, 519 F.2d 20, 25-26 (7th Cir. 1975). The purpose behind this rule is to aid small individual claimants who would otherwise be reluctant to bring their claims due to the expense of the litigation. Hawaii v. Standard Oil, 405 U.S. 251, 266 (1972). The class of women sought to be represented here are especially vulnerable since they are poor and have relied upon the defendants for high risk hospital delivery services free of charge only to discover that defendants have left them liable for their hospitalization bills. Plaintiffs have met their burden of proving the requisites for class certification. Accordingly, plaintiff requests certification of the plaintiff class under Rules 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure. Respectfully Submitted, [Attorney]
42 Def. Mem. at 6. This defense, however, is entitled to little credibility since Dr. Dye admitted at his deposition that no written or oral instructions were given to intake staff at clinics about what to tell women about the program. Dye Deposition at 130. Nor are women given any written description of the program. Furthermore, it is implausible that women would choose Cook County Hospital over less crowded, more modern private hospitals knowing the latter care was free and the former costly.

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Sample Notices

N.1 Rule 23(c) Notice of Certification (Hughes)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO
) ) ) ) ) ) ) ) CIVIL ACTION NO. ) v. ) (Judge Montgomery) ) BANK ONE OF ) YOUNGSTOWN and GEICO ) FINANCIAL SERVICES, INC., ) Defendants. ) ) GEORGE R. HUGHES and MARILYN B. HUGHES, and ROBERT E. MILLER and SALLY J. MILLER, his wife, individually and on behalf of all others similarly situated, Plaintiffs,

NOTICE OF CLASS ACTION LAWSUIT DO NOT BE ALARMED. YOU ARE NOT BEING SUED. This Notice is to inform you about a class action lawsuit brought against Bank One of Youngstown, Ohio and GEICO Financial Services Inc. of Denver, Colorado on behalf of certain persons who purchased 1/750th interests in campgrounds known as Ponderosa Park and The Landing At Clays Park. Both campgrounds were owned and operated by Eastern Resorts, Inc. of Youngstown, Ohio. This suit was commenced in the Federal District Court for the Northern District of Ohio in Cleveland. George and Marilyn Hughes and Robert and Sally J. Miller have been certified by the Federal Court to represent themselves and other individuals who purchased interests in Ponderosa Park and The Landing at Clays Park pursuant to installment contracts financed by Bank One. Many of these installment contracts were later assigned to GEICO Financial Services of Denver, Colorado. Records provided by GEICO and Bank One indicate you are a class member as defined in a court order dated July 25, 1991. SUMMARY OF THIS LAWSUIT This lawsuit was originally filed on February 2, 1991, in the United States Federal Court for the Northern District of Ohio located in Cleveland, Ohio. The Hughes and Millers allege that Bank One has violated federal law by using a fraudulent scheme to receive a rate of interest greater than 18% and by assisting the Campgrounds in a fraudulent scheme to sell interests in the Campgrounds. Plaintiffs also allege that Bank One and GEICO have agreed to be subject to Plaintiffs claims against the Campgrounds for violation of federal law and for violations of state contract law.

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Consumer Class Actions: A Practical Litigation Guide

The Hughes allege that they purchased a 1/750th interest in Ponderosa Park pursuant to a contract entitled an Agreement For Deed. The Millers allege they purchased a 1/750th interest in The Landing At Clays Park. Both the Hughes and the Millers assert that they and many other class members financed their purchase of an interest pursuant to an installment contract with Defendant Bank One. Later, the Millers and many other class members installment contracts were assigned to Defendant GEICO Financial Services, Inc. The Hughes paid off their installment contract with Bank One. In October 1988, both Ponderosa Park and The Landing declared bankruptcy under federal law. The original owners of the campgrounds, Ponderosa Park, Inc. and The Landing at Clays Park Inc. are no longer in business. Under supervision of the federal bankruptcy court for the Northern District of Ohio in Akron, Ohio, the assets of both campgrounds were sold to Buckeye Resorts, Inc. which now is the owner-operator of the campgrounds. The Complaint against Bank One and GEICO Financial alleges that Bank One violated the Federal Racketeer Influenced And Corrupt Organization Act (RICO) by fraudulently collecting an interest rate higher than the 18% agreed to by Bank One in the Plaintiffs installment contract. Plaintiffs also allege that Bank One breached its installment contracts by charging excess interest rates. The Complaint alleges that Bank One assisted both Ponderosa Park and The Landing in violating federal RICO. The Complaint alleges that both Bank One and GEICO are liable for Ponderosa Parks and The Landings violation of Federal RICO and for their breach of contract. In this connection, the Plaintiffs installment contract included the following contractual provision: Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder. Plaintiffs allege that under the terms of this contractual provision Bank One and/or GEICO have agreed to be subject to any claims Plaintiffs have against Ponderosa or The Landing. Bank One and GEICO are contesting the allegations asserted against them in the Complaint. They have asserted a number of defenses, including the following: (1) Bank One and GEICO cannot be held liable for the wrongful conduct of the developers; (2) the Plaintiffs claims are inconsistent with and are barred by the Plans of Reorganization approved by the Bankruptcy Court; (3) the claims are barred by the applicable statute of limitations; (4) those who are in default on the maintenance agreements or notes have no right to use the facilities and, therefore, lack standing. On July 25, 1991, the Court held that the Hughes, Millers and their counsel could represent several classes of purchasers of interests in both Ponderosa Park and The Landing defined as follows: (1) The Bank One Class: All individuals who purchased interests in Ponderosa Park and The Landing at Clays Park which were financed in whole or in part by Bank One. (2) The GEICO Class: All individuals who purchased interests in Ponderosa Park and The Landing at Clays Park which were financed in whole or in part by Bank One and whose installment notes were sold or assigned to GEICO. You have been identified as a member of one or both of these classes. The filing of this lawsuit, and certification of the Bank One Class and the GEICO Class, does not invalidate or otherwise affect the Plans of Reorganization confirmed by the United States Bankruptcy Court on April 12, 1991, for The Landing, Inc. and Ponderosa Park Resorts, Inc. Under those plans, contracts of the owners of undivided interests (or persons who had contracted for the purchase of undivided interests) were assumed by the Chapter 11 Trustee and assigned to Buckeye Resorts, Inc., the new owner of the campgrounds. Accordingly, this lawsuit does not affect or involve any obligations you may owe to Buckeye Resorts, Inc. under the applicable Plan of Reorganization. This Notice should not be considered as an expression of any opinion by the Court as to the merits of the claims or defenses asserted by either party, but is being sent to you for the sole purpose of informing you of the pendency of the lawsuit so that you can decide whether or not to remain as a class member. Similarly, the Court has not ruled on the merits of this litigation. Accordingly, until the Court has ruled on the merits of this lawsuit, this notice should not be construed in any way to relieve you from any obligation you may have under any note you signed in connection with a purchase of an undivided interest in Ponderosa Park or The Landing.

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YOUR RIGHTS AS A CLASS MEMBER

Appx. N.1

1. To remain a member of the class and participate in the recovery, if any, resulting from this class action, you do not have to file any document with the Court. You or your attorney may file an appearance with the Clerk if you desire. Otherwise you will be represented by the attorneys for the class, whose names are listed below. You will not personally have to pay them any attorneys fees, costs or expenses for their professional services but such fees, costs and expenses may be awarded to them by the Court out of any recovery made in this lawsuit on your behalf. As a class member, you will be entitled to share in any monetary recovery obtained by the class, if any, and also receive the benefit of any injunctive or other relief. As a class member, you will be bound by any final determinations made by the Court in this case, either favorable or unfavorable. If your address has changed, or changes in the future, you should send your new address to the attorneys for the class. If you exclude yourself from the class, you will not be entitled to share in any recovery that may be obtained for the class, and you will not be bound by any determinations made in this case; nor will you be entitled to any further notice concerning these proceedings. 2. You are under no obligation to remain a member of the class. If you do not wish to be a class member in this case, you may exclude yourself by returning the attached exclusion form to the Clerk on or before February 15, 1992. 3. A copy of all papers you file should also be sent to Michael P. Bennett, Esq. and/or James M. Darcy, Esq., Attorney at Law, P.C., The Big Building, Pittsburgh, Pennsylvania. OTHER MATTERS 1. Please do not call the Court or the Clerk about this case. You should contact your own attorney or direct your inquiries to the attorneys for the Plaintiff class, Michael P. Bennett, Esq. and/or James M. Darcy, Esq., Attorney at Law, P.C., The Big Building, Pittsburgh, Pennsylvania, 555-123-4567. 2. The name of this lawsuit is: George R. Hughes and Marilyn B. Hughes, et al. vs. Bank One Of Youngstown, et al., Civil Action No. (N.D.Ohio). 3. This notice is only a summary of this lawsuit. All pleadings and documents filed in Court may be reviewed or copied in the office of the Clerk of the United States District Court for the Northern District of Ohio. This Notice is sent merely to advise you of the pendency of this lawsuit and your rights with respect thereto. , Clerk United States District Court Northern District of Ohio DATED:

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Consumer Class Actions: A Practical Litigation Guide

N.2 Rule 23(e) Settlement Notices

N.2.1 Lenders Liability for Campgrounds Law Violations (Hughes)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO
) ) ) ) ) ) ) ) CIVIL ACTION NO. ) v. ) JUDGE STEWART ) BANK ONE OF ) YOUNGSTOWN and GEICO ) FINANCIAL SERVICES, INC., ) Defendants. ) ) GEORGE R. HUGHES and MARILYN B. HUGHES, and ROBERT E. MILLER and SALLY J. MILLER, his wife, individually and on behalf of all others similarly situated, Plaintiffs,

DO NOT BE ALARMED. YOU HAVE NOT BEEN SUED. THIS NOTICE IS MERELY TO TELL YOU ABOUT YOUR RIGHTS AS TO A PROPOSED SETTLEMENT WITH DEFENDANT GEICO AND OF A SETTLEMENT HEARING. TO: ALL PERSONS WHO PURCHASED AN INTEREST IN ANY PHASE OF PONDEROSA PARK RESORT IN SALEM, OHIO, OR IN THE LANDING AT CLAYS PARK RESORT IN CANAL FULTON, OHIO, WHICH WAS FINANCED IN WHOLE OR IN PART BY BANK ONE, YOUNGSTOWN, N.A. PURSUANT TO INSTALLMENT CONTRACTS WHICH WERE PURCHASED BY GEICO FINANCIAL SERVICES, INC. PLEASE READ THIS NOTICE CAREFULLY This class action was originally brought against Bank One of Youngstown (Bank One) and GEICO Financial Services, Inc. (GEICO) by George R. Hughes, Marilyn B. Hughes, Robert F. Miller, Sally J. Miller, Kenneth D. Dixon and Linda Dixon (Plaintiffs) on behalf of themselves and all others similarly situated who purchased an interest in Ponderosa Park Resort in Salem, Ohio, or in the Landing at Clays Park Resort in Canal Fulton, Ohio, which was financed by Bank One. Certain of the installment contracts involved in these transactions were later sold or assigned to GEICO. The claims against Bank One were settled earlier and have been fully resolved. This Notice is to inform you of a proposed settlement with GEICO so that you may make whatever decisions you deem appropriate for the protection of your interests. You have been identified as a member of the Class whose rights may be affected by this Settlement. YOU DO NOT HAVE TO DO ANYTHING TO SHARE IN THE PROPOSED SETTLEMENT (unless you previously excluded yourself from the plaintiff classes certified by the Court; in which case you must return the Inclusion Request as described in How To Share In The Settlement Fund And Obtain A Cancellation Of Debt You May Owe To GEICO.) If you do not want to participate in this partial Settlement, and have not already done so, you may exclude yourself by following the instructions set forth at page 6 of this Notice. IMPORTANT INFORMATION ABOUT THE PROPOSED SETTLEMENT This civil action (the Action) is pending in the United States District Court for the Northern District of Ohio, Eastern Division in Cleveland, Ohio (the Court). With regard to the proposed Settlement you are notified that: 1. A hearing will be held before the Court on February 5, 1996, in Courtroom No. 400 at the United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114, (or at such adjourned times and dates as the Court may direct without further notice) (the Hearing) to determine whether the proposed Settlement of this Action brought against GEICO should be approved as fair, reasonable and adequate and, if approved, to consider and pass upon the petition of the attorneys for the Class for an award of attorneys fees and

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Sample Notices

Appx. N.2.1

reimbursement of expenses, and for a payment to the representative plaintiffs. You need not attend this Hearing unless you intend to raise an objection to this Settlement. 2. The proposed Settlement of the lawsuit has created a Settlement Fund in the amount of $1,700,000.00, which is being held by GEICO. In addition to the Settlement Fund, if this Settlement is approved, GEICO will forgive and discharge all balances due to GEICO under certain Consumer Installment Loan and Security Agreements (Installment Loan Agreements) between Bank One and persons who borrowed funds under those Agreements to finance the purchase of an interest in any phase of Ponderosa Park or The Landing at Clays Park which contracts were purchased by GEICO. These settlement provisions are described more fully in the part of this notice titled Summary Of Certain Settlement Terms. The Settlement Fund will be distributed as described at page 5 of this Notice under the heading Plan Of Distribution Of The Settlement Proceeds. 3. The Court has certified two classes in the Action. The Bank One Class is all persons who have purchased interests in Ponderosa Park and/or The Landing at Clays Park which was financed in whole or in part by Bank One. The GEICO Class includes all persons whose Installment Loan Agreements were subsequently sold or assigned by Bank One to GEICO. The proposed Settlement involves all persons identified as being in the GEICO Class. As a member of these classes you may have received a check from a prior settlement with Bank One in this action. Certain persons who would have been members of the Settlement Class elected to exclude themselves from the Class pursuant to an earlier Notice of Class Action Lawsuit dated December 31, 1991. Those persons shall remain excluded from the Settlement Class unless they return the Inclusion Request attached to this Notice by January 12, 1996, as directed under the part of this Notice titled How To Share In The Settlement Fund And Obtain A Cancellation Of Debt You May Owe To GEICO. Any other person who requests exclusion from the Settlement Class in writing and in the manner set forth below, postmarked on or before January 12, 1996 will be excluded (along with all co-borrowers or co-obligers on that persons Installment Loan Agreement) from the Settlement Class and will not be entitled to participate in the benefits of this Settlement. THIS NOTICE SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY CLAIMS OR DEFENSES BY ANY OF THE PARTIES. THE ACTION This Action was filed against Bank One and GEICO by Plaintiffs on behalf of the Classes. The claims against Bank One were the subject of the previous Bank One Settlement. Plaintiffs also asserted claims against GEICO in relation to the Installment Loan Agreements sold or assigned to GEICO. Plaintiffs claim that GEICO is subject to liability for breaches of contract and violations of the law by Ponderosa Park, Inc. and The Landing, Inc. The claims against GEICO are the subject of this Settlement. GEICO has denied all wrongdoing and any liability to the Plaintiffs and to the Class and concedes no infirmity in any defense raised by it in this Action, but nonetheless has agreed to enter in to the Stipulation in order to put to rest all controversy to avoid further expense, burden, distraction, and inconvenience of litigation. This description of the claims and contentions of the parties is general and does not purport to cover all of the claims and contentions of the parties. For a more detailed statement of the matters involved in this Action, reference is made to the pleadings and to the other papers filed in the Action, all of which may be inspected in person at the Office of the Clerk of the United States District Court for the Northern District of Ohio, United States Courthouse, Cleveland, Ohio 44114, during normal business hours. SETTLEMENT NEGOTIATIONS Plaintiffs counsel have made a thorough investigation of the law and the facts relating to the allegations of the Complaint and the defenses asserted by GEICO. In conducting this investigation, Plaintiffs counsel have, among other things, reviewed several hundred thousand pages of documents and have taken more than thirty-five (35) depositions. Plaintiffs and GEICO have engaged in arms-length negotiations which resulted in an agreement to settle the claims against GEICO as set forth in a Stipulation of Settlement, dated November 22, 1995. In agreeing to the Stipulation, Plaintiffs and their counsel considered the risks of continued litigation against GEICO and the likelihood of success, balanced against the substantial benefits to the Class which would accrue as a result of the proposed settlement. Plaintiffs, on advice of counsel, have concluded that the proposed settlement of the claims against GEICO is fair, reasonable and adequate and in the best interest of the Settlement Class.

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Consumer Class Actions: A Practical Litigation Guide

SUMMARY OF CERTAIN SETTLEMENT TERMS

A complete copy of the Stipulation signed by Plaintiffs and GEICO is on file with the Office of the Clerk of the United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114, and is available for review during normal business hours. The following is a summary of certain terms of the proposed Settlement. GEICO has created a Settlement Fund in the amount of $1,700,000.00. If the Settlement is approved, this money will be distributed to class members based upon a percentage of the amounts paid to GEICO by each class member after any court approved attorneys fees and costs of litigation have been deducted. As part of the Settlement, GEICO has agreed to forgive all remaining amounts owed under the installment loan contracts. The total amount of this outstanding debt is calculated to be $1,372,000. IF YOU ARE CURRENTLY PAYING MONEY TO GEICO UNDER THE INSTALLMENT LOAN CONTRACTS YOU MAY STOP PAYING IMMEDIATELY IF YOU INTEND TO PARTICIPATE IN THIS SETTLEMENT. If you stop paying GEICO and this Settlement is not finally approved you will owe GEICO for all missed payments including retroactive interest, excluding late fees, during this post-notice period of time. After the effective date of the Settlement, GEICO will notify TRW Consumer Credit Service, Credit Bureau, Inc. and Trans Union Corp. that GEICOs claims against Plaintiffs and members of the Settlement Class have been resolved by Settlement. Plaintiffs counsel expect to apply to the Court for an award of fees and for reimbursement of expenses incurred in the prosecution and partial settlement of this litigation and for a payment to representative plaintiffs. Plaintiffs counsel will seek a fee of thirty-three percent (33%) of the Cash Settlement Fund (this represents approximately fifteen percent (15%) of the total benefit to the Class including the outstanding indebtedness which will be forgiven) and reimbursement of expenses and estimated future expenses in the amount of no more than $40,000, and for a payment of Two Thousand Five Hundred Dollars ($2,500.00) to each of the four remaining representative Plaintiffs, Robert and Sally J. Miller and Kenneth and Linda Dixon. Any and all fees and expenses and payments to the representative Plaintiffs, if any, allowed by the Court shall be paid out of the Cash Settlement Fund. If the terms of the Stipulation are approved by the Court, the claims against GEICO in the Action will be dismissed with prejudice, and all claims, rights, or causes of action which Plaintiffs in the Action, or any members of the Settlement Class who have not previously excluded themselves or who do not exclude themselves as set forth below ever had, or now has or hereafter can or shall be released and dismissed with prejudice with respect to GEICO. In addition, Plaintiffs and members of the Class who are not excluded will be permanently barred and enjoined from instituting, any action asserting claims against GEICO in any manner related to the subject of the Action. GEICO may elect to terminate the partial settlement under certain conditions related to the number of Settlement Class members who request to exclude themselves from the Class. If such conditions were to occur and GEICO were to so elect, the Settlement would be terminated. If the Settlement is terminated by GEICOs election, GEICO will have no obligation to make payments from the Settlement Fund, and the outstanding amounts due under the Installment Loan Agreements will not be forgiven or discharged. Interest but not late charges would be due on all post-notice amounts not paid. GEICOs obligations to make payments out of the Settlement Fund and to discharge the amounts due under the Installment Loan Agreements will also be terminated if the Court does not approve the Stipulation, or if it is otherwise terminated in accordance with its terms or fails to become effective. Under such circumstances the rights and duties of the parties will revert to their respective status as of the date and time immediately prior to the execution of the Stipulation except that the costs of this notice will be borne equally by the Parties. PLAN OF DISTRIBUTION OF THE SETTLEMENT PROCEEDS The Settlement, if and when finally approved by the Court and not subject to appeal, will provide funds out of which members of the Settlement Class with valid claims will share as follows: After deduction from the Settlement Fund of court-approved attorneys fees, costs, expenses, court-approved payment, if any, to representative plaintiffs, each other member of the Class shall receive a check representing their proportionate share of the Fund. The Settlement checks will be valid for one hundred and eighty (180) days commencing on the date the first of such checks are post-marked for delivery by GEICO. The shares of the settlement fund will be available for distribution for a period of one year from the date of the effective date of the Settlement (Payment Period).

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Appx. N.2.1

(1) GEICO shall prepare Settlement checks payable to Class members in an amount equal to their Settlement share. If two or more individuals are co-borrowers on an Installment Loan Agreement, then the Settlement check for those Class members shall be made payable jointly to them. The Settlement share for each Class member shall be calculated by using a fraction, the numerator of which shall represent the aggregate amount of principal, interest and late fees received by GEICO under his or her Installment Loan Agreement, and the denominator of which will be the total amount of principal, interest and late fees received by GEICO under all Installment Loan Agreements pursuant to which the members of the Class financed their purchases of interests in Ponderosa Park and The Landing at Clays Park. (2) If a member of the Settlement Class entitled to a payment out of the Settlement Fund is deceased at the time of payment, and because of said death the check payable to the Settlement Class member cannot be negotiated, then GEICO will reissue that check upon presentation to it, within the Payment Period, by Plaintiffs counsel of evidence documenting the death of the Class member and of the direction to whom the payment should be paid. If you are a relative of a deceased class member you should contact Plaintiffs Counsel to determine how to proceed. (3) The Settlement check of any member of the Class who cannot be located, and Settlement checks returned by the United States Postal Service for insufficient address or any other reason, shall be held by GEICO in the Settlement Fund and available to be claimed by any such person(s) during the Payment Period of one year from the effective date of this settlement. In order to receive such checks from Plaintiffs counsel, the Class member claiming to be entitled to the check must produce documentation sufficient to demonstrate to Plaintiffs counsel his or her identity. (4) Members of the Class who do not receive their Settlement checks for whatever reason or who fail to cash their Settlement checks during the Payment Period: (i) shall be ineligible to share in the Settlement Fund, (ii) shall not be required to pay any remaining indebtedness to GEICO under their Installment Loan Agreements, and (iii) shall be bound by any judgment entered in the Action. HOW TO SHARE IN THE SETTLEMENT FUND AND OBTAIN A CANCELLATION OF DEBT YOU MAY OWE TO GEICO Remaining as a Class member will not obligate you personally to pay any out-of-pocket costs or attorneys fees and expenses, but will enable you to participate in the proceeds of the proposed Settlement. If you remain as a Class member, you will continue to be represented by the Class representatives, and their counsel. Unless you oppose the Settlement, or wish to be excluded from the Class, you need not take any action at this time to participate, unless you previously excluded yourself from the classes certified by the Court pursuant to the Notice of Class Action Lawsuit dated December 31, 1991. If you previously filed an Exclusion Request, you still may participate in this Settlement by returning the Inclusion Request which is attached to this Notice to Clerk of Court, United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114 by January 12, 1995, and by mailing copies of the Inclusion Request to: Plaintiffs counsel, James M. Darcy, Esq., Attorney at Law, P.C., The Big Building, Pittsburgh, Pennsylvania; and GEICOs counsel, Marc B. Collins, The Bigger Building, Akron, Ohio. HOW TO ELECT TO EXCLUDE YOURSELF FROM THE SETTLEMENT CLASS Any member who would otherwise fall within the definition of Settlement Class but who has previously filed an Exclusion Request will be excluded from the Settlement Class unless that member files an Inclusion Request as set forth in the preceding section of this Notice. Any other member who would otherwise fall within the definition of the Settlement Class may elect to be excluded, but only upon specific request. If a timely and effective request for exclusion is made by any member of the Settlement Class who is a co-borrower or co-obligor of an Installment Loan Agreement, then all borrowers or obligers on said Agreement will be excluded from the Settlement Class. Settlement Class members who request exclusion will not be entitled to participate in a distribution of the Settlement Fund, nor will their obligations to GEICO under their Installment Loan Agreements be discharged, nor will they be bound by any judgment entered herein related to the settlement of the claims against GEICO or Release executed by Plaintiffs on behalf of the Settlement Class. If you wish to be excluded from the Settlement Class and have not already request such exclusion, you must submit the attached Exclusion Request no later than January 12, 1995 to: Clerk of the Court Northern District of Ohio Eastern Division United States Courthouse Cleveland, Ohio 44114

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Consumer Class Actions: A Practical Litigation Guide

If you exercise your right to be excluded from the Settlement Class, you will not be granted an opportunity to object to or otherwise comment on the settlement, the Stipulation, Plaintiffs counsels requests for attorneys fees and costs and for payment to the representative plaintiffs, or any other proceedings in the Action related to the settlement of the claims against GEICO. KEEP YOUR ADDRESS CURRENT As a member of the Class, you are requested to notify Plaintiffs counsel, James M. Darcy, at the address listed below, of any change in your address. NOTICE OF HEARING AND RIGHT TO OBJECT NOTICE IS HEREBY GIVEN THAT, pursuant to an Order of Court dated November 9, 1995, a hearing shall be held on February 5, 1995 at 9:00 a.m. (or at such adjourned dates and time as the Court may direct without further Notice to the Settlement Class), in Courtroom No. 400 of the United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114: (a) To determine whether the proposed settlement is fair, reasonable and adequate and in the best interest of the Settlement Class and should be approved by the Court and whether judgment should be entered thereon dismissing the claims against GEICO in this Action with prejudice; (b) To consider the applications of attorneys for Plaintiffs and the Settlement Class for an award of fees and reimbursement of expenses, including the fees and expenses of Plaintiffs experts, if any, and for a payment to the representative Plaintiffs; and (c) To consider such other matters as the Court may deem proper and necessary. As a member of the Settlement Class, you are not required to do anything in order to participate in the Settlement. You may, however, appear at the Settlement hearing, in person, or through counsel of your own choice, and show cause, if any, why the proposed Settlement should not be approved, why a judgment dismissing the claims against GEICO with prejudice should not be entered, why the attorneys for the Plaintiffs and for the Class should not be awarded fees and reimbursement of expenses as requested, and/or why the representative Plaintiffs should not be awarded a payment for their services to the Settlement Class; provided, however, that no one shall be heard or entitled to contest any of the foregoing unless that person has filed with the Clerk of the Court for the United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114, on or before January 22, 1995, and, on or before said date, has served by actual delivery on counsel for the Plaintiffs: James M. Darcy, Esq., Attorney at Law, P.C., The Big Building Pittsburgh, Pennsylvania and on counsel for GEICO: Marc B. Collins LAW FIRM The Bigger Building Akron, Ohio a written statement containing the following information: (i) the name, address and telephone number of the objector; and (ii) the grounds or reasons for the objection(s). FURTHER INFORMATION The foregoing description of the Action, the proceedings to be held, the activities leading to the Stipulations, the terms of the Stipulation, the terms of the dismissal of the claims against GEICO and other matters described herein, does not purport to be all inclusive. Accordingly, you are referred to the pleadings and other documents, including the Stipulation filed with the Court, which may be examined in person during regular business hours at the office of the

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Clerk of the Court of the United States District Court for the Northern District of Ohio, Eastern Division, United States Courthouse, Cleveland, Ohio 44114, during normal business hours. ALL INQUIRIES regarding this Notice, or the class action, or the proposed settlement should be addressed, in writing, to the following attorneys for the Plaintiffs and the Settlement Class at the following address: James M. Darcy, Esq., Attorney at Law, P.C., The Big Building Pittsburgh, Pennsylvania Attorneys for the Representative and Class Plaintiffs

Clerk Of The Court United States District Court for the Northern District of Ohio, Eastern Division DATED:

N.2.2 Dealer Law Violations Relating to Used Car Sales (Norris)

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
) ) ) ) ) ) Case No. ) v. ) Hon. Jon Judge ) CARS TO GO, INC., ) a Michigan corporation, ) Defendant. ) ) MARK G. NORRIS, and ALLEN WOLEK, individually and on behalf of all others similarly situated, Plaintiffs,

NOTICE TO CLASS MEMBERS THIS IS TO NOTIFY YOU THAT THE ABOVE LAWSUIT HAS BEEN CERTIFIED AS A CLASS ACTION, THAT YOU HAVE BEEN IDENTIFIED AS A MEMBER OF THE CLASS AND THAT YOU HAVE CERTAIN RIGHTS INCLUDING THE RIGHT TO OPT-OUT OF THE CLASS. THIS NOTICE EXPLAINS: A. The lawsuit, B. The relief sought, C. Your rights, D. Further court proceedings, and E. Additional information. A. The Lawsuit A class action lawsuit was filed by the plaintiffs (named above) against the defendant (named above) in the United States District Court for the Western District of Michigan alleging that defendant violated the federal Truth-in-Lending Act and the Michigan Consumer Protection Act. The complaint also alleges breach of contract and fraud by defendant. The plaintiffs original complaint in this action was filed on October 31, 1997. The Court has conditionally certified a class defined as:

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(i) All persons who executed a retail installment contract with Cars To Go, Inc. for the purchase of a used motor vehicle; (ii) in a transaction that included the purchase of a vehicle service contract; (iii) where the retail installment contract listed the full price of the vehicle service contract under Itemization of Amount Financed in the category Other Charges Including Amounts Paid to Others on Your Behalf; (iv) but which contract failed to disclose that a portion of the price of the vehicle service contract may be retained by Cars To Go, Inc.; and (v) where a portion of the price of the vehicle service contract was in fact retained by Cars To Go, Inc. The claims certified are limited to claims brought under the federal Truth-in-Lending Act and the Michigan Consumer Protection Act. The class certified is further limited by the following time limitations: with respect to claims brought under the federal Truth-in-Lending Act, the claims must have arisen within one year of the filing of the original complaint in this action, and with respect to claims brought under the Michigan Consumer Protection Act, the claims must have arisen within six years of the filing of the original complaint in this action. The Court has determined that the claims brought by plaintiffs for breach of contract and common law fraud shall not be certified for class action. You have been identified as a member of this class. The plaintiffs claim that defendant Cars To Go, Inc. violated the federal Truth in Lending Act and the Michigan Consumer Protection Act by executing retail installment contracts for the sale of used motor vehicles which included the sale of a vehicle service contract and which contracts represented that the full price of the vehicle service was being paid to third parties, when in fact a portion of the price of each vehicle service contract was being retained by Cars To Go, Inc. B. The Relief Sought for Class Members The possible relief available to class members if this lawsuit is successful may include the following: For violations of the federal Truth-in-Lending ActStatutory damages totaling one percent of the net worth of Cars To Go, Inc., to be shared equally by the class members and plaintiffs who were subjected to Cars To Go, Inc.s federal Truth-in-Lending Act violations; For violations of the Michigan Consumer Protection ActA declaratory judgment that Cars To Go, Inc. has violated the Michigan Consumer Protection Act. For each of these violations, an award of costs and attorneys fees will also be sought. C. Your Rights To be included as a member of the Class, you need not do anything at all. How to Be Excluded From the Class: If you do not wish to be included in this Class Action, you must write Class Counsel, at the addresses below, within thirty (30) days of the postmark of this notice, and state that you opt-out of the Class. If you choose to be excluded from the Class, you will be forever barred from making any claim under this Class Action. However, you will have the right to bring an individual lawsuit on your own behalf against the defendant if you bring it within the time allowed by law. If you opt-out of this Class, bring your own lawsuit, and win, you might recover a larger amount of money than you would have received in this Class Action. If you were to lose your own lawsuit, however, you will recover nothing. Your Right to Intervene or File an Appearance You have the right to file an appearance or intervene (participate as a plaintiff) in this case through your own attorney. However, it is not necessary to appear or intervene in order to receive your share of any judgment or settlement as a member of the Class. If you do want to intervene or appear through your own attorney, you must do so within thirty days of the postmark of this Class Notice. Otherwise, you will be represented by plaintiffs attorneys in all further court proceedings. You will not be charged for this representation. If this Class Action is successful, attorneys fees will be approved by the Court and be paid by the defendant. D. Further Court Proceedings Further proceedings in this case will be conducted before the Honorable Jon Judge, United States District Judge for the United States District Court for the Western District of Michigan. These proceedings may include determination of

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motions for summary judgment, pretrial proceedings, trial, approval of any proposed settlement, and other aspects of this litigation. E. Additional Information If you would like more information about this notice, you may write Class Counsel at: Joe Reilly, Attorney at Law Street Address Chicago, Illinois 60601 Phone Philip Brady Attorney at Law Street Address Grand Rapids, Michigan 49503 Phone

The court papers filed in this case are available for inspection in the Office of the Clerk, U.S. District Court, 110 Michigan, N.W., Grand Rapids, Michigan 49503. Please do not call the Judge or Clerk of the Court. They will not be able to give you advice about this case.

N.3 Combined Rule 23(c) and (e) Notice of Certification and Settlement
N.3.1 Federal Fair Debt Collection Case (Boddie)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
) ) Plaintiff, ) ) v. ) ) LARRY CARSON; ) NATIONWIDE CASSEL, ) L.P.; and N.A.C. ) MANAGEMENT ) CORPORATION, ) Defendant. ) ) BRIAN BODDIE,

NOTICE OF CLASS ACTION AND PROPOSED SETTLEMENT TO: All persons who, on or after May 16, 1992, were sent letters bearing the printed name of an attorney, Larry Carson and the address, [address] Chicago, Illinois. PLEASE READ THIS NOTICE CAREFULLY. THIS IS NOT A NOTICE OF A LAWSUIT AGAINST YOU. YOU MAY BENEFIT FROM READING THIS NOTICE. WHAT THIS LAWSUIT IS ABOUT Brian Boddie (plaintiff), filed a class action lawsuit against an attorney, Larry Carson, Nationwide Cassel, L.P., and N.A.C. Management Corporation in the United States District Court for the Northern District of Illinois. The class action was brought for the benefit of persons who received collection letters bearing the printed name of Carson and the address [address] Chicago, Illinois, on or after May 16, 1992.

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The complaint in the class action alleges that Nationwide Cassel and N.A.C. Management, which do business as Nationwide, sent consumers collection letters bearing the printed name of an attorney, Larry Carson, and demanding payment of debts allegedly due to Nationwide. The complaint alleges that these letters violated a Federal law known as the Fair Debt Collection Practices Act, which prohibits false, misleading and deceptive debt collection practices and confers certain other rights on consumers. Plaintiff alleges that the letters were not sent by an attorney and failed to comply with certain notice requirements imposed by the Fair Debt Collection Practices Act. Each of the defendants has denied liability and has raised defenses. The plaintiff has filed a motion for judgment finding that the collection letters in question violate the Fair Debt Collection Practices Act. However, the Court has not made any decision concerning the merits of the lawsuit. The parties have negotiated a proposed settlement. On September 29, 1993, Judge Brian Barnett Duff (i) determined that this action should proceed as a class action, for purposes of settlement only, with plaintiff as the representative of the class, and (ii) granted preliminary approval of the settlement, subject to a fairness hearing which will take place at 10 a.m. on November 29, 1993, in Room 2319 of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604. You are being sent this notice because you appear to be a member of the class. This notice explains the nature of the lawsuit and the terms of the settlement, and informs you of your legal rights and obligations. IN ORDER TO OBTAIN THE BENEFITS OF THIS SETTLEMENT, YOU DO NOT HAVE TO DO ANYTHING EXCEPT GIVE NOTICE OF ANY CHANGE OF ADDRESS. NO ADMISSION OF LIABILITY By settling this lawsuit, defendants are not admitting that they have done anything wrong. THE PROPOSED SETTLEMENT THE PARTIES HAVE AGREED TO THE SETTLEMENT DESCRIBED BELOW. YOU DO NOT NEED TO DO ANYTHING IN ORDER TO RECEIVE THE BENEFITS OF THIS SETTLEMENT EXCEPT GIVE NOTICE OF ANY CHANGE OF YOUR ADDRESS. IF THE SETTLEMENT IS FINALLY APPROVED, YOU WILL AUTOMATICALLY RECEIVE THE BENEFITS DESCRIBED BELOW. The attorneys for the class believe that this settlement is fair, reasonable, and in the best interests of the customers. A settlement fund of $60,000 will be created when the settlement becomes effective. Boddie will receive $1,000. Each of 1,642 accounts will receive an equal share of the remaining $59,000, minus attorneys fees (not to exceed 1/3) and any expenses incurred in tracking down the class member. Any interest which accrues while funds are being distributed will be added to the fund. For purposes of the settlement, an account with more than one debtor or obligor is treated as a single class member. The debtors may either agree as to the disposition of the funds or request the Court to divide the money. VALUE OF THE SETTLEMENT The Fair Debt Collection Practices Act provides that in a class action in which the plaintiff establishes a violation (i) the plaintiff recovers the same amount as he or she would recover in an individual action, and (ii) the class recovers a statutory penalty not exceeding $500,000 or 1% of the net worth of the defendants, whichever is less. The amount of the statutory award is set by the Court depending on the seriousness of the violation, the harm caused, and the defendants record of compliance with the Act. In addition, the class may recover any actual damages which resulted from a violation. In an individual case, the Fair Debt Collection Practices Act provides that the plaintiff may recover a statutory penalty of up to $1,000. There is disagreement between courts whether the $1,000 may be multiplied by the number of violations if there is more than one. The amount of the statutory award is set by the Court depending on the seriousness of the violation, the harm caused, and the defendants record of compliance with the Act. In addition, the individual may recover any actual damages which resulted from a violation. In either an individual or a class action, the defendant may also be required to pay attorneys fees. Because the amount of the statutory penalty is set by the Court, an individual with a claim under the Fair Debt Collection Practices Act cannot be assured of any particular amount of recovery in either an individual or a class action.

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Even if the Court were to find that a violation was committed (which defendants deny), the Court may assess a statutory penalty in any amount between $1 and the maximum. The maximum possible statutory penalty in an individual action is either $1,000 or $1,000 per violation. The maximum possible statutory penalty in a class action is 1% of the defendants net worth. Although the plaintiff and the defendants in this case disagree as to the defendants net worth, $60,000 is a reasonable estimate of the maximum possible statutory penalty, to be divided among 1,642 class members accounts. Again, this is the statutory maximum, and there is no assurance that (i) the Court would agree with the plaintiffs position as to the computation of the defendants net worth or (ii) the Court would award the maximum statutory penalty. There do not appear to be any actual damages that resulted from the mailing of the letters. BENEFITS TO THE CLASS The attorneys for the class believe that this settlement is fair, reasonable, and in the best interests of the class. Defendants agreed, promptly after the filing of suit, to pay the class a substantial settlement. The attorneys for the class believe that it is appropriate to trade the speculative possibility of recovering a larger penalty for the prompt and immediate payment of the amount offered. RELEASES EACH CLASS MEMBER WILL GIVE UP ANY RIGHT TO SUE DEFENDANTS OR ANYONE RELATED TO DEFENDANTS, AND THEIR EMPLOYEES AND AGENTS, FOR ALL CLAIMS BASED ON THE DISSEMINATION BY NATIONWIDE OF COLLECTION LETTERS WRITTEN ON THE LETTERHEAD OF CARSON. CORRECT ADDRESS If this Notice was sent to you at your current address, you do not have to do anything further to receive any credit or payment to which you are entitled. If it was forwarded by the Postal Service, or if it was otherwise sent to you at an address which is not current, you should immediately send a letter to each of the lawyers named below stating your past and current addresses and (if possible) your loan number. [name] [address] [telephone] (Attorneys for defendants) [name] [address] [telephone] (Attorneys for the class) If a class member has died, you should send a letter to the same lawyers explaining who is entitled to the payment and including any supporting documentation. FEES The attorneys for the class will request that the Court award attorneys fees and expenses out of the money paid to the class members. The attorneys will not ask for more than 1/3 of the recovery of each class member. The Settlement Agreement also provides that if it is impossible to notify a class member by mail, class counsel may employ a tracing service to track down the class member. The fee of the tracing service will be deducted from that particular class members recovery. FAIRNESS HEARING At 10 a.m. on November 29, 1993, a hearing will be held on the fairness of the proposed settlement. At the hearing, the Court will be available to hear any objections and arguments concerning the fairness of the proposed settlement. The hearing will take place before Judge Brian Barnett Duff in Room 2319 of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, Illinois 60604.

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WHAT YOU CAN DO

1. You have the right to exclude yourself from both the class action and the settlement by filing a request for exclusion with the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604, and serving copies of the request on the lawyers listed above, under Correct Address. The request for exclusion must be received by the Clerk of the Court on or before November 10, 1993 and refer to the name and number of the case. Unless you plan to bring this claim on an individual basis, there is no benefit to excluding yourself. 2. If you do not wish to exclude yourself, and have no objection to the settlement, it is not necessary for you to take any action. You will get the benefits of the settlement if it is approved. 3. If you do object to the settlement, but do not wish to simply exclude yourself from the class action, you must submit your objection in writing to the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604. The objection must be received by the Clerk of the Court on or before November 10, 1993. You must also serve copies on the attorneys listed under Correct Address, above, by the same date. Any objection must include the name and number of the case and a statement of the reasons why you believe that the Court should find that the proposed settlement is not in the best interests of the classes. If you do file an objection and wish it to be considered, you must also appear at the hearing before Judge Duff on November 29, 1993. Please note that it is not sufficient to simply state that you object. You must state reasons why the settlement should not be approved. IMPORTANT: THE COURT REQUIRES THAT ANY REQUESTS FOR EXCLUSION OR OBJECTIONS BE RECEIVED BY THE CLERK BY NOVEMBER 10, 1993. IF YOU MAIL A REQUEST FOR EXCLUSION OR OBJECTION, YOU BEAR THE RISK OF ANY PROBLEM WITH THE MAILS. If the settlement is not approved, the case will proceed as if no settlement has been attempted. Defendants retains the rights to contest whether this case should be maintained as a class action and the merits. There can be no assurance that if the settlement is not approved, the class will recover more than is provided in this settlement, or indeed anything. This description of the case is general and does not cover all of the issues and proceedings thus far. In order to see the complete file, you should visit the office of the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604. The Clerk will make the files relating to this lawsuit available to you for inspection and copying at your own expense. WHAT YOU SHOULD DO NOW IN ORDER TO RECEIVE THE BENEFITS TO WHICH YOU ARE ENTITLED UNDER THE SETTLEMENT AGREEMENT OUTLINED ABOVE, YOU DO NOT NEED TO DO ANYTHING. If you are entitled to money, you will get it after final approval of the settlement. However, if you wish, you may consult with an attorney (at your expense), exclude yourself from the case, or file objections, as described above. You also have the right to file an appearance in the case if you wish. This notice is only a summary of the terms of the settlement. You may inspect the entire settlement agreement. IF YOU ARE A DEBTOR IN A CHAPTER 13 OR CHAPTER 7 BANKRUPTCY PROCEEDING THAT WAS PENDING ON OR AFTER MAY 12, 1992, SEND A COPY OF THIS NOTICE TO YOUR BANKRUPTCY ATTORNEY. DO NOT ADDRESS ANY QUESTIONS ABOUT THE SETTLEMENT OR THE LITIGATION TO THE CLERK OF THE COURT OR TO THE JUDGE. They are not permitted to answer your questions.

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N.3.2 TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) HARVEY CYCLE & ) CAMPER, INC., doing business ) as WATSON MOTORSPORT, ) LTD.; and WONDERLIC & ) ASSOCIATES, INC., doing ) business as WONDERLIC ) FINANCE, ) Defendants. ) ) CHRISTINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff,

NOTICE OF CLASS ACTION AND PROPOSED SETTLEMENT TO: All persons who signed a retail installment contract with Harvey Cycle & Camper, Inc., doing business as Watson Motorsport, Ltd. (Watson) on or after March 17, 1993, which contract included a charge for V.S.I. insurance in the amount financed and excluded it from the finance charge and the annual percentage rate. PLEASE READ THIS NOTICE CAREFULLY. THIS IS NOT A NOTICE OF A LAWSUIT AGAINST YOU. YOU MAY BENEFIT FROM READING THIS NOTICE. WHAT THIS LAWSUIT IS ABOUT Christine Willis (Willis) filed an action in the United States District Court for the Northern District of Illinois, alleging both class and individual claims against Watson and Wonderlic & Associates, Inc., doing business as Wonderlic Finance (Wonderlic). On behalf of a class, Willis alleged that Watson and Wonderlic understated the finance charge and annual percentage rate on their retail installment contracts, in that a $50 charge for V.S.I. insurance was included in the amount financed and excluded from the finance charge and annual percentage rate. This was alleged to violate the Truth in Lending Act (Count I) and the Illinois Sales Finance Agency Act (Count II). Only Wonderlic is alleged to be subject to the Sales Finance Agency Act. Individually, Willis claimed that she purchased a defective car from Watson, that Watson breached warranties with respect to the car under federal and state law, and that Wonderlic was liable under the terms of the retail installment contract (Counts III and IV). Watson and Wonderlic have denied liability and has raised defenses. The Court has not made any decision concerning the merits of the lawsuit. Willis and Watson have negotiated a proposed settlement. Wonderlic is not a party to the proposed settlement, and the action is continuing with respect to Wonderlic. On [date], Judge William T. Hart (i) determined that this action should proceed as a class action with respect to the claims of the class described above against Watson, for purposes of settlement only, with Willis as the representative of the class, and (ii) granted preliminary approval of the settlement, subject to a fairness hearing which will take place at [time] on [date], 1994, in Room 2588 of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604.

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You are being sent this notice because you appear to be a member of the class. This notice explains the nature of the lawsuit and the terms of the settlement, and informs you of your legal rights and obligations. IN ORDER TO OBTAIN THE BENEFITS OF THIS SETTLEMENT, YOU DO NOT HAVE TO DO ANYTHING EXCEPT GIVE NOTICE OF ANY CHANGE OF ADDRESS. NO ADMISSION OF LIABILITY By settling this lawsuit, Watson is not admitting that it has done anything wrong. Watson expressly denies that it did anything wrong. THE PROPOSED SETTLEMENT WILLIS AND WATSON HAVE AGREED TO THE SETTLEMENT DESCRIBED BELOW. YOU DO NOT NEED TO DO ANYTHING IN ORDER TO RECEIVE THE BENEFITS OF THIS SETTLEMENT EXCEPT GIVE NOTICE OF ANY CHANGE OF YOUR ADDRESS. IF THE SETTLEMENT IS FINALLY APPROVED, YOU WILL AUTOMATICALLY RECEIVE THE BENEFITS DESCRIBED BELOW. The attorneys for the class believe that this settlement is fair, reasonable, and in the best interests of the class members. The terms of the settlement are as follows: 1. Payment to each class member. Watson agrees to pay each of the 5864 class members, including Willis, $150. If the Court approves the settlement on [date], the payments will sent out 65 days thereafter. 2. Relief to Willis on individual claim. Willis has previously returned the used car she bought to Watson. Willis will execute all documents necessary to transfer title to the vehicle to Watson. Watson will return to Willis all money she paid, cancel all contracts she signed, and give appropriate notice to credit reporting agencies. 3. Release. Each class member not opting out will, if the settlement is approved and the $150 paid, be deemed to release and discharge forever Watson and its officers, directors, successors, predecessors, shareholders, affiliated companies, employees and agents, from all claims, irrespective of legal theory, based on any Truth in Lending, financing, credit, or other disclosures made or required in connection with the contract or contracts that causes said person to be a class member. The claims asserted on behalf of Willis and a class against Wonderlic under the Truth in Lending Act and the Sales Finance Agency Act are specifically excluded from this release. The following claims by class members are also not released or affected: (i) claims under the terms of credit life, disability or unemployment insurance policies or warranties or extended service contracts, even if referred to on the Truth in Lending statement, or for the return of premiums upon the cancellation of such policies or warranties or service contracts, (ii) disputes or disagreements concerning the receipt of payments made by class members, (iii) any claims for personal injury, property damage, or relating to the condition of vehicles. This list of claims which are not released is not meant to suggest that any such claims exist. Class counsel has simply not attempted to determine whether any such claims exist and Watson is not paying to dispose of any such claims. Willis further releases Watson, Wonderlic, or any other party for any claim based on the condition of the vehicle she purchased from Watson, and is giving Watson a general release. Finally, if a judgment is entered in favor of a class member, either in a class action or an individual action, against nonsettling defendants (Wonderlic), the nonsettling defendants may be entitled to credit for the $150. 4. Attorneys Fees and Expenses. In addition to the benefits described above, Watson will pay counsel for the class the sum of $5,000 for fees and expenses, subject to approval by the court. None of the fees and expenses will come out of the amounts to be received by the customers and described above. OPINION OF CLASS COUNSEL CONCERNING THE VALUE OF THE SETTLEMENT The only claim asserted on behalf of the class against Watson is under the federal Truth in Lending Act. The Truth in Lending Act requires that specified information be disclosed to any consumer entering into a credit transaction, such as the purchase of a car on time. The information required includes the finance charge, which is the cost of credit

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expressed as a dollar amount, the annual percentage rate, which is the cost of credit expressed as a percentage, and the amount financed, which is the amount of credit that the consumer receives. Each of these numbers must be calculated in a very specific manner. There are many pages of laws and regulations specifying how they must be calculated. The complaint in this case alleges that Watson failed to calculate the numbers properly. Specifically, Watson included in the amount financed on each class members retail installment contract a charge for V.S.I. for insurance. Willis complaint alleged that this charge had to be included in the finance charge and annual percentage rate, because the class members were not told in clear and conspicuous terms that they have the option to obtain the insurance from their own company. The Truth in Lending Act provides for both individual actions and class actions. In a class action, the maximum possible recovery is (i) any actual damages suffered by the class members and (ii) a penalty, in such amount as the court shall assess, based on the culpability of the defendants conduct and the amount of harm caused by the defendant. The penalty cannot in any event exceed the smaller of $500,000 or 1% of the defendants net worth. The penalty is divided up among the class members. In an individual action, the person bringing the suit may recover (i) any actual damages suffered and (ii) a penalty equal to twice the finance charge, but not less than $100 and not more than $1,000. In either case, the person bringing the suit can also recover attorneys fees and the expenses of prosecuting the suit, if it is successful. Class counsel contend that the $50 insurance charge constitutes actual damage. Defendants contest this position. Class counsel believe that the $150 per person payment provided for by this settlement is fair and reasonable and that the class members should accept this settlement. While one might recover more in an individual case, if it is brought and is successful, few individual suits under the Truth in Lending Act are brought because it is not economical to file a lawsuit in which the maximum recovery cannot exceed $1,000. In addition, Watson has denied that it violated the Truth in Lending Act, and the Court has not ruled on the merits of the suit. A person that elects to opt out of the action, as described below, might recover nothing. At the same time, class members retain all of their rights against Wonderlic. The claims against Wonderlic include one under an Illinois law known as the Sales Finance Agency Act, which does not apply to Watson. The maximum potential recovery under the Sales Finance Agency Act is 25% of the amount financed. CORRECT ADDRESS If this Notice was sent to you at your current address, you do not have to do anything further to receive any credit or payment to which you are entitled. If it was forwarded by the Postal Service, or if it was otherwise sent to you at an address which is not current, you should immediately send a letter to each of the lawyers named below stating your past and current addresses. [name] [address] [phone] (attorney for Willis and the class) [name] [address] [phone] (attorney for Watson) If any of the persons whose names appear on the contract have died, or by reason of divorce or separation payments have been made by some of the persons whose names appear on the account, you should send a letter to the same lawyers explaining who is responsible for payments on the account and including any supporting documentation (such as a divorce decree). FAIRNESS HEARING At [time] on [date], a hearing will be held on the fairness of the proposed settlement. At the hearing, the Court will be available to hear any objections and arguments concerning the fairness of the proposed settlement. The hearing will take place before Judge William T. Hart in Room 2588 of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604.

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WHAT YOU CAN DO

1. You have the right to exclude yourself from both the class action and the settlement by filing a request for exclusion with the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604, and serving copies of the request on the lawyers listed above, under Correct Address. The request for exclusion must be received by the Clerk of the Court on or before [date] and refer to the name and number of the case. Unless you plan to bring this claim on an individual basis, there is no benefit to excluding yourself. 2. If you do not wish to exclude yourself, and have no objection to the settlement, it is not necessary for you to take any action. You will get the benefits of the settlement if it is approved. 3. If you do object to the settlement, but do not wish to simply exclude yourself from the class action, you must submit your objection in writing to the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604. The objection must be received by the Clerk of the Court on or before [date]. You must also serve copies on the attorneys listed under Correct Address, above, by the same date. Any objection must include the name and number of the case and a statement of the reasons why you believe that the Court should find that the proposed settlement is not in the best interests of the classes. If you do file an objection and wish it to be considered, you must also appear at the hearing before Judge Hart on [date]. Please note that it is not sufficient to simply state that you object. You must state reasons why the settlement should not be approved. IMPORTANT: THE COURT REQUIRES THAT ANY REQUESTS FOR EXCLUSION OR OBJECTIONS BE RECEIVED BY THE CLERK BY [date]. IF YOU MAIL A REQUEST FOR EXCLUSION OR OBJECTION, YOU BEAR THE RISK OF ANY PROBLEM WITH THE MAILS. If the settlement is not approved, the case will proceed as if no settlement has been attempted. Watson retains its rights to contest whether this case should be maintained as a class action and the merits. There can be no assurance that if the settlement is not approved, the class will recover more than is provided in this settlement, or indeed anything. The claims against Wonderlic will proceed in any event. Wonderlic also retains its rights to contest whether this case should be maintained as a class action and the merits. This description of the case is general and does not cover all of the issues and proceedings thus far. In order to see the complete file, you should visit the office of the Clerk of the District Court on the 20th floor of the Dirksen Federal Building, 219 S. Dearborn Street, Chicago, IL 60604. The Clerk will make the files relating to this lawsuit available to you for inspection and copying at your own expense. WHAT YOU SHOULD DO NOW IN ORDER TO RECEIVE THE BENEFITS TO WHICH YOU ARE ENTITLED UNDER THE SETTLEMENT AGREEMENT OUTLINED ABOVE, YOU DO NOT NEED TO DO ANYTHING. If you are entitled to money, you will get it after final approval of the settlement. However, if you wish, you may consult with an attorney (at your expense), exclude yourself from the case, or file objections, as described above. You also have the right to file an appearance in the case if you wish. This notice is only a summary of the terms of the settlement. You may inspect the entire settlement agreement. IF YOU HAVE RECEIVED A DISCHARGE OF YOUR DEBT IN A CHAPTER 7 BANKRUPTCY, this notice does not affect your discharge. IF YOU ARE CURRENTLY A DEBTOR IN A CHAPTER 13 BANKRUPTCY, send a copy of this notice to your bankruptcy attorney. DO NOT ADDRESS ANY QUESTIONS ABOUT THE SETTLEMENT OR THE LITIGATION TO THE CLERK OF THE COURT OR TO THE JUDGE. They are not permitted to answer your questions.

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N.3.3 State Usury Case (Adams)

) ) Plaintiff, ) ) v. ) ) RECKLESS SAVINGS & LOAN ) ASSOCIATION and ) PREDATORY FINANCE ) COMPANY, ) Defendants. ) ) PATRICIA ADAMS,

NOTICE OF CLASS ACTION AND PROPOSED SETTLEMENT On January 4, 1990, Judge Clark Washington of the Circuit Court of Cook County determined that the complaint in the above-entitled lawsuit should proceed as a class action with Patricia Adams as the representative of two classes. Class A consists of all persons (and, in the case of deceased persons, their estates, personal representatives or beneficiaries) (a) who on or after January 1, 1986, entered into a mortgage loan secured by residential property in Illinois (b) which was originated or acquired by Predatory Finance Limited (hereinafter Predatory Finance) and (c) which provides for the use of the Rule of 78s to compute the amount due upon prepayment of the loan. Class B consists of all persons (and, in the case of deceased persons, their estates, personal representatives or beneficiaries) (a) who on or after January 1, 1985, entered into a mortgage loan secured by residential property in Illinois (b) which was originated by Predatory Finance and (c) which provided for the payment by the borrower of a brokerage commission to a loan broker. According to the records of Predatory Finance, you are a member of one or both classes. The parties to the lawsuit, after investigation, have reached a proposed settlement, described below. The Court has granted preliminary approval of the settlement, subject to a fairness hearing which will take place on March 15, 1990, at 2:00 p.m., in courtroom 2508 of the Richard J. Daley Center, Randolph and Dearborn Streets, Chicago, Illinois 60602. The purpose of this notice is to explain the nature of the lawsuit, to describe the terms of the settlement, and to inform you of your legal rights and obligations. IN ORDER TO OBTAIN THE BENEFITS OF THIS SETTLEMENT, YOU DO NOT HAVE TO DO ANYTHING EXCEPT GIVE NOTICE OF ANY CHANGE OF ADDRESS. NATURE OF THE LAWSUIT Adams filed a complaint on behalf of herself and all others similarly situated against Predatory Finance. The complaint asserts two types of claims. 1. Rule of 78s Predatory Finances standard form loan documents in Illinois provided that the interest due upon prepayment or acceleration of a loan is computed according to a formula known as the Rule of 78s. Adams alleges that such use of the Rule of 78s is precluded by a section of the Illinois Interest Act which applied to loans made on or after January 1, 1986. Adams claims that lenders are required to use a different method of computing interest, known as the actuarial method, instead. If a borrowers loan is reasonably current, the actuarial method generally will result in he or she paying less than under the Rule of 78s. Predatory Finance has denied liability and has raised various defenses to Adamss claims brought under the Illinois Interest Act. The result if the parties were to proceed with the litigation on this claim is uncertain. 2. Brokerage Payments Predatory Finances loans in Illinois were generally originated through loan brokers. The brokers were compensated by being paid a portion of the principal of each loan. Adams alleges that the broker payments violated the Illinois Interest Act, were not disclosed properly under the Federal Truth in Lending Act, and violated the Illinois Consumer Fraud Act.

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Consumer Class Actions: A Practical Litigation Guide

Predatory Finance denies all of these contentions. Predatory Finance has set forth other equitable, statutory and legal defenses as well. Predatory Finances liability in connection with the brokerage payments is thus also uncertain. No Admission of Liability The settlement of this lawsuit does not constitute an admission of liability. THE PROPOSED SETTLEMENT THE PARTIES HAVE AGREED TO THE SETTLEMENT DESCRIBED BELOW. YOU DO NOT NEED TO DO ANYTHING IN ORDER TO RECEIVE THE BENEFITS OF THIS SETTLEMENT EXCEPT GIVE NOTICE OF ANY CHANGE OF YOUR ADDRESS. IF THE SETTLEMENT IS FINALLY APPROVED, YOU WILL AUTOMATICALLY RECEIVE THE BENEFITS DESCRIBED BELOW. MONEYS TO BE PAID WILL BE DISTRIBUTED 30 DAYS AFTER FINAL APPROVAL BY THE COURT. Counsel for Adams believes that this settlement is fair, reasonable, and in the best interests of the classes. The settlement has been approved preliminarily by the Court. The terms of the settlement are as follows: 1. PREDATORY FINANCE WILL DISCONTINUE THE USE OF THE RULE OF 78S with respect to the members of Class A who do not opt out, unless and until the Illinois Supreme Court or the Illinois General Assembly specifically authorizes or approves its use. (The parties agree that the statute upon which the claims of Class A are based does not apply to loans entered into prior to January 1, 1986.) Until then, the rebate of unearned interest upon prepayment or acceleration of a loan will be computed using the actuarial method rather than the Rule of 78s. This is a significant benefit to persons who have not yet prepaid their loans because a predictable proportion of borrowers will pay their loans off early. It is estimated that Predatory Finance will ultimately collect $100,000 to $150,000 less from members of Class A who have not yet prepaid their loans by using the actuarial method than it would have collected using the Rule of 78s. 2. PREDATORY FINANCE WILL PAY AN AGGREGATE AMOUNT OF $200,000 TO THE MEMBERS OF CLASS A AND CLASS B, AS FOLLOWS. For purposes of these payments, joint borrowers on a single loan are treated as one borrower. a. Each member of Class A who already prepaid his or her loan will receive a rebate. Each individuals payment will consist of 100% of the difference between the amount which the subclass member actually paid at prepayment and the amount which the subclass member would have paid had the prepayment been computed according to the actuarial method. The total amount of all rebates will be approximately $80,000. b. Each member of Class B will receive $100 in settlement of all claims relating to loan brokers. The total amount of the payments to be made on this account will be approximately $60,000. c. The balance of the $200,000 will be paid to the members of Class A (whether or not they prepaid their loans). The sum will be approximately $60,000, and will be divided among the class members based upon the percentage that the original class members loan bears to the sum of the original principal amount of all of the loans made to the members of Class A. d. Amounts which cannot be distributed within one year will be returned to Predatory Finance. 3. EACH CLASS MEMBER WILL RELEASE ALL CLAIMS AGAINST PREDATORY FINANCE, ITS ASSOCIATES, AND VARIOUS OTHER ENTITIES, AS DESCRIBED IN THE SETTLEMENT AGREEMENT. This means that you will be barred from bringing any further claims based on your loan or its administration through the date of the settlement, with a narrow exception applicable if a home improvement contractor referred you to Predatory Finance. Adams did not allege any such claims, the parties have no reason to believe that any such claims exist, and the Settlement Agreement does not address them. 4. The payments to class members will be made approximately 30 days after final approval of the settlement by the Court. Payments will be mailed directly to class members. CORRECT ADDRESS If this Notice was sent to you at your current address, you do not have to do anything further to receive any payment to which you are entitled. If it was forwarded by the Postal Service, or if it was otherwise sent to you at an address which is not current, you should immediately send a letter to each of the lawyers named below stating your past and current

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Sample Notices

Appx. N.3.3

addresses and (if possible) your loan number. Similarly, if the person to whom the loan was originally made is deceased, you should send a letter to each of the lawyers named below giving the name and address of the persons heirs. [name and address of class attorney] [name and address of defendants attorney] FEES Counsel for Adams will request that the Court award attorneys fees and expenses. Adams will also request compensation for her services as class representative. Predatory Finance has agreed not to oppose an application for an award of attorneys fees and litigation expenses not exceeding $150,000. Predatory Finance has also agreed not to oppose an application for an award to Adams in an amount not exceeding $1,000. Adamss default is being cured. Predatory Finance will pay separately whatever fees are awarded by the Court. None of the fees and expenses will come out of the amounts to be received by the class members and described above. If it is necessary to employ a tracing service to track down an individual class member entitled to money under this agreement, the expenses incident to this may be charged against that class members recovery. BENEFITS TO THE CLASS Counsel for the class believes that this settlement is fair, reasonable, and in the best interests of the class. The imposition of penalties for the use of the Rule of 78s is hotly disputed in the lending industry and the law concerning the issues in this case, although slowly evolving, remains unsettled. The settlement guarantees a substantial benefit to the class and resolves substantial issues without prolonged litigation. The concessions obtained from Predatory Finance will reduce significantly the amounts due on prepayment from future prepayers and will provide members of Class A who have already prepaid with rebates of interest. The members of Class B will receive payments on account of the brokerage fees. The total value of the settlement, including amounts to be paid and future interest which Predatory Finance will not collect, is estimated to be $300,000 to $350,000. In addition, the class will be spared payment for any attorneys fees or litigation expenses from that amount. FAIRNESS HEARING At 2:00 p.m. on March 15, 1990, a hearing will be held on the fairness of the proposed settlement. At the hearing, the Court will be available to hear any objections and arguments concerning the fairness of the proposed settlement. The hearing will take place in the courtroom of Judge Clark Washington, room 2508 of the Richard J. Daley Center, Randolph and Dearborn Streets, Chicago, Illinois. WHAT YOU CAN DO 1. You have the right to exclude yourself from both the class action and the settlement by filing a request for exclusion with the Clerk of the Circuit Court of Cook County, Chancery Division, in room 802 of the Richard J. Daley Center, Randolph and Dearborn Streets, Chicago, Illinois 60602, and serving copies of the request on the lawyers listed above, under Correct Address. The request for exclusion must be filed on or before March 1, 1990 and refer to the name and number of the case. 2. If you do not wish to exclude yourself, and have no objection to the settlement, it is not necessary for you to take any action. You will get the benefits of the settlement if it is approved. 3. If you do object to the settlement, but do not wish to simply exclude yourself from the class action, you must submit your objection in writing to the Clerk of the Circuit Court of Cook County, Chancery Division, in Room 802 of the Richard J. Daley Center, Randolph and Dearborn Streets, Chicago, Illinois 60602, on or before March 1, 1990. You must also serve copies on the attorneys listed under Correct Address above, by the same date. Any objection must include the name and number of the case and a statement of the reasons why you believe that the Court should find that the proposed settlement is not in the best interests of the classes. If you do file an objection and wish it to be considered, you must also appear at the hearing before Judge Washington on March 15, 1990. If the settlement is not approved, the case will proceed as a class action with Adams as class representative and the attorneys listed above representing the class.

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Consumer Class Actions: A Practical Litigation Guide

This description of the case is general and does not cover all of the issues and proceedings thus far. In order to see the complete file, you should visit the office of the Clerk of the Circuit Court, Chancery Division, in Room 802 of the Richard J. Daley Center, who will make the files relating to this lawsuit available to you for inspection and copying at your own expense. WHAT YOU SHOULD DO NOW IN ORDER TO RECEIVE THE BENEFITS TO WHICH YOU ARE ENTITLED UNDER THE SETTLEMENT AGREEMENT OUTLINED ABOVE, YOU DO NOT NEED TO DO ANYTHING. If you are entitled to money, you will get it in the mail within 30 days after final approval of the settlement. However, if you wish, you may consult with an attorney (at your expense), exclude yourself from the case, or file objections, as described above. You also have the right to file an appearance in the case if you wish. DO NOT ADDRESS ANY QUESTIONS ABOUT THE SETTLEMENT OR THE LITIGATION TO THE CLERK OF THE COURT OR TO THE JUDGE.

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Appendix O

Sample Stipulations of Proposed Settlements

This appendix provides five sample stipulations of proposed class action settlements. Additional examples of class action settlements (in print and on a WordPerfect disk) are included in National Consumer Law Center, Consumer Law Pleadings With Disk, Numbers One through Five. These sample stipulations will be listed below by volume number, such as CLP#1 or CLP#2: 1 Creditors illegal practices in force placing automobile insurance, CLP#1 2.11; 1 Odometer rollbacks, CLP#1 3.10; 1 Fair Debt Collection Practices Act case, CLP#3 3.5; 1 Merchants illegal reaffirmation of debts discharged in bankruptcy, CLP#5 2.1.1; and 1 Tax agency filing baseless proof of claims in chapter 13 bankruptcies, CLP#3 7.2.8.

O.1 Federal Fair Debt Collection Case (Boddie)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS ) ) Plaintiff, ) ) v. ) ) LARRY CARSON, ) NATIONWIDE CASSEL, ) L.P., AND NAC ) MANAGEMENT CORP. ) Defendants. ) ) BRIAN BODDIE, SETTLEMENT AGREEMENT This Settlement Agreement is entered into as of September 21, 1993, between Brian Boddie (Boddie), suing on behalf of himself and the class described below, on the one hand, and Larry Carson (Carson), Nationwide Cassel, L.P. (Nationwide), and N.A.C. Management Corporation (NAC), on the other. WHEREAS: 1. Boddie has asserted class claims against Carson, Nationwide and NAC for alleged violation of the Fair Debt Collection Practices Act in Brian Boddie v. Larry Carson, Nationwide

Cassel, L.P., and N.A.C. Management Corporation, in the United States District Court for the Northern District of Illinois (federal action). 2. The class on whose behalf this settlement is made consists of all persons who, on or after May 16, 1992, were sent letters similar to that attached as Exhibit A [not attached herein] to the complaint and this agreement by Nationwide or NAC. Similar letters shall include all letters bearing the printed name of Carson and the address [address], Chicago, Illinois. 3. The federal action alleges that the dissemination of Exhibit A and similar letters violated the Fair Debt Collection Practices Act. 4. Defendants deny all liability with respect to all of the claims asserted against them, and have asserted various defenses to those claims. 5. Counsel for defendants have provided certain financial information to plaintiffs counsel regarding defendants net worth and have represented that there are approximately 1642 accounts and that, because there are sometimes multiple obligors on a single account (spouses, guarantors, etc.), there are potentially approximately 20002200 total obligors on these accounts. Counsel for the class has investigated the facts available to their clients and the law. 6. Based on the foregoing, and upon an analysis of the benefits which this Settlement Agreement affords the class, plaintiffs counsel considers it to be in the best interest of the class to enter into this Settlement Agreement. 7. While defendants deny any wrongdoing and any liability whatsoever, they have concluded that it is in their best interests to settle the federal actions on the terms set forth herein in order to avoid expense, inconvenience, and interference with ongoing business operations. Nothing herein shall constitute an admission of liability or be used as evidence of liability. IT IS THEREFORE AGREED: 1. Five days after the Effective Date, as defined below, defendants will pay $60,000 into an interest bearing account. Of this amount, $1,000 plus interest shall be paid to Boddie and the balance shall be divided equally among the accounts (multiple obligors on a single account count as a single class member), other than Boddie, after allowance for counsel fees, as described below. 2. Defendants or their counsel will file or cause to be filed an affidavit listing the names and addresses of the class members and payments made to each. 3. Where the class member is deceased, defendants will, upon receipt of proper notification and documentation of the payees interest, make the payment to the class members heirs or estate.

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B. Find that Boddie, as the class representative, fairly and adequately represents the interest of the class. C. Find that the notice previously given to class members in this action satisfied the requirements of due process and Rule 23 of the Federal Rules of Civil Procedure. D. Find that the Settlement Agreement is fair, reasonable, and adequate to the class, provide that each member of the classes except those who have excluded themselves shall be bound by this Settlement Agreement, including the release, and conclude that the Settlement Agreement should be and is approved. E. Dismiss on the merits and with prejudice all claims asserted in the federal action. F. Retain jurisdiction of all matters relating to the interpretation, administration, implementation, effectuation and enforcement of the Settlement Agreement. 11. The final approval order (Final Approval Order) shall be deemed final 30 days after entry if no pleadings are filed within that time seeking appeal, review or rehearing of the order, or if such pleadings are filed, then 14 days after the date upon which all appellate and other proceedings resulting therefrom have been finally terminated in such a manner as to permit the Final Approval Order to take effect. 12. Plaintiff and the class shall request that the Court approve the fee award at the same time as the Final Approval Order is entered. The award shall be deemed final at the same time that the Final Approval Order becomes final, as described above, or at such other time as the Court directs. 13. The percentage of the class members recoveries that shall be awarded as fees by the Court will be deducted from each class members check. Defendants or their representatives or agents shall issue a single check to the attorneys for the fees out of the $60,000 settlement fund, once the award is final. Inability to deliver a check to a class member shall not defeat the attorneys entitlement to fees on account of that class members recovery. 14. Where there are multiple obligors on an account, the check will be payable to all of them. Any interested party may request that the Court permit less than all of the obligors to cash a check, without the need for complying with technical requirements relating to probate. 15. In the event any court disapproves this Settlement Agreement or any material part thereof for any reason, or declines to enter the Final Approval Order, or overturns or reverses the Final Approval Order or any material part thereof, then: A. If all parties hereto do not agree jointly to appeal such ruling, or if plaintiff does not wish to appeal such ruling himself, this Settlement Agreement shall become null and void; the litigation shall continue; and the order certifying the class shall be vacated (without prejudice to further proceedings to certify a class); or B. If all parties hereto agree to jointly appeal such ruling, or if plaintiff appeals such ruling himself, and if the final approval order or its equivalent in all material respects is not in effect after the termination of all proceedings arising out of such appeal, this Settlement Agreement shall become null and void; the litigation shall continue; and the order certifying the class shall be vacated (without prejudice to further proceedings to certify a class).

4. Counsel for the class shall request that the Court make an award of legal fees and expenses to be paid out of the fund described in k8. Defendants agree not to oppose or cause to be opposed a request for an amount of fees and expenses not exceeding $20,000. Defendants payment obligations shall not in any event be increased by the payment of attorneys fees. 5. Defendants counsel will be responsible for notifying the class members. Each class member will be sent a notice by first class mail addressed to his or her last known address, as shown by the records of defendants. If a mailing is returned with a forwarding address provided by the Postal Service, defendants counsel will remail it to the address or addresses provided. The parties agree to recommend the form of notice attached as Exhibit B [not attached herein]. Since defendants have addresses, drivers license numbers and social security numbers for all class members, it is not anticipated that notice by publication is required. 6. If the above-described mailings do not result in notice to a class member, plaintiffs counsel may engage a tracing service to locate that class member. The cost of locating a class member in this manner shall be deducted from the class members recovery. If the class member is not located prior to the date for filing objections and opt outs, described below, the class member retains the right to opt out within 14 days of receiving a class notice, but not to object. This right shall expire 90 days after the Effective Date. 7. Upon the Effective Date, each class member who does not opt out shall be deemed to have given defendants, their officers, directors, employees, successors, assigns and agents, a limited release, which shall forever bar them from asserting any claim, under the Fair Debt Collection Practices Act or any other legal theory, which is based on the dissemination by Nationwide of collection letters written on the letterhead of Carson. 8. The parties agree to petition the Court presiding over the federal action within 7 days of the execution date of this Settlement Agreement for a preliminary approval order: A. Determining (for purposes of settlement) that the federal action may be maintained as a class action on behalf of the class described in k2. B. Finding that Boddie fairly and adequately represents the interests of the class. C. Finding that the mailing of a class notice as described above is the only notice required and that such notice satisfies the requirements of due process and Rule 23 of the Federal Rules of Civil Procedure. D. Finding preliminarily that this Settlement Agreement is fair, reasonable, and adequate to the class. E. Setting dates by which objections and opt outs must be filed. 9. If the court enters the preliminary approval order described above, defendants counsel shall, within 14 days thereafter, mail to each class member at his or her last known address a notice in the form approved by the Court. The parties will agree to request notice in the form attached as Exhibit B [not attached herein]. 10. The parties shall petition the Court before which the federal action is pending to hold a final hearing upon the settlement approximately 45 days after entry of the preliminary approval order. The final hearing order shall: A. Determine that this action may, for settlement proposes, be maintained as a class action on behalf of the class described in k2, above.

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Sample Stipulations of Proposed Settlements

16. At least seven days prior to the final approval hearing, the parties shall exchange and finalize lists of the persons who have excluded themselves from the class and of the persons who object to the settlement. 17. The Effective Date shall be the 5th day after the Final Approval Order becomes final, as described above. 18. On the Effective Date, defendants or their representatives or agents shall make the payments specified herein. 19. In connection with the distribution of funds, defendants or their representatives or agents will prepare, or have prepared, envelopes in which to mail each class members check by addressing such envelopes to the last address shown in defendants records for such class members, or to such other address as is supplied by counsel for the classes, inserting the correct check in the envelopes, and then mail the envelopes to the class members by first class mail. The envelopes will bear the return address of class counsel. In the event any class members envelope is returned, defendants or their representatives or agents will timely provide plaintiffs counsel with the information on the class members application as to the class members social security number, prior names, banking and credit relationships, date of birth, and past and present home and business addresses (assuming that the information is available to defendants or their representatives or agents and has not already been furnished). Plaintiffs counsel will resend the checks. 20. Counsel for the class may communicate with the class members in order to effect payment on the checks. If a class members check is not cashed within one year, it shall be null and void (the checks may be stamped or printed with a legend to that effect) and defendants shall have no further obligation to make payment to the class member. (This does not affect the right of counsel to obtain payment from the fund.) Funds remaining in the interest-bearing account 400 days after the Effective Date shall revert to defendants. 21. Counsel for the class are authorized to employ a tracing service to locate any missing class members, to be paid from out of the class members recovery. If this is done, defendants shall issue checks from the settlement account reflecting the amount due the tracer and the amount to be distributed to the class member. 22. Defendants may withdraw from this settlement if more than 10% of the class members opt out prior to the final approval hearing. This right may be exercised by notice given not later than five days prior to the final approval hearing. Persons who had to be located by the tracing service and opt out later are not included in the 10%. 23. This Settlement Agreement may not be changed orally. It may be changed without the consent or approval of any nonsignatory by a writing signed by all signatories hereto, any of whom may sign by counsel of record (whose ability to make changes and signature is hereby authorized as between all parties hereto). 24. As agent for receipt of communications relating to this Settlement Agreement, plaintiff and the class appoint: [Plaintiffs Attorney(s)] and defendants appoint: [Defendants Attorney(s)]

Appx. O.2.1

The persons and addresses designated in this paragraph may be changed by any signatory hereto by written notice to the other signatories hereto. 25. This Settlement Agreement may be executed in counterparts, in which case the various counterparts shall be and constitute one instrument for all purposes. The several signature pages may be collected and annexed to one or more documents to form a complete counterpart. Photocopies of executed copies of this Settlement Agreement may be treated as originals. 26. Each and every term of this Settlement Agreement shall be binding upon and inure to the benefit of Boddie, the members of the class, and any of their successors and personal representatives, and shall bind and shall inure to the benefit of the released parties, which persons and entities are intended to be beneficiaries of this Settlement Agreement. 27. All time periods and dates relating to the approval of this Settlement Agreement and the notification of the classes (but not those relating to the substantive rights of the parties and class members, such as those that are part of the class definition) are subject to approval and change by the Court. 28. This Settlement Agreement shall be interpreted in accordance with the laws of Illinois. BRIAN BODDIE, on behalf of himself and the class defined herein [name] LARRY CARSON, NATIONWIDE CASSEL, L.P. and N.A.C. MANAGEMENT CORPORATION, [name] [title]

O.2 TIL Disclosure CaseHidden Finance Charge in Car Sale (Willis)

O.2.1 Settlement With Dealer
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) HARVEY CYCLE & ) CAMPER, INC., doing ) business as WATSON ) MOTORSPORT, ltd ) Defendants. ) ) CHRISTINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff,

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Counsel for the class have investigated the facts available to them and the law. Based on the foregoing, and upon an analysis of the benefits which this settlement agreement affords the class, counsel for the class considers it to be in the best interest of the class to enter into this settlement agreement. In consideration of the foregoing and other good and valuable consideration, it is stipulated and agreed by and between counsel for the class and counsel for Watson that the claims of the class be and are hereby compromised and settled, subject to the approval of the court, upon the following terms and conditions. TERMS 1. Certification of settlement class. Watson stipulates to the certification of a class or subclass (the class) under Fed.R.Civ.P. 23(b)(3), which class shall consist of all persons who signed a retail installment contract with Watson within one year prior to the filing of this action, which contract included a charge for V.S.I. insurance in the amount financed and excluded it from the finance charge and the annual percentage rate. There are 5864 persons in the class, including Willis (and counting multiple obligors as one person), all of whose contracts were assigned by Watson to Wonderlic. This stipulation is for purposes of settlement only, and if this settlement is not approved or does not become effective for any reason, Watson retains its right to object to the maintenance of the action as a class action. 2. Relief to class. Watson agrees to pay each of the 5864 class members $150. If a judgment is entered in favor of a class member, either in a class action or an individual action, against nonsettling defendants, the $150 (or any portion thereof paid) shall be used as a setoff against the limits on recovery by any claimant, prescribed in 15 U.S.C. 1640, to the lesser of twice the finance charge or $1,000, and the $500,000 limit on a class action recovery. In the event that a class member entitled to a check is deceased, or there are multiple obligors on an account, Watson shall be released if it sends a check to the person whom it reasonably believes to have been making payments on the account, notwithstanding the failure to comply with laws relating to probate and marital property. If such check is not cashed within 180 days the monies represented thereby shall become the sole and exclusive property of Watson and Watson shall not have any further payment obligation to the payee. The payments shall be made within 30 days of the effective date of the settlement. 3. Relief to Willis on individual claim. Willis individual warranty claims will be disposed of as follows: A. Willis has previously returned the 1985 Buick Century, VIN 1G4AL1934FT410298, to Watson. Willis will execute all documents necessary to transfer title to the vehicle to Watson. B. Watson will return to Willis her $600 down payment and an amount equal to all payments she made to Wonderlic, if any. C. Watson will cancel the purchase order Willis signed and take whatever steps are necessary to secure the cancellation of the retail installment contract Willis signed on February 9, 1994, which steps may include paying it off or repurchasing it.

CLASS SETTLEMENT AGREEMENT RECITALS Parties The parties to this Agreement are Harvey Cycle & Camper, Inc., doing business as Watson Motorsport, Ltd. (Watson), on the one hand, and Christine Willis (Willis) and a class of persons who entered into retail installment contracts for the purchase of motor vehicles from Watson, further defined below, on the other. NATURE OF LITIGATION Willis filed an action in the United States District Court for the Northern District of Illinois, alleging both class and individual claims. Individually, Willis claimed that she purchased a defective car from Watson, that Watson breached warranties with respect to the car under federal and state law, and that Wonderlic was liable under the terms of the retail installment contract (Counts III and IV). On behalf of a class, Willis alleged that Watson and Wonderlic understated the finance charge and annual percentage rate on their retail installment contracts, in that a $50 charge for V.S.I. insurance was included in the amount financed and excluded from the finance charge and annual percentage rate. This was alleged to violate the Truth in Lending Act (Count I) and the Illinois Sales Finance Agency Act (Count II). Only Wonderlic is alleged to be subject to the Sales Finance Agency Act. SETTLEMENT WITH WATSON ONLY This settlement agreement is intended to compromise the rights of Willis and the class for disclosure claims with respect to Watson, only, and to preserve the rights of Willis and the class with respect to such claims against Wonderlic. Willis enters into a complete compromise of her warranty claims. DENIAL OF LIABILITY Watson denies any liability to Willis or the class and has asserted a number of defenses to the complaint. Nevertheless, Watson considers it desirable that the action and the claims alleged therein be settled upon the terms and conditions set forth in this Agreement, in order to avoid further expense and burdensome, protracted litigation, and to put to rest all claims that have been or might be asserted by the plaintiff or the class arising out of or related to the subject matter of the complaint. The class desires to settle its claims against Watson, having taken into account through its counsel the risks, delay and difficulties involved in establishing a right to recovery in excess of that offered by this settlement and the likelihood that the litigation will be further protracted and expensive. Counsel for Watson has provided certain documents and information and made certain representations to counsel for the class concerning the number of class members. Specifically, it has been represented that Watson charged for V.S.I. insurance on 5864 contracts, including the Willis contract, and the contracts have been produced.

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D. Watson will notify any credit reporting agency which shows the account as delinquent or unpaid that the debt has been cancelled has been paid and should not be treated as delinquent or unpaid. E. Willis will execute the release described below. 4. Release. Each class member not opting out shall, as of the effective date of this settlement, be deemed to release and discharge forever Watson and its officers, directors, successors, predecessors, shareholders, affiliated companies, employees and agents (Released Parties), from all claims, irrespective of legal theory, based on any Truth in Lending, financing, credit, or other disclosures made or required in connection with the contract or contracts that causes said person to be a class member. The following claims are not released or affected: (i) claims under the terms of credit life, disability or unemployment insurance policies or warranties or extended service contracts, even if referred to on the Truth in Lending statement, or for the return of premiums upon the cancellation of such policies or warranties or service contracts, (ii) disputes or disagreements concerning the receipt of payments made by class members, (iii) any claims for personal injury, property damage, or relating to the condition of vehicles. The claims asserted on behalf of Willis and a class against Wonderlic under the Truth in Lending Act and the Sales Finance Agency Act are specifically excluded from this release. This release is conditioned upon the performance by Watson of its obligations toward the class member set forth in this settlement agreement. 5. Additional release by Willis. Willis further releases Watson, Wonderlic, or any other party for any claim based on the condition of the vehicle she purchased from Watson, and releases Watson and the other Released Parties, as defined above, from all claims which she has through the date of this agreement. This release is conditioned upon the performance by Watson of its obligations toward Willis set forth in this settlement agreement. 6. Effective date. This agreement shall become effective upon the occurrence or happening of all of the following events: A. The courts entry of a final judgment approving this agreement as fair, reasonable and adequate to the class; finding that this agreement is fair and made in good faith, thereby barring any potential claims for contribution or indemnity against Watson and the other Released Parties by nonsettling parties; dismissing the claims of Willis and the class against Watson with prejudice and without cost; and directing entry of judgment approving the settlement under Rule 54(b) of the Federal Rules of Civil Procedure. B. The expiration of five days after the time the final judgment becomes a final order not subject to appeal, or, if an appeal has been sought, the expiration of five days after the final disposition of any such appeal, which disposition approves the courts final judgment, the transactions contemplated therein, and the consummation of the settlement in accordance with the terms and provisions of this agreement. If this agreement is not approved by the court or for any reason does not become effective, it shall be deemed null and void and shall be without prejudice to the rights of the parties

Appx. O.2.1

hereto and shall not be used in any subsequent proceedings in this or any other litigation, or in any manner whatsoever. 7. Attorneys Fees, Notice Costs and Related Matters. In addition to the benefits described above, Watson will pay counsel for the class the sum of $5,000, subject to approval by the court, upon the date specified in k17. Class counsel will not request additional fees from either Watson or the class members and Watson will not oppose or cause to be opposed an application in the amount of $5,000. Class counsel will give notice to the 5864 class members. Watson shall provide an affidavit stating the names, last known addresses and social security numbers (if available) of the class members and attesting that the 5864 persons listed are the only persons known to be members of the class described above. Any subsequent application for fees based on lodestar will identify time spent in connection with the claims against Watson and on administration of this settlement agreement for appropriate consideration by the Court. 8. Class Members Right of Exclusion. Any class member may seek to be excluded from this settlement agreement and from the class within the time and in the manner provided by court order. Any class member so excluded shall not be bound by the terms of this settlement agreement nor entitled to any of its benefits. 9. Preliminary approval. As soon as practical after execution of this agreement, the parties shall make application to the court for an order which: A. Preliminarily approves this settlement agreement. B. Certifies for purposes of settlement only that the class claims may be maintained on behalf of the class defined above. C. Schedules a hearing for final approval of this agreement by the court. D. Approves the form of notice to the class, to be directed to the last known address of the class member as shown on Watsons records. If as a result of the mailing a forwarding address is furnished by the Postal Service but the notice is not forwarded by the Postal Service, the notice will be remailed to the address(es) provided. Plaintiffs counsel may employ a tracing service to locate class members whose mail cannot be delivered. The cost of the tracing service will be deducted from the $150. Watson will issue checks in the amounts necessary to pay the claimant and the tracing service. E. Finds that mailing of such class notice and the other measures specified in k21d is the only notice required and that such notice satisfies the requirements of due process and Fed.R.Civ.P. 23. The parties agree to request the form of notice attached hereto as Exhibit A [not attached herein] and propose the form of preliminary approval order attached hereto as Exhibit B [not attached herein]. The fact that the court may require changes in the notice or order does not invalidate this settlement agreement. 10. Final approval. At the conclusion of, or as soon as practicable after, the close of the hearing on the fairness, reasonableness and adequacy of this agreement, counsel for the class and Watson shall request that the court enter a Final Judgment approving the terms of this agreement as fair, reasonable and adequate, providing for the implementation of those terms and provisions, finding that the notice given to the class

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satisfies the requirements of due process and Rule 23, dismissing the claims of the class with prejudice and without costs, directing the entry of judgment under Fed.R.Civ.P. 54(b), and retaining jurisdiction to enforce the provisions of this agreement. The parties agree to request the form of judgment attached hereto as Exhibit C [not attached herein]. The fact that the court may require changes in the judgment does not invalidate this settlement agreement. 11. Miscellaneous provisions. Whether or not this Agreement and the settlement contemplated hereunder are consummated, this agreement and the proceedings had in connection herewith shall in no event be construed as, or be deemed to be, evidence of an admission or concession on the part of Watson of any liability or wrongdoing whatsoever. The parties and their attorneys agree to cooperate fully with one another in seeking court approval of this agreement, and to use their best efforts to effect the consummation of this agreement and the settlement provided for herein. Notices regarding this settlement agreement directed to the class shall be sent to: [Attorney for the Plaintiff] [address] and notices to Watson shall be sent to: [Attorney for the Defendant] [address] The persons and addresses designated in this paragraph may be changed by any signatory hereto by written notice to the other signatories hereto. The foregoing constitutes the entire agreement between the parties with regard to the subject matter hereof and may not be modified or amended except in writing signed by all parties hereto. This settlement agreement may be executed in counterparts, in which case the various counterparts shall be and constitute one instrument for all purposes. The several signature pages may be collected and annexed to one or more documents to form a complete counterpart. Photocopies of executed copies of this settlement agreement may be treated as originals. Each and every term of this settlement agreement shall be binding upon and inure to the benefit of plaintiff, the members of the class, and any of their successors and personal representatives, and shall bind and shall inure to the benefit of the Released Parties, all of which persons and entities are intended to be beneficiaries of this settlement agreement. This agreement and the exhibits annexed hereto shall be governed by and interpreted in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF, the parties hereto, acting by and through their respective counsel of record, have so agreed, on [date]. For Willis and the class: [Plaintiffs Attorney] For Watson: [Defendants Attorney]

O.2.2 Settlement With Related Lender/Assignee

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) ) ) ) ) ) v. ) ) WONDERLIC & ) ASSOCIATES, INC., ) doing business as ) WONDERLIC FINANCE, ) Defendants. ) ) CHRISTINE WILLIS, on behalf of herself and all others similarly situated, Plaintiff, CLASS SETTLEMENT AGREEMENT RECITALS PARTIES The parties to this Agreement are Wonderlic & Associates, Inc., doing business as Wonderlic Finance (Wonderlic), on the one hand, and Christine Willis (Willis) and a class of persons who entered into retail installment contracts for the purchase of motor vehicles from auto dealers, further defined below, on the other. RELATIONSHIP TO SETTLEMENT AGREEMENT WITH WATSON This agreement is to be construed in conjunction with the prior settlement agreement with Harvey Cycle & Camper, Inc., doing business as Watson Motorsport, Ltd. (Watson), the intent of the parties being that both agreements shall be effective. NATURE OF LITIGATION Willis filed an action in the United States District Court for the Northern District of Illinois, alleging both class and individual claims. Individually, Willis claimed that she purchased a defective car from Watson, that Watson breached warranties with respect to the car under federal and state law, and that Wonderlic was liable under the terms of the retail installment contract (Counts III and IV). On behalf of a class, Willis alleged that Watson and Wonderlic understated the finance charge and annual percentage rate on their retail installment contracts, in that a $50 charge for V.S.I. insurance was included in the amount financed and excluded from the finance charge and annual percentage rate. This was alleged to violate the Truth in Lending Act (Count I) and the Illinois Sales Finance Agency Act (Count II). Only Wonderlic is alleged to be subject to the Sales Finance Agency Act.

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Sample Stipulations of Proposed Settlements

The class desires to settle its claims against Wonderlic, having taken into account through its counsel the risks, delay and difficulties involved in establishing a right to recovery in excess of that offered by this settlement and the likelihood that the litigation will be further protracted and expensive. Wonderlic denies any liability to Willis or the class and has asserted a number of defenses to the complaint. Nevertheless, Wonderlic considers it desirable that the action and the claims alleged therein be settled upon the terms and conditions set forth in this Agreement, in order to avoid further expense and burdensome, protracted litigation, and to put to rest all claims that have been or might be asserted by the plaintiff or the class arising out of or related to the subject matter of the complaint. Counsel for Wonderlic has made certain representations to counsel for the class concerning the number of class members. Specifically, it has been represented that there are charges for V.S.I. insurance on 64 contracts that Wonderlic purchased from Watson, including the Willis contract, and 257 contracts that Wonderlic purchased from other auto dealers. Counsel for the class have investigated the facts available to them and the law. Based on the foregoing, and upon an analysis of the benefits which this settlement agreement affords the class, counsel for the class considers it to be in the best interest of the class to enter into this settlement agreement. In consideration of the foregoing and other good and valuable consideration, it is stipulated and agreed by and between counsel for the class and counsel for Wonderlic that the claims of the class be and are hereby compromised and settled, subject to the approval of the court, upon the following terms and conditions. TERMS 1. Certification of settlement class. Wonderlic stipulates to the certification of a class (the class) under Fed.R.Civ.P. 23(b)(3), which class shall consist of all persons who signed a retail installment contract assigned to Wonderlic, which contract included a charge for V.S.I. insurance in the amount financed and excluded it from the finance charge and the annual percentage rate. There are 321 persons in the class, including Willis (and counting multiple obligors as one person), of which 64 contracts were assigned by Watson to Wonderlic and 257 by other auto dealers. This stipulation is for purposes of settlement only, and if this settlement is not approved or does not become effective for any reason, Wonderlic retains its right to object to the maintenance of the action as a class action. 2. Relief to class. Wonderlic agrees to pay each of the class members $300. Wonderlic will receive credit for the $150 Watson is obligated to pay certain class members pursuant to the prior settlement with Watson. Each class member shall be given the option of choosing to receive payment by check or as a credit to the principal balance of the obligation. The class notice shall inform the class members that they should contact Wonderlics counsel if they want to receive a check. If the class member does not so indicate, he or she will have the payment applied to their balance. Wonderlic reserves the right, if it has obtained or should in the future obtain a judgment

Appx. O.2.2

against any class member on their obligation, to offset the amount due against such judgment irrespective of any election by the class member. Wonderlic will issue all of the checks/ credits and make an appropriate adjustment with Watson. 3. Relief to Willis on individual claim. Wonderlic will cooperate with Watson in effectuating the disposition of Willis individual warranty claims pursuant to the agreement with Watson. Wonderlic will notify any credit reporting agency which shows the account as delinquent or unpaid that the debt has been canceled and should not be treated as delinquent or unpaid. In the event that a class member entitled to a check is deceased, or there are multiple obligors on an account, Wonderlic shall be released if it sends a check to the person whom it reasonably believes to have been making payments on the account, notwithstanding the failure to comply with laws relating to probate and marital property. If such check is not cashed within 180 days the monies represented thereby shall become the sole and exclusive property of Wonderlic and Wonderlic shall not have any further payment obligation to the payee. The payments shall be made within 30 days of the effective date of the settlement. 4. Release. Each class member not opting out shall, as of the effective date of this settlement, be deemed to release and discharge forever Wonderlic, the dealers originating the class members contracts (a list is attached as Appendix 1) [not attached herein], and their current and former officers, directors, successors, predecessors, shareholders, affiliated companies, employees and agents (Released Parties), from all claims, irrespective of legal theory, which arise our of or relate to: (i) any facts or circumstances alleged in the complaint; (ii) any disclosure or calculation required by state or federal law, whether made or not made, and if made, whether made correctly or incorrectly; and (iii) any other legal defect with respect to the form or substance of such contract or contracts that causes said person to be a class member. The following claims are not released or affected: (i) claims under the terms of credit life, disability or unemployment insurance policies, or warranties or extended service contracts, even if referred to on the Truth in Lending statement, or for the return of premiums upon the cancellation of such policies or warranties or service contracts, (ii) disputes or disagreements concerning the receipt of payments made by class members, (iii) any claims for personal injury, property damage, or relating to the condition of vehicles. This release is conditioned upon the performance by Wonderlic of its obligations toward the class member set forth in this settlement agreement. 5. Additional release by Willis. Willis further releases Watson, Wonderlic, or any other party for any claim based on the condition of the vehicle she purchased from Watson, and releases Wonderlic and the other Released Parties, as defined above, from all claims which she has through the date of this agreement. 6. Effective date. This agreement shall become effective upon the occurrence or happening of all of the following events: A. The courts entry of a final judgment approving this agreement as fair, reasonable and adequate to the class; finding that this agreement is fair and made in good faith, thereby barring any potential claims for contribution or indemnity against Wonderlic and the other Re-

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to the class members who are located. Wonderlic will issue checks in the amounts necessary to pay the claimant and the tracing service. E. Finds that mailing of such class notice and the other measures specified in k22d is the only notice required and that such notice satisfies the requirements of due process and Fed.R.Civ.P. 23. F. The parties agree to request the form of notice attached hereto as Exhibit A [not attached herein] and propose the form of preliminary approval order attached hereto as Exhibit B [not attached herein]. The fact that the court may require changes in the notice or order does not invalidate this settlement agreement. 11. Final approval. At the conclusion of, or as soon as practicable after, the close of the hearing on the fairness, reasonableness and adequacy of this agreement, counsel for the class and Watson shall request that the court enter a Final Judgment approving the terms of this agreement as fair, reasonable and adequate, providing for the implementation of those terms and provisions, finding that the notice given to the class satisfies the requirements of due process and Rule 23, dismissing the claims of the class with prejudice and without costs, directing the entry of judgment, and retaining jurisdiction to enforce the provisions of this agreement. The parties agree to request the form of judgment attached hereto as Exhibit C [not attached herein]. The fact that the court may require changes in the judgment does not invalidate this settlement agreement. 12. Miscellaneous provisions. Whether or not this Agreement and the settlement contemplated hereunder are consummated, this agreement and the proceedings had in connection herewith shall in no event be construed as, or be deemed to be, evidence of an admission or concession on the part of Wonderlic of any liability or wrongdoing whatsoever. The parties and their attorneys agree to cooperate fully with one another in seeking court approval of this agreement, and to use their best efforts to effect the consummation of this agreement and the settlement provided for herein. Notices regarding this settlement agreement directed to the class shall be sent to: [Attorney for the Plaintiff] [address] and notices to Wonderlic shall be sent to: [Attorney for the Defendant] [address] The persons and addresses designated in this paragraph may be changed by any signatory hereto by written notice to the other signatories hereto. The foregoing constitutes the entire agreement between the parties with regard to the subject matter hereof and may not be modified or amended except in writing signed by all parties hereto. This settlement agreement may be executed in counterparts, in which case the various counterparts shall be and constitute one instrument for all purposes. The several signature pages may be collected and annexed to one or more

leased Parties by other persons and entities; dismissing the claims of Willis and the class against Wonderlic with prejudice and without cost; and directing entry of judgment approving the settlement. B. The expiration of five days after the time the final judgment becomes a final order not subject to appeal, or, if an appeal has been sought, the expiration of five days after the final disposition of any such appeal, which disposition approves the courts final judgment, the transactions contemplated therein, and the consummation of the settlement in accordance with the terms and provisions of this agreement. C. If this agreement is not approved by the court or for any reason does not become effective, it shall be deemed null and void and shall be without prejudice to the rights of the parties hereto and shall not be used in any subsequent proceedings in this or any other litigation, or in any manner whatsoever. 7. Attorneys Fees, Notice Costs and Related Matter. In addition to the benefits described above, Wonderlic will pay counsel for the class the sum of $13,300, which is intended to cover all fees, expenses (including expenses of giving notice), and a payment to Willis in the amount of $750, subject to approval by the court, upon the date specified in k17. These amounts are in addition to the $5,000 to be paid by Watson pursuant to the prior agreement. Class counsel will not request additional fees from either Wonderlic or the class members and Wonderlic will not oppose or cause to be opposed an application in the amounts stated. Class counsel will give notice by first class mail to the class members, as further described below. Wonderlic shall provide an affidavit stating the names, last known addresses and social security numbers (if available) of the class members and attesting that the persons listed are the only persons known to be members of the class described above. 8. Maximum liability of Wonderlic. In no event shall the total liability of Wonderlic under this agreement exceed $100,000. 9. Class Members Right of Exclusion. Any class member may seek to be excluded from this settlement agreement and from the class within the time and in the manner provided by court order. Any class member so excluded shall not be bound by the terms of this settlement agreement nor entitled to any of its benefits. 10. Preliminary approval. As soon as practical after execution of this agreement, the parties shall make application to the court for an order which: A. Preliminarily approves this settlement agreement. B. Certifies for purposes of settlement only that the class claims may be maintained on behalf of the class defined above. C. Schedules a hearing for final approval of this agreement by the court. D. Approves the form of notice to the class, to be directed to the last known address of the class member as shown on Watsons records. If as a result of the mailing a forwarding address is furnished by the Postal Service but the notice is not forwarded by the Postal Service, the notice will be remailed to the address(es) provided. Plaintiffs counsel may employ a tracing service to locate class members whose mail cannot be delivered. The cost of the tracing service will be deducted from the payments

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Sample Stipulations of Proposed Settlements

documents to form a complete counterpart. Photocopies of executed copies of this settlement agreement may be treated as originals. Each and every term of this settlement agreement shall be binding upon and inure to the benefit of plaintiff, the members of the class, and any of their successors and personal representatives, and shall bind and shall inure to the benefit of the Released Parties, all of which persons and entities are intended to be beneficiaries of this settlement agreement. This agreement and the exhibits annexed hereto shall be governed by and interpreted in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF, the parties hereto, acting by and through their respective counsel of record, have so agreed, on [date] For Willis and the class: [Plaintiffs Attorney] For Wonderlic: [Defendants Attorney]

Appx. O.3

O.3 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, STIPULATION OF SETTLEMENT It is hereby stipulated and agreed as of this day of October 1993, by and among the plaintiff Ian Shepherd in the aboveentitled action and defendants Volvo North, America, Inc. and Car Finance, Inc., by and through their respective undersigned attorneys, as follows: I. DEFINED TERMS 1.01 VFNA. Volvo Finance North America, Inc. is herein referred to as VFNA. 1.02 VCFI. Volvo Car Finance, Inc. is herein referred to as VCFI. 1.03 Affiliates. All of either VFNAs or VCFIs current, former or future subsidiary, affiliate or parent corporations are referred to collectively herein as Affiliates. These do not include Volvo dealers in the U.S.

1.04 Included Agents and Employees. All current, former or future directors, officers, employees, agents, accountants or attorneys of either VFNA or VCFI or any of their Affiliates are referred to collectively herein as VFNAs and/or VCFIs (or their) Included Agents and Employees. 1.05 Shepherd Action. The lawsuit entitled Ian Shepherd, Plaintiff v. Volvo Finance North America, Inc. and Volvo Car Finance, Inc., Defendants (Civil Action No. 1-93-CV-971 MHS) in the United States District Court for the Northern District of Georgia, Atlanta Division is referred to herein as the Shepherd Action. 1.06 Class. The Class or Class Members as used herein, means all persons and entities that leased a motor vehicle pursuant to a lease agreement entitled Closed End Motor Vehicle Lease Agreement that (i) was assigned to VFNA, (ii) was in effect on May 4, 1993, or terminated at any time during the period from January 1, 1987 through May 4, 1993, and (iv) was written on a VFNA printed form bearing on the lower left margin of the front page any one of the following lease-form identification numbers, any revision: VFNA-82-0888 VFNA-82-0287FL VFNAW-82-0888 VFNA-82-0288US VFNA-87-0188WI VFNA-82-0287US VFNA-79-1286 VFNA-59-0584 VFNA-59-0384 VFNA-55-0581 1.07 Subject Lease. Subject Lease, as used herein, shall mean any lease that satisfies all of the requirements which must be satisfied under Section 1.06 to make the lessee thereunder a member of the Class. 1.08 Stipulation. Stipulation, as used herein, shall mean this Stipulation of Settlement. 1.09 Settlement. Settlement, as used herein, shall mean the settlement set forth in this Stipulation. 1.10 Proof of Refund. Proof of Refund, as used herein, shall have the meaning set forth in Section 4.04(a). 1.11 Proof of Claim. Proof of Claim, as used herein, shall have the meaning set forth in Section 4.05(a). 1.12 Class and Settlement Notice. Class and Settlement Notice, as used herein, shall mean the Notice of Pendency of Class Actions, Proposed Class Settlement and Hearing, in substantially the form attached to this Stipulation as Exhibit A. 1.13 Plaintiff. Plaintiff, as used herein, means Ian Shepherd. 1.14 Class Representative. Class Representative, as used herein, shall mean the Plaintiff in his capacity as representative of the Class. 1.15 Class Counsel. [attorneys] are referred to herein as Class Counsel. 1.16 Compromised Claims. As used herein, Compromised Claims means all claims and causes of action that are or could have been alleged by any Class Member in the Shepherd Action, whether known or unknown, including but not limited to claims under state or federal law arising out of the disclosures in the printed forms referred to herein as the Sub-

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Appx. O.3

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sumer Leasing Act (the CLA), 15 U.S.C. 1667 et seq. The Shepherd Action further charges in substance that such closedend consumer motor vehicle leases did not conform in certain respects to disclosure requirements of the CLA and regulations issued thereunder and contained provisions relating to payments upon early termination for lessee default or voluntary early termination that were impermissible under the CLA. The Shepherd Action also charges in substance that certain of the provisions relating to early termination and default payments contained in those consumer leases, and also contained in other closed-end motor vehicle leases similar to them but not primarily for personal, family or household purposes, were penalty provisions unlawful under state law. The Shepherd Action further charges in substance that certain of those lease provisions were also unlawful under various state statutes dealing with unfair or deceptive trade practices or consumer fraud. 2.03 VFNA and VCFI have at all times denied, and continue to deny, each and every claim of wrongdoing raised against them in the Shepherd Action. VFNA and VCFI further deny that they are liable in damages to the plaintiff in the Shepherd Action. VFNA and VCFI have filed motions to dismiss Shepherds claims alleged in Counts II and III. VFNA and VCFI further deny that class certification is appropriate or required and have opposed Shepherds motion for class certification. VFNA and VCFI recognize the expense and length of time necessary to continue the litigation through trial and the appeals that may follow, the burden upon and interference with VFNAs and VCFIs ordinary business operations which would be caused by continued litigation, and the uncertainty inherent in predicting the outcome of the litigation. 2.04 Class Counsel have made an investigation of the facts and circumstances underlying the issues raised by the Shepherd Complaint and have researched the law applicable thereto. Class Counsel recognize the expense and length of time necessary to continue the litigation through trial and the appeals that may follow, the difficulty of complex litigation and the uncertainty inherent in predicting the outcome of the litigation and have concluded that the settlement set forth herein is in the best interests of the Class and Class Members. 2.05 The parties hereto and their counsel believe that the proposed settlement of the Shepherd Action on the terms and conditions hereinafter set forth in this Stipulation is fair, adequate, reasonable and proper, and further state that this Stipulation is the result of arms-length negotiations among the parties hereto. VFNA has recalculated default liabilities that lessees have incurred from July 1, 1991 through May 4, 1993 using the formula provided in the Table 1 of the Stipulated Settlement. The aggregate difference between the outstanding invoiced amounts and the revised default liability amounts is approximately $7 million. Taking into account the differing positions of the parties and the expense and uncertainties of litigation, the plaintiff in the Shepherd Action believes that the proposed settlement is in the best interest of the Class Members and Class. NOW THEREFORE, in consideration of the premises and agreements, covenants, representations and warranties set forth herein, it is hereby stipulated and agreed by Plaintiff on its own behalf and on behalf of the Class and Class Members, and by VFNA and VCFI, acting through their counsel, subject to the approval of the Court, that each and every Compro-

ject Leases and VFNAs and/or VCFIs disclosure or collection practices with respect thereto and claims arising out of the formula used in the Subject Leases for default or early termination and VFNAs and/or VCFIs practices with respect thereto. Notwithstanding the foregoing, the term Compromised Claims shall not include (i) claims for personal injury, wrongful death, property damage or the like, arising under warranties issued by VFNA affiliates, or arising out of vehicle problems, (ii) claims arising out of automobile liability or other insurance policies issued in connection with lease transactions, or (iii) claims arising out of disputes concerning the receipt and application of payments from customers with respect to the Subject Leases. Furthermore, nothing herein shall be deemed to release or alter any amounts due under any Subject Lease except as specifically set forth in this Stipulation. 1.17 Court. Court, as used herein, refers to the United States District Court for the Northern District of Georgia. 1.18 Final Approval. As used herein, the term Final Approval refers to the Courts issuance of a final, appealable order which is the same in substance as the form of Final Judgment and Order attached hereto as Exhibit B, which order approves this Settlement pursuant to Rule 23 of the Federal Rules of Civil Procedure. 1.19 Final Judgment. As used herein, a Final Judgment shall be deemed entered only after both of the following have occurred: (a) an order which is the same in substance as the form of Final Judgment and Order attached hereto as Exhibit B has been entered in which the Court gives its Final Approval to the Stipulation of Settlement, and (b) the time has expired in which to seek review or appeal of such order without any review or appeal having been taken therefrom, or, if such review or appeal is taken, such review or appeal shall have been finally determined (subject to no right of further review or appeal) by the highest court before which such review or appeal is sought and allowed, and such review or appeal shall have been resolved in such manner as to permit the consummation of the Settlement effected by this Stipulation in accordance with all of its terms and provisions. 1.20 Preliminary Approval. Preliminary Approval refers to the Courts determination that the settlement is within the range of possible approval and therefore that a notice should be sent to the Class and a hearing should be held with respect to fairness. 1.21 Settlement Hearing. Settlement Hearing, as used herein, shall have the meaning set forth in Section 6.01(c). 1.22 Pre-Hearing Order. Pre-Hearing Order, as used herein, shall have the meaning set forth in Section 6.01. II. RECITALS WHEREAS: 2.01 The Shepherd Action was filed on behalf of a class of lessees of closed-end motor vehicle leases written on a VFNA printed form identified as VFNA-82-0888, or on any other VFNA printed form in substance closely similar to that form, which leases had been assigned to VFNA; 2.02 The Shepherd Action charges in substance that some of the provisions of those of the Subject Leases which were consumer leases (i.e., primarily for personal, family or household purposes) were not in compliance with the Federal Con-

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Sample Stipulations of Proposed Settlements

mised Claim shall be finally settled and compromised and dismissed with prejudice to Plaintiff and all Class Members, as to VFNA, VCFI, their Affiliates and their Included Agents and Employees, and shall be fully discharged on the following terms: III. CERTIFICATION OF CLASS; RIGHT TO OPT OUT 3.01 Class Certification. The parties hereto will seek, and as a condition to the settlement obtain, an order of the Court conditionally certifying the Class described in Section 1.06. 3.02 Class Members Right to Opt Out. Any Class Member may elect to be excluded from this Settlement and from the Class by opting out of the Class within 30 days of the mailing of the Class and Settlement Notice. Any Class Member who opts out shall neither be bound by the terms of this Stipulation nor be entitled to any of the benefits set forth in this Stipulation. 3.03 VFNA and VCFI Withdrawal from Settlement. VFNA and VCFI shall have the option, at their sole discretion, to withdraw from this Settlement in the event that more than 500 lessees who are not current or former employees of VFNA, VCFI, their Affiliates, or authorized Volvo dealerships elect to exclude themselves from this Settlement. IV. BENEFITS TO PLAINTIFF AND CLASS 4.01 VFNA and VCFI Undertakings Regarding Lessee EarlyTermination Rights and Obligations. Subject to, and conditional and effective upon, Final Judgment approving the Settlement, VFNA represents to undertake with each member of the Class who shall not have elected to be excluded therefrom as provided in Section 3.02, but only with respect to each Subject Lease of which such member is the named lessee, as follows: Notwithstanding any provisions of your lease which are less favorable to you than the provisions set forth below, you shall have the following rights and obligations: (1) You will be entitled prior to expiration of the stated lease term, to voluntarily terminate your lease effective as of the scheduled due date of any monthly lease payment which is scheduled to be paid after the first 12 months of the stated lease term, by either purchasing the vehicle pursuant to your stated lease terms or paying the early termination liability as described below. However, you may not exercise this right of voluntary early termination if you are at the time in default in the performance of any of your obligations under your lease. (2) If you exercise your right to terminate voluntarily after the first 12 months and do not purchase the vehicle, or VFNA terminates your lease by reason of a default by you in the performance of any of your lease obligations, you must pay to VFNA, in certified funds or their equivalent, an estimate of your early-termination balance computed by VFNA or VCFI. After your actual early termination liability is determined as provided in Table 1 below, VFNA will compare the estimate you paid

Appx. O.3

against your actual early termination liability. VFNA will refund any balance to you within 30 days after calculation of the actual early termination liability. If the actual early termination liability exceeds the estimate you have paid, you will be obligated to pay the difference to VFNA, promptly, but no later than 30 days, after either VFNA or VCFI bills you therefor. (3)In the event your lease terminates early (whether you elect to terminate it voluntarily or VFNA elects to terminate it by reason of a default by you), you are obligated to return immediately the leased vehicle to VFNA at a location selected by VFNA. Notwithstanding any such early-termination election, you will be obligated to pay to VFNA each monthly lease payment which is scheduled to be paid on any subsequent due date that coincides with or precedes the vehicle-return date (regardless of when the election to terminate is made or is communicated by you or by VFNA or VCFI, and regardless of the expressed effective date, if any, of the early termination). In the event you are obligated to make any such postelection scheduled monthly lease payment(s), the date on which you return the leased vehicle will be deemed the effective date of early termination for purposes of computing the lease balance due from you pursuant to Table 1 below. COMPUTATION OF BALANCE OWING BY LESSEE ON EARLY TERMINATION CHARGES CHARGES VFNA will CHARGE YOU for the following: 1. All monthly lease payments which, under the terms of your lease, have become payable by you during the period up to and including the effective date of termination of your lease, to the extent such monthly lease payments have not been paid. 2. The constant yield payoff, calculated based upon the running rate of return used by VFNA to compute the monthly lease payments specified in your lease, which results in a payoff equal to the capitalized cost of the vehicle reduced by all depreciation credited against the capitalized cost through the date of payoff. The unamortized capitalized cost is calculated by taking the capitalized cost and reducing it each month you make a payment. Your monthly payments are applied first to lease charge at a specific rate of interest applicable to your lease and then to lease depreciation. This is similar to the way payments are applied on a mortgage loan. For specific information you may write Volvo at: Volvo Car Finance, Inc. Customer Service 25 Phillips Parkway Montvale, New Jersey 07645. 3. Except to the extent waived by VFNA in its discretion, any late charges and other fees, charges or amounts you are obligated to pay under the terms of your lease (other than for scheduled monthly lease payments or the vehicles estimated residual value).

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notify those Class Members of their revised default liability. In no event will VFNA collect from any Class Member default liability charges in an amount greater than the amount calculated in accordance with the formula in Table 1. 4.03 VFNA Undertaking to Inform Credit Reporting Agencies. Subject to, and conditional upon, Final Judgment approving the Settlement, VFNA will make reasonable efforts to inform credit reporting agencies to whom VFNA has submitted reports regarding default lessees of the revised default liabilities. VFNAs efforts will include providing the default liability information referred to in Section 4.02 to Equifax, TRW and TransUnion in manners mutually agreed upon between VFNA and each of these companies. VFNA will cooperate with class members who request that revised reports be submitted to a credit reporting agency. 4.04 VFNA Undertaking to Refund Overpayments to Default Lessees. Subject to, and conditional upon, Final Judgment approving the Settlement, VFNA will make reasonable efforts to determine the identity of each Class Member default lessee who actually paid default liability charges over the amount of their default liability as calculated in accordance with the formula in Table 1 and then to refund the overpayment to those default lessees. VFNA will review its records and prepare a list of such persons. To the extent not identified by VFNA, VFNA will also provide refunds to default lessees who provide VFNA with Proofs of Refund satisfying the requirements of subsection (a) of this Section 4.04. All refunds described in Section 4.04 are exclusive of the common fund described in Section 4.05. a. To be eligible to receive a refund of overpayment, a Class Member must file a valid proof of refund (Proof of Refund). To be valid, a Proof of Refund must: (i) be in the form titled Proof of Refund and set forth as in the Class and Settlement Notice, (ii) contain sufficient information to permit verification that the Class Member is entitled to refund; (iii) to receive a refund in an amount other than that shown on VFNAs records, the Class Member must have enclosed therewith photocopies of the subject lease, and the canceled checks evidencing payment of default liability; (iv) be dated, certified and signed as provided for therein; (v) have printed or typed in the spaces therein provided the name(s) of the Class member(s) filing such Proof of Refund and the address to which the refund is to be mailed; and (vi) be mailed, postage pre-paid, in an envelope post-marked not later than 60 days after Final Judgment approving the Settlement to: Volvo Finance North America, Inc. Customer Service 25 Phillips Parkway Montvale, New Jersey 07645 4.05 VFNA and VCFI Undertaking To Establish Common Fund. Subject to, and conditional upon, Final Judgment approving the Settlement, VFNA and VCFI will establish a fund totalling $270,000 for the common benefit of the Class and payment of attorneys fees and litigation expenses. The common fund described in Section 4.05 and the refunds described

4. Any official fees and taxes imposed in connection with lease termination (e.g., sales or use taxes payable on any portion of the balance chargeable to you on early termination). 5. Any attorneys fees and other expenses reasonably incurred by VFNA and/or VCFI in attempting to repossess or sell the leased vehicle after early termination (whether by VFNA and/or VCFI upon default by you or by you voluntarily) or in collecting any of the amounts chargeable to you upon early termination or otherwise owed by you in respect of your lease. CREDITS VFNA is obligated to CREDIT YOU for the following: 1. The realized value, at wholesale, of your leased vehicle at the time your lease is terminated, determined in any one of the following ways: (a) by written agreement between you and VFNA, provided that it is signed within 10 days after return or repossession of the vehicle; (b) if you elect within 10 days after you return the leased vehicle, and at your expense, by a professional appraisal of the vehicles wholesale value, provided that the appraisal, which is final and binding, is made by a professional appraiser satisfactory to you and to VFNA or VCFI, (c) if the realized value is not determined in either of the above ways within 10 days after return or repossession of the vehicle, VFNA may dispose of the vehicle at wholesale on a bid basis, at auction, or through any other reasonable disposal method and the realized value will be the price received for the vehicle. If VFNA does not sell the vehicle, the realized value will be the highest bona fide cash bid submitted and not revoked. 2. If your leased vehicle is destroyed or damaged beyond repair in an accident, fire or other casualty, or is stolen, the amount of any insurance proceeds collected by VFNA. (You are liable for the deductible.) 3. Your security deposit. Subject to and conditional and effective upon Final Judgment, the foregoing provisions of this Section 4.01 shall amend and supersede the terms of the Subject Leases of Class members to the extent the foregoing provisions are inconsistent with the existing terms of the Subject Lease. Nothing in this Stipulation, the Class and Settlement Notice or otherwise in connection with this Settlement shall in any way limit or restrict VFNAs or VCFIs rights, in their sole and unlimited discretion, (i) to negotiate, with any individual Class Members, amendments, arrangements or terms of or regarding their Subject Leases that modify, differ from or settle rights or obligations under any or all of the provisions contained in the Subject Leases as amended and superseded by this Section 4.02, or (ii) to waive, in whole or in part and conditionally or unconditionally, any or all of the obligations of any of the individual Class Members under or in respect of said provisions (as so amended and superseded) or any thereof. 4.02 VFNA Undertaking to Issue Revised Default Liability Reports. Subject to, and conditional upon, Final Judgment approving the Settlement, VFNA will issue reports reflecting revised default liability calculated in accordance with the formula in Table 1 regarding those Class Members who have outstanding default liabilities as identified by reasonable efforts of VFNA. Volvo will submit this report to Class Counsel. VFNA will

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in Section 4.04, shall constitute full and complete compensation by VFNA and VCFI for settlement of all individual claims, class claims, attorneys fees and litigation expenses. 4.06 Distribution of Common Fund. Plaintiffs counsel will apply for an award of $200,000 for counsel fees and litigation expenses from the fund described in 4.05. VFNA and VCFI will not oppose such application. After such amounts as are approved by the Court are deducted, the balance of the fund will be distributed by VFNA and VCFI in equal amounts to those eligible Class Members who file Proofs of Claim satisfying the requirements of subsection (a) of this section 4.06. a. To be eligible to receive an award, a Class Member must file a valid proof of claim (Proof of Claim). To be valid, a Proof of Claim must: (i) be in the form titled Proof of Claim and set forth as the Class and Settlement Notice, (ii) contain all of the information called for; (iii) be dated, certified and signed as provided for therein; (iv) have printed or typed in the spaces therein provided the name(s) of the Class member(s) filing such Proof of Claim and the address to which the Certificate is to be mailed; (v) have enclosed therewith a photocopy of the Subject Lease regarding which such Proof of Claim is filed; and be mailed, postage pre-paid, in an envelope post-marked not later than 60 days after Final Judgment approving the Settlement: Volvo Settlement Fund [address] 4.07 Additional Relief to Plaintiff. In full settlement of the claims made by the Plaintiff individually that are neither common to nor made on behalf of the Class and also in consideration for his return of the leased vehicle, and substantial time spent by him responding to discovery requests and providing deposition testimony, the parties hereto agree, subject to and conditional and effective upon Final Judgment approving the Settlement, that, in addition to Plaintiffs rights under Sections 4.01 and 4.02: Plaintiff Ian Shepherd shall have no obligation to pay to VFNA or VCFI any additional sums (whether for default, early termination or otherwise) in respect of the 36-month lease dated May 11, 1992, and terminated in May, 1993, which is the subject of his individual claims in this litigation. V. RELEASES 5.01 Releases by Class Members. Subject to and conditional upon Final Judgment, each Class member who shall not have elected to be excluded from this Settlement and from the Class as provided in Section 3.02, shall, effective upon Final Judgment, release and be deemed to have released VFNA, VCFI, their Affiliates and their Included Agents and Employees of and from all Compromised Claims. The release does not extend to dealers. VI. APPROVAL 6.01 Preliminary Approval. As soon as practicable after execution of this Stipulation, the parties shall make application to the Court for Preliminary Approval of this Settlement and

Appx. O.3

the entry of an order (the Pre-Hearing Order) substantially in the form of Exhibit C [not attached herein], which: A. evidences the Courts Preliminary Approval of this Settlement; B. for purposes of this Settlement only: 1. certifies the Class; 2. designates Plaintiff as the class representative of the Class; and 3. designates [attorneys] as class counsel for the Class; C. schedules a hearing on the fairness of this Settlement (the Settlement Hearing), pursuant to Rule 23 of the Federal Rules of Civil Procedure, for final approval of this Settlement; D. directs that notice of this Settlement be given to the Class by VFNA and VCFI as follows: 1. mailing of the Class and Settlement Notice, to probable members of the Class whose names and addresses will appear on a confidential list VFNA and VCFI will file with the Court, which list shall be derived by VFNA and VCFI from VFNA and VCFI records maintained by them in the ordinary course of their businesses. Copies of the list should be furnished to counsel (subject to that order). If notices are returned with a new address by the postmaster, VFNA or VCFI will remail the notices to these addresses. 2. advertising of the Class and Settlement Notice in U.S.A. Today. 6.02 Final Approval. At the Settlement Hearing, the parties shall require that the Court enter a judgment and order substantially in the form of Exhibit B evidencing the Courts Final Approval of this Settlement, providing for the implementation of the terms and provisions hereof, dismissing the Shepherd Action with prejudice and without cost and retaining jurisdiction of the Shepherd Action to enforce the provisions of this Stipulation, including the releases set forth in Section 5.01. 6.03 Effective Time. This Stipulation and the Settlement provided for herein shall become effective when Final Judgment has been entered. VII. EFFECT OF NONCONSUMMATION OF THE SETTLEMENT 7.01 Failure to Enter Final Judgment. If a Final Judgment is not entered, no right, claim, obligation, liability or defense of any person shall arise or be affected by the negotiation or execution of this Stipulation. If a Final Judgment is not entered, the conditional certification of the Class for settlement purposes shall be null, void and of no further force or effect. VIII. ATTORNEYS FEES AND LITIGATION COSTS AND EXPENSES 8.01 Application for and Payment of Attorneys Fees and Expenses. Class Counsel shall apply to the Court at the Settlement Hearing for an award of attorneys fees and reimbursement of litigation expenses, payment of which will be made exclusively from the common fund described in Section 4.05. 8.02 Full Compensation. The attorneys fees and reimbursements awarded by the Court that are payable as provided in

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strued to be a waiver of such provision, nor in any way to affect the validity of this Stipulation or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Stipulation shall constitute or be deemed a waiver of any other breach. 10.05 Counterparts. This Stipulation may be executed in one or more counterparts, each of which shall be an original, and all of which together shall constitute one and the same instrument. 10.06 Binding Effect; Assignment. This Stipulation shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. No party hereto may assign its, his or her rights or obligations hereunder without the prior written consent of all of the other parties hereto. 10.07 Headings. The headings herein are for convenience only and shall not affect the interpretation or construction of this Stipulation. 10.08 Governing Law. This Stipulation (including the attached Exhibits) shall be governed by and construed and enforced in accordance with the laws of the State of Georgia, without reference to principles of choice or conflict of laws. 10.09 Ambiguity Not To Be Construed Against Any Party. For the purpose of construing or interpreting this Agreement, the Agreement is deemed to have been drafted equally be all parties hereto, and shall not be construed strictly for or against any party. IN WITNESS WHEREOF, the parties hereto, by their respective counsel, have executed this Stipulation as of the day and year first above written. Respectfully Submitted, [Attorney for Plaintiff] [Attorney for Defendant] [date]

Section 8.01 shall constitute full and complete compensation of all fees and reimbursement of costs and expenses to Class Counsel in respect of any and all services performed or to be performed by Class Counsel before or after Final Judgment approving the Settlement. 8.03 Class Not Obligated. Class Members shall have no obligation whatsoever to pay, or reimburse for, any fees, costs or expenses of Class Counsel in respect of the Shepherd Action. IX. PROOFS OF CLAIM AND REFUND 9.01 Processing Proofs of Claim. VFNA and VCFI shall be responsible for processing Proofs of Claim by Class Members seeking to obtain awards as described in Section 4.06. With respect to each Proof of Claim denied, VFNA or VCFI will give written notification of such denial to the claimant. Class Counsel shall not be obligated for any attorneys fees, costs or expenses incurred by any claimant with regard to the filing, processing, grant or denial of, or any dispute concerning, any Proof of claim filed by such claimant. 9.02 Processing Proofs of Refund. VFNA and VCFI shall be responsible for, and bear the cost of, processing Proofs of Refund by Class Members seeking to obtain refunds as described in Section 4.04. With respect to each Proof of Refund denied, VFNA and/or VCFI will give written notification of denial to the claimant. Class Counsel shall not be obligated for any attorneys fees, costs or expenses incurred by any claimant with regard to the filing, processing, grant or denial of, or any dispute concerning, any Proof of Claim filed by such claimant. X. MISCELLANEOUS 10.01 No Admission. The Plaintiff, the Class, VFNA and VCFI agree that this Stipulation, the Settlement provided for herein, and any proceedings in connection herewith or therewith, are not, and shall not be construed or invoked by anyone as, an admission of liability or wrongdoing on the part of VFNA or VCFI or as an admission as to the validity of any claim asserted against VFNA or VCFI. Neither this Stipulation (including the Exhibits hereto) or any orders or documents contemplated herein or related hereto nor any of the terms hereof or thereof shall be offered or received in evidence as an admission of liability or wrongdoing on the part of VFNA or VCFI. VFNA and VCFI expressly disclaim and deny any wrongdoing whatsoever and state that they have entered into this Stipulation solely to avoid the inconvenience and expense of protracted and costly litigation. 10.02 Entire Agreement. This Stipulation (including the Exhibits) sets forth the entire agreement and understanding of the parties in respect of the settlement of the Shepherd Action and supersedes all prior agreements, arrangements and understanding related to the subject matter hereof. 10.03 Amendment. Neither this Stipulation nor the Settlement provided for herein shall be modified or amended except by written agreement executed by Class Counsel on behalf of Plaintiff and the Class and either by VFNA (by a duly authorized officer thereof) and VCFI (by a duly authorized officer thereof) or on behalf of VFNA and VCFI (by its counsel in the Shepherd Action). 10.04 No Waiver. The failure of any party hereto to enforce at any time any provision of this Stipulation shall not be con-

O.4 Revolving Repossession Case (Johnson)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION ) ) ) ) ) ) v. ) ) MIDLAND FINANCE CO., ) and U. S. AUTO SALES, INC., ) Defendants. ) ) ARTHUR JOHNSON, individually, and on behalf of all others similarly situated, Plaintiffs, STIPULATION OF PROPOSED SETTLEMENT The parties stipulate and agree as follows: WHEREAS, the Plaintiff, Arthur Johnson, has filed the above-captioned action against the Defendants, Midland Fi-

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nance Co., (hereafter Midland) and U. S. Auto Sales, Inc., (hereafter U. S. Auto), alleging in three Counts that the Defendants had violated the Illinois Commercial Code Ill. Rev.Stats., ch. 26, 9-504, the Illinois Consumer Fraud Act, Ill.Rev.Stats., ch. 121-1/2, 261, et seq., and common law duties; WHEREAS, on September 3, 1981, the Court entered an Order certifying this case as a class action with the class defined as All persons who purchased a motor vehicle from U. S. Auto pursuant to a retail installment contract that was assigned to Midland Finance and from whom the secured collateral was repossessed by Midland Finance subsequent to August 1, 1977, and later resold to U. S. Auto. WHEREAS, on July 30, 1982, the Court entered summary judgment as to liability only in favor of the Plaintiff class and against both Defendants on Counts I and II based upon a finding that the Defendants had not conducted commercially reasonable resales of repossessed automobiles and had not provided commercially reasonable notice to the debtors because the noticed repossession sales were not public marketplace sales; WHEREAS, the Defendants have filed affirmative defenses and counterclaims against all of the Plaintiff class in amounts equal to all or part of the claimed damages and the Court has not ruled on any of the substantive contentions of the parties regarding damages or the affirmative defenses and counterclaims, or expressed any opinion with respect thereto; WHEREAS, the Plaintiff maintains that he, individually, and as class representative, would ultimately prevail on all issues in this action, but deems the proposed settlement set forth herein to be in his best interest and in the best interest of the class, and the Defendants deny all liability whatsoever and maintain that they would ultimately prevail on all issues in this action in the trial court or upon appeal but deem the proposed settlement set forth below to be in their best interests; Now, therefore, it is hereby stipulated and agreed by and among the parties, that this action shall be settled and compromised, subject to Court approval, upon the terms and conditions hereinafter set forth. 1. The Class. The class, as defined by the Court in its September 3, 1981 Order, consists of the persons whose names will be set forth on Settlement Exhibit A which is to be filed with the court under seal within 21 days after entry of the Order set forth in paragraph 2 below, pursuant to an Agreed Protective Order in the form of Exhibit 1 attached hereto [not attached herein]. 2. Submission of Stipulation to the Court. The parties shall promptly submit this Stipulation to the Court and jointly request the Court to enter its Order in the form of Exhibit 2 attached hereto [not attached herein]. 3. Definitions. As used here, the following terms shall have the following meaning: a. The term Effective Date means the later of: (1) 30 days after the entry of the judgment approving this Stipulation and dismissing with prejudice and on the merits as to the Defendants the action brought by Plaintiffs, (or

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if the date for taking an appeal shall be extended, the date of expiration of the extension), if no appeal therefrom be taken; or, (2) if such appeal be taken, the date after which such judgment is affirmed and becomes final and the expiration of the time for filing a Petition For Leave To Appeal has expired, if none be filed, and if such filing be made, when action on the Petition or the merits thereof becomes final. b. The term Settlement Fund means the entire $1,100,000.00 to be paid jointly by the Defendants, $1,090,000 by Midland and $10,000 by U. S. Auto, in the settlement of this action. c. The term Class Settlement Fund means the $924,000.00 portion of the settlement fund to be distributed to claimant class members. d. The term Escrowee means American National Bank and Trust Company of Chicago, a national banking association (American National Bank) acting in the capacity of escrow agent of the Settlement Fund. e. The term Claimant Class Members means those members of the class making a claim against the Class Settlement Fund. 4. Consideration For Settlement. a. Midland shall pay $1,090,000.00 to the Settlement Fund and U. S. Auto shall pay $10,000.00 to the Settlement Fund, thus creating a settlement fund of $1,100,000. The fund shall be paid and distributed as set forth below. b. The Defendants will release each class member from any obligation to pay any balance purportedly still owing or claimed to either of the Defendants after the repossession and sale of a class members automobile at issue. The parties hereto estimate that the aggregate value of said release is approximately $1,350,000.00. Within 10 days after the Effective Date, the Defendants shall dismiss Appeal No. 83-2376 and within 60 days all pending actions seeking deficiencies against class members. c. The Credit Reporting Bureaus listed at the end of this paragraph will be notified, as to each class member, that all disputes over the repossession of the automobile at issue, deficiencies claimed, and deficiency judgment obtained, have been fully resolved. The Credit Reporting Bureaus will be requested to remove any adverse comments regarding the repossession, deficiencies and judgments. The notice to the Credit Bureaus shall be in a form substantially similar to the letter attached hereto as Exhibit 3 [not attached herein]. Defendants will prepare the letters, turn them over to Plaintiffs counsel who will assume responsibility for mailing copies of the letters to the respective class members and the credit reporting bureaus, Trans-Union Credit Information Company, 444 N. Michigan Avenue, Chicago, IL 60611, and T.R.W. Credit Data, Inc., 1699 Wall, Mt. Prospect, IL. d. The class members will release the Defendants, their past and present officers, directors, employees, agents, attorneys, subsidiaries, parent corporations, related entities and affiliates, if any, and their respective successors and assigns, whomever, from all claims of members of the class, their heirs, representatives, agents, attorneys, successors, or assigns or any one claiming on their behalf, which have been asserted in this action or arose out of the repossession or resale of the automobile at issue.

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a. All class members whose notice of class certification was returned by the post office as undeliverable will have their addresses traced by United Exchange, Inc., 221 N. LaSalle Street, Chicago, IL, a professional tracing service, to attempt to find a more current address to use for mailing the settlement notice. b. All other class members will be mailed a settlement notice at the most current address known to Plaintiffs attorneys. Any class member who has not responded in some manner within 30 days after mailing the settlement notice, will have his or her address traced by United Exchange, Inc. to attempt to find a more current address. He or she shall then be mailed or delivered another settlement notice to the more current address if one if found. c. If two or more persons are class members as the result of the single purchase of an automobile and said class members have the same last known address, only one notice shall be sent to such address. The notice shall be addressed to both class members and shall include two option cards. d. The settlement notice will give all class members the option of opting out of the class or staying in the class. The settlement notice will also explain the manner by which the class member may claim against the fund and the consequences of neither opting out nor making a claim against the fund. 7. Distribution Of The Settlement Fund. The settlement fund will be distributed as follows: a. In distributing the $924,000.00 class settlement fund, payments will be made only to claimant class members. If two or more persons are claimant class members as a result of a single purchase of an automobile, they shall be deemed to be one claimant class member for purposes of distribution of the class settlement fund and shall receive one joint payment. b. All claimant class members who have paid any sums as a deficiency (including any sums paid on the claimant class members behalf), first shall have those sums returned to them. The parties estimate that the total deficiencies paid by or on behalf of all class members is approximately $430,000.00. c. The remainder of the class settlement fund, which will not be less than approximately $494,000.00, shall be paid to all claimant class members on a pro rata basis. Each claimant class member shall receive a percentage of the remainder of the fund determined by dividing the individual claimant class members maximum damages allowed under Illinois Revised Statutes, ch. 26, 9-507 (the amount of the finance charge shown on the retail installment contract, plus 10% of the cash price shown on the retail installment contract) by the sum of the maximum 9-507 damages of all claimant class members. However, no claimant class member may receive an amount in excess of his or her maximum 9-507 damages under this subparagraph. d. The amount to be distributed to each claimant class member shall be determined prior to the fairness hearing. If the total amount to be distributed under subparagraph 7(b) and (c) is less than $924,000.00, the difference shall be credited to the Defendants and applied against their final installment payments.

e. On the Effective Date, Arthur Johnson, the named plaintiff in this action, will execute and deliver to each defendant a separate Release in the form of Exhibit 4, attached hereto [not attached herein]. 5. Payment Of The Settlement Fund. The settlement fund shall be paid by the Defendants to an escrow account as set out below as follows: a. Approximately one-third, $366,668.00, shall be paid within seven days after the entry of the Order set forth in paragraph 2 above, or any modified Order as agreed to by the parties, to an escrow account established at the American National Bank. b. The remaining $733,332.00, shall be paid in 24 monthly installments of $30,555.50 each, to the above named escrow account. The first installment shall be paid one month after the entry of the Order set forth in paragraph 2 above, and the remaining installments shall be paid on the same days of each successive month. Defendants shall not pay any interest on these installments. c. Time is of the absolute essence in making the payments set forth above. Upon the failure of the Defendants to make any of said payments when due, all of the remaining unpaid installments shall become immediately due and payable provided however, that Defendants have twenty days grace period after the due date of any installment payment to cure their default, and such cure shall not accelerate the balance of the unpaid installments. d. In order to secure the payments set forth above, Defendants agree to provide within seven days after entry of the Order set forth in paragraph 2 above, an Irrevocable Standby Letter of Credit, approved by plaintiffs attorneys, which shall remain in effect until June 13, 1985, to insure Defendants performance of the Settlement when presented in conjunction with the following documents: i. A copy of this Stipulation of Proposed Settlement; and, ii. An Order from a court of competent jurisdiction (a) finding that Midland Finance Co. has defaulted under the terms of the Stipulation by failing to make one or more payments as required therein, (b) ordering Midland Finance Co. to pay a specified amount, as a result of its default under the Stipulation, to the Escrowee (c) requiring payment under the Letter of Credit in such amount, and (d) finding no just cause for delay of enforcement or appeal. If the proper documents are obtained, the Plaintiffs may present the Irrevocable Standby Letter of Credit for payment of sums owed to the Escrowee by the issuing bank. 6. Settlement Notice To Class Members. All of the class members or their co-purchasers, except a few discovered subsequent to class certification, were notified of the pendency of this action by personal mailed notice and newspaper advertisements. Copies of the Advertisement, a list of the dates of its publication and appearance, and a copy of the notice mailed to class members or their co-purchasers on June 28, 1982, are attached hereto as Exhibit 5 [not reprinted in this appendix]. The class will be notified of this proposed settlement by mailing a settlement notice, a copy of which is attached hereto as Exhibit 6. Distribution of the notice will be made as follows as to reach the maximum number of class members.

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e. Any amounts of the class settlement fund paid by the Defendants shall be held in an escrow account at the American National Bank. f. The class settlement fund shall be distributed to the claimant class members in two installments; January 25, 1984 and April 25, 1985, if this Stipulation is effective as of these dates. On each distribution date, each claimant class member shall receive one-half of the total amount due him or her, plus his proportionate share of the accumulated interest. If a professional tracing service was used to locate any class member, the tracing fee shall be deducted from the January 25, 1984 payment to the claimant class member and paid to either the tracing service or LAFC if the fee was previously advanced. The escrow fee and the fee charged for preparing the checks and the cost of mailing will be deducted or paid from income on the Class Settlement Fund. g. In the event that any checks payable to a claimant class member for the January 25, 1984 distribution are not cashed within 80 days of mailing, then, upon order of the Court, said persons will be removed from the list of claimant class members. The amount of these uncashed checks will be returned to the class settlement fund. This amount and the amount of the removed claimant class members second payment will be distributed to the remaining claimant class members in the April 25, 1985 distribution in the same manner and proportion as if it were interest on the class settlement fund. h. In the event that any checks payable to a claimant class member for the April 25, 1985 distribution are not cashed within 40 days of mailing, then, upon order of the Court, payment on the check shall be stopped. The class member whose payment was stopped will be traced by United Exchange, Inc. Any such class member who is found within 60 days after the stopped payment order will be issued a new check for the stopped one, less the tracing fee. The tracing fee shall be paid to United Exchange, Inc. In the event said persons are not found within 60 days of the order stopping payment, then upon order of the court, said persons will be removed from the list of claimant class members. Any amounts remaining after this shall be returned to Midland. i. $175,000,000 to the Legal Assistance Foundation of Chicago (hereafter LAFC) as attorneys fees and expenses. This amount will cover all time and expenses already incurred and those to be incurred in the future in the administration of the settlement including but not limited to costs of preparing, printing and mailing the settlement notices and letters. j. When the Defendants make the initial payment of $366,668.00 to the settlement fund, LAFC shall immediately receive $58,600.00 as attorneys fees and expenses. Out of each monthly payment made by the defendants, LAFC shall receive $4,850.00. In the event that this settlement does not become effective, LAFC will return all funds received under this sub-paragraph, except those amounts expended subsequent hereto in administering this settlement (including, but not limited to, tracing fees, costs of preparation of the class list and costs of preparing, printing and mailing the settlement notice), to the Defendants.

Appx. O.4

k. $1,000.00 to the named Plaintiff, Arthur Johnson, in exchange for a full and complete release covering all claims he may have, specifically including those not the subject of this lawsuit. Mr. Johnson will also claim against the fund as a class member. l. Arthur Johnson shall receive the $1,000.00 set forth in sub-paragraph (k) above on the Effective Date, without interest. 8. Judgment To Be Entered Upon Approval Of The Settlement. If the Court enters its Order in the form of Exhibit 2 attached hereto, or any other form thereof agreeable to the parties, all other conditions of this Stipulation are satisfied, and the Court approves the settlement embodies in this Stipulation and the Exhibits hereto without modification of any provision, then, final judgment shall be entered in this action as follows: a. Approving the settlement contemplated in this Stipulation as lawful, fair, just, reasonable and adequate, after considering among other things, that the settlement was reached after good faith, arms length negotiations by experienced and capable counsel for the class and in the absence of collusion; the amount of the settlement; the likelihood of Plaintiffs success in obtaining all relief prayed for; the cost, complexity, and duration of litigation if pursued; potential claims of Defendants against certain class members; the disruption of the business of the Defendants; and any other matters bearing on the best interests of the parties, and directing its consummation and that all parties perform in accordance with the terms of this Stipulation and the Exhibits hereto. b. Permanently and finally certifying a class, enumerated by name, consisting of all members of the class who do not timely request exclusion from the class. For each class member who is a claimant class member, the Order shall also indicate the principal amount to be paid that claimant class member. c. Providing for the release of the Defendants, their past and present officers, directors, employees, agents, attorneys, subsidiaries, parent corporations, related entities and affiliates, if any, and their respective successors and assigns, whomever, from all claims of members of the class, their heirs, representatives, agents, attorneys, successors, or assigns, personal representatives, or anyone claiming on their behalf, which have been asserted in this action. d. Dismissing Plaintiffs complaint and all claims asserted therein with prejudice and on the merits. e. Reserving jurisdiction over consummation of the settlement provided for herein. f. Determining there is no just reason for delay of enforcement or appeal. 9. On the Effective Date, Arthur Johnson will execute and deliver to the Defendants a separate Release in the form of Exhibit 4, attached hereto [not attached herein]. 10. Additional Conditions To Settlement: In addition to the entry of the orders described in paragraphs 2 and 8 above, without modification except as provided herein, and the performance by the respective parties of all obligations herein described, and the effectiveness and finality of any or all or-

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b. Neither this Stipulation nor any documents executed or prepared, acts done, or orders entered shall be construed as an admission by the Defendants or any of them of the validity of any claims asserted in this action or of any Defendants liability herein or of any wrongdoing or of any act or omission by them or any of them, nor construed as an admission of any fault or omission in any statement or document, nor offered or received in evidence in any civil, criminal, or administrative action or proceeding against any party other than such proceedings as may be necessary to consummate or enforce this Stipulation and the Exhibits hereto, and other than to the extent necessary to prove the terms of this Stipulation and the Exhibits hereto in any other action or proceeding. c. All of the Exhibits hereto are incorporated herein by reference. d. This Stipulation, the Exhibits hereto and the acts done shall be binding upon and shall inure to the benefit of the parties hereto, and their respective heirs, executors, administrators, officers, directors, employees, agents, related entities, successors and assigns, as the case may be. e. This Stipulation and its Exhibits may be executed in one or more counterparts, all of which together shall be and shall be deemed to be on instrument, and true and correct copies may be used in lieu of the originals. f. Counsel for Plaintiffs and Defendants agree that they will not solicit or advise potential class members to request exclusion from the class and will not represent, or arrange representation for, any potential class member in requesting exclusion from the potential class and/or filing a separate action. g. Plaintiffs and defendants will make every attempt to give notice to as many class members as possible, and will make a good faith effort to foster the maximum res judicata effect of this settlement. h. Plaintiff and his counsel will cooperate with Defendants or any of them in resisting a collateral attack on the judgment contemplated hereby. i. Plaintiff agrees that neither he nor his counsel shall seek, or cooperate in, any publicity of this settlement through radio, television or newspapers of general circulation. j. All documents and other communications required to be forwarded to the parties or their counsel pursuant to this Stipulation shall be mailed, postage prepaid, to counsel at the address shown below: [Insert Addresses] k. All documents relating to discovery in the possession of Plaintiff or Plaintiffs counsel shall be returned to Defendants within one month of the last payment to the class members. IN WITNESS WHEREOF, the parties by their counsel have signed this Stipulation this [date]. [Attorney for Plaintiffs] [address] [Attorney for Defendants] [address]

ders to be entered, this Stipulation and the settlement contemplated hereby is conditioned as follows: a. If the Court approves this Stipulation and judgment is entered thereon as provided in paragraph 8 and an appeal or petition for leave to appeal is taken therefrom or from any other order entered in this action, and, on appeal or hearing after the grant of petition for leave to appeal, if such be granted, such judgment or order is modified so as to change any of the terms of this Stipulation, or such judgment or order is finally reversed, then absent the written consent to the contrary by all parties to this Stipulation, within thirty (30) days from the date of such ruling, this Stipulation and all orders entered in connection herewith shall become null and void in all respects without further act by any party hereto and funds restored to Defendants in accordance with the provisions of paragraph 11(c). b. If 50 or more persons elect to be excluded from the class, Defendants may, at their option, elect to terminate this Stipulation by giving written notice of said election to the Court and counsel for each of the parties hereto, within ten (10) days of the last day designated by the Court as the deadline for filing any such requests for exclusion. Upon Defendants election to terminate this Stipulation, this Stipulation and all orders entered in connection herewith shall become null and void in all respects without further act by any party hereto and funds restored to Defendants in accordance with the provisions of paragraph 11(c). 11. Effect of Failure To Consummate Settlement. If the settlement contemplated hereby is not consummated for any reason, except for Defendants failure to comply with any provision of the stipulation or order: a. This Stipulation, all documents executed or prepared, acts done, and orders entered pursuant to it shall be null, void, and of no force or effect whatsoever without further act of any party hereto and shall not be offered or received in evidence or construed as an admission by the Defendants or any of them of the validity of any claim asserted or any wrongdoing of any kind or as a waiver, abandonment, or release of any claim, position, or defense; b. The parties hereto and the actions herein and all issues therein shall thereupon forthwith be deemed to have reverted to their respective status as of January 2, 1983, and the action shall proceed in all material aspects as if this Stipulation and related Orders and papers had not been executed, all substantive and procedural issues having been fully preserved for litigation; and c. Any sums advanced by Defendants to Plaintiff under this settlement will be returned to Defendants immediately upon demand including interest earned thereon except for tracing fees, costs of preparation of the class list and costs of preparing, printing and mailing the settlement notice. 12. Miscellaneous Provisions. a. The named Plaintiff and the Defendants shall not, directly or indirectly, in any way exercise, and they, and all of them, do hereby waive, any and all rights they, or any of them, may have to appeal from any Order of the Court entered pursuant to an in accordance with this Stipulation.

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Appx. O.5

O.5 State Usury Case (Adams)

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION ) ) Plaintiff, ) ) v. ) ) RECKLESS SAVINGS & ) LOAN ASSOCIATION and ) PREDATORY FINANCE, ) Defendants. ) ) PATRICIA ADAMS, STIPULATION OF PROPOSED SETTLEMENT This Settlement Agreement is entered into as of January 8, 1990 between Patricia Adams, suing on behalf of herself and the two classes defined below (Adams), on the one hand, and Predatory Finance Limited (Predatory Finance), on the other. WHEREAS: 1. Adams has asserted class claims against Predatory Finance in 88 CH 9999 (Adams action). 2. Predatory Finance has originated or acquired certain mortgage loans secured by residential property in Illinois. Predatory Finance has sold certain of the Illinois mortgage loans originated by it to various entities (assignees). 3. There are two classes on whose behalf this settlement is made. Class A consists of all persons (and, in the case of deceased persons, their estates, personal representatives or beneficiaries) (a) who on or after January 1, 1986, entered into a mortgage loan secured by residential property in Illinois (b) which was originated or acquired by Predatory Finance and (c) which provides for the use of the Rule of 78s to compute the amount due upon prepayment of the loan. Class B consists of all persons (and in the case of deceased persons, their estates, personal representatives or beneficiaries) (a) who on or after January 1, 1985, entered into a mortgage loan secured by residential property in Illinois (b) which was originated by Predatory Finance and (c) which provided for the payment by the borrower of a brokerage commission to a loan broker. Predatory Finance has represented that there are approximately 300 members of Class A and approximately 600 members of Class B. 4. Adams alleges that certain of the terms of the loans provided to the members of Class A and Predatory Finances administration of prepayments of those loans violated Ill. Rev. Stats., ch. 17, kk6401, et seq. (the Illinois Interest Act). 5. Adams further alleges that certain payments made to loan brokers from the proceeds of the loans provided to the members of Class B, and the disclosures of those payments on the Truth in Lending statements relating to the loans, violated the Illinois Interest Act, the federal Truth in Lending Act, 15

U.S.C. 1601, et seq. and the Illinois Consumer Fraud Act, Ill. Rev. Stats., ch. 121 1/2, kk 261, et seq. 6. Predatory Finance denies all liability with respect to all of the claims asserted against it, and has asserted various defenses to those claims. 7. Counsel for Predatory Finance have provided certain information and made certain representations to counsel for the classes concerning Predatory Finance and its conduct of business in Illinois. Counsel for the classes have investigated the facts available to their clients and the law. They are now in the process of engaging in discovery designed to confirm the accuracy of the information and representations provided to them and to determine other facts. Such discovery will include securing and examining documents from Predatory Finance. Counsel will attempt to complete their discovery prior to the final hearing date described in paragraph 21 and, if they are unable to do so, will seek additional time from the Court. If, during the course of their discovery, counsel for the classes discover that the relevant facts are materially different from the representations made by counsel for Predatory Finance, then counsel for the class may withdraw from this Settlement Agreement. Among the specific representations made by Predatory Finance are: a. that Predatory Finance made approximately 293 loans since January 1, 1986 which are secured by residential property in Illinois and which provide for use of the Rule of 78s to compute the amount due upon prepayment or acceleration; b. that approximately 100 of these 293 loans have been prepaid; and c. that since January 1, 1985 Predatory Finance made approximately 600 loans to residents of Illinois who paid a portion of their loan proceeds to a loan broker. Predatory Finance further states that to the best of its knowledge, it has not originated or acquired loans made to residents of Illinois since January 1, 1985 in which the borrower was referred to Predatory Finance by a home improvement dealer and in which part of the proceeds was used to finance the purchase of goods or services from that dealer. Any release and judgment shall specifically exclude any liability which Predatory Finance or its assignees may have, arising as a result of 16 C.F.R. part 433 and the notice required thereby, for defective home improvements performed by any home improvement dealers who referred consumers to Predatory Finance. Adamss lawsuit did not raise any such claims and neither party has any reason to believe at this time that such claims or liability exist; it is the intent of this Settlement Agreement to not address claims of that nature, if any do exist. Based on the foregoing, and upon an analysis of the benefits which this Settlement Agreement affords the classes, counsel for the classes consider it to be in the best interest of the classes to enter into this Settlement Agreement. 8. While Predatory Finance denies any wrongdoing and any liability whatsoever, it has concluded that it is in its best interests to settle this action on the terms set forth herein in order to avoid expense, inconvenience, and interference with its ongoing business operations. Nothing herein shall constitute an admission of liability.

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IT IS THEREFORE AGREED: 13. Predatory Finance will file with the Court an affidavit stating the payments made to each class member. 14. Where the class member is deceased, Predatory Finance will, upon receipt of proper notification and documentation of the payees interest, make the payment to the class members heirs or estate. 15. Counsel for the classes shall request that the Court make an award of legal fees and expenses. Predatory Finance agrees not to oppose or cause to be opposed a request for an amount of fees and expenses not exceeding $150,000. The attorneys fees and expenses awarded by the Court will be paid by Predatory Finance in addition to the other amounts specified in this agreement. 16. Adams shall request that the Court make an award of fees for service as the class representative. Predatory Finance agrees not to oppose a request in an amount not exceeding $1,000. 17. With respect to Adams loan, all late charges through the Effective Date will be forgiven. The parties will execute a separate document expressing their agreement as to the amount owed as of a specific date. Adams will, as of the scheduled payment date following (by at least 7 days) the Effective Date, resume making payments on her loan at a rate of not less than $295 per month (more at her option). Payments shall be made to such party as Predatory Finance or its successors may direct Adams in writing. Any amounts which have not been paid on the date that Adams loan would originally have been paid off, had all payments been made when due, shall constitute a balloon payment due on the date that Adamss loan would originally have been paid off. Upon Adamss resuming payments in this manner, Predatory Finance will agree to treat Adamss individual loan as not in default. 18. The parties agree to petition the Court presiding over this action within 7 days of the execution date of this Settlement Agreement for a preliminary approval order: a. Determining that this action may, for all purposes, be maintained as a class action based upon the classes defined not more narrowly than described in paragraph 3 of this Settlement Agreement; b. Finding that Adams, as class representative, fairly and adequately represents the interests of both Class A and Class B; c. Finding that the mailing of a class notice substantially in the form of Exhibit A, attached, [not attached herein] and described generally below is the only notice required and that such notice satisfies the requirements of due process and of 2-801 through 2-806 of the Code of Civil Procedure; and d. Finding preliminarily that this Settlement Agreement is fair, reasonable, and adequate to the class. 19. If this Court enters the preliminary approval order described above, Predatory Finance shall, within 14 days thereafter, mail to each class member at his or her last known address a notice substantially in the form of Exhibit A (or as modified by the Court in the preliminary approval order). Each notice shall apprise class members that any objections to the proposed settlement, to the proposed award of legal fees and expenses, or to the proposed award of the class representatives fee, must be filed with the Clerk of the Court

9. Beginning on the Effective Date (or at the sole election of Predatory Finance, sooner than the Effective Date), and continuing until the Illinois General Assembly or the Illinois Supreme Court affirm that the Rule of 78s may be used to compute the amount due upon the prepayment of mortgage loans generally or any class thereof: a. Predatory Finance will not originate or purchase any new mortgage loans secured by residential property in Illinois which provide for the use of the Rule of 78s to compute the amount due upon prepayment of such loans; and b. Predatory Finance will not use the Rule of 78s to compute the amounts due from members of Class A who seek to prepay their mortgage loans and will take all necessary steps to assure that any purchasers of mortgages from it will not do so. Predatory Finance represents that it has retained the right to any Rule of 78s increments on loans which it has sold and that it is the collection agent for such loans. 10. Predatory Finance believes, based on past experience concerning the time during which mortgage loans remain outstanding, that certain of the approximately 193 members of Class A who have not as yet prepaid their loans will prepay their loans prior to maturity. If, upon prepayment of their loans, the actuarial method is used to calculate the amount due rather than the Rule of 78s, Predatory Finance estimates that the classwide difference may be approximately $100,000 to $150,000. 11. Predatory Finance will pay an aggregate amount of $200,000 to members of the two classes, as follows. For purposes of this paragraph, joint borrowers on a single loan shall be treated as one borrower. a. Predatory Finance will pay approximately $80,000 to a subclass consisting of the approximately 100 members of Class A who have prepaid their mortgages and who have had the amount due computed using the Rule of 78s. Each individual subclass members payment will consist of 100% of the difference between the amount which the subclass member actually paid at prepayment and the amount which the subclass member would have paid had the prepayment been computed according to the actuarial method. b. Predatory Finance will pay approximately $60,000 to the members of Class B in settlement of all claims relating to payments to loan brokers. Each member of Class B will receive $100 per loan. c. Predatory Finance will pay the balance of the $200,000 (approximately $60,000) to the members of Class A (whether or not they prepaid their loans) in settlement of claims brought under Ill. Rev. Stats., ch. 17, k6413, part of the Illinois Interest Act. This amount will be divided among the class members based upon the percentage that the original class members loan bears to the sum of the original principal amount of all of the loans made to the members of Class A. 12. Predatory Finance will make these payments within 30 days after the Effective Date.

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and served upon counsel for the classes and counsel for Predatory Finance within 30 days after entry of the preliminary approval order. Any requests by putative class members to exclude themselves from the class must be filed and served in the same manner and within the same time. To the extent that the parties are required to search for a particular class member, such class member shall, if necessary and appropriate, have the right to apply to the Court for additional time in which to opt out. Each such notice shall further inform the class members that a final hearing to determine the fairness, reasonableness and adequacy of the proposed settlement and the reasonableness of the proposed fee awards will be held at a date to be set by the Court, approximately 45 days after the entry of the preliminary approval order. The notice shall further inform the class members that, upon approval of the settlement, all claims of the class members against Predatory Finance and its transferees (other than claims arising as a result of 16 C.F.R. part 433, if in fact any such claims do exist) shall be barred. Predatory Finance shall pay the costs of notice to the class. Predatory Finance shall file with the Court and serve upon counsel for the class an affidavit or declaration stating that the notice procedures outlined in this paragraph have been followed. Predatory Finance shall calculate the amounts due each class member and make the payments to them within 30 days after the Effective Date. 20. The parties shall petition the Court before which this action is pending to hold a final hearing upon the settlement approximately 45 days after entry of the preliminary approval order. The final hearing order shall: a. Determine that this action may, for all proposes, be maintained as a class action based upon the classes defined in paragraph 3 of this Settlement Agreement; b. Find that Adams, as the class representative, fairly and adequately represents the interest of both Class A and Class B; c. Find that the notice previously given to class members in this action satisfied the requirements of due process and of 2-801 through 2-806 of the Code of Civil Procedure; d. Find that the Settlement Agreement is fair, reasonable and adequate to the class, provide that each member of the classes except those who have excluded themselves shall be bound by this Settlement Agreement, including the release below, and conclude that the Settlement Agreement should be and is approved; e. Dismiss on the merits and with prejudice all claims asserted in this action against Predatory Finance and Reckless Savings & Loan Association; f. Retain jurisdiction of all matters relating to the interpretation, administration, implementation, effectuation and enforcement of the Settlement Agreement. 21. The final approval order (Final Approval Order) shall be deemed final 35 days after entry if no pleadings are filed within that time seeking appeal, review or rehearing of the order, or if such pleadings are filed, then 14 days after the date upon which all appellate and other proceedings resulting therefrom, including the time for filing petitions for rehearing or leave to appeal to the Illinois Supreme Court, have been finally terminated in such a manner as to permit the Final Approval Order to take effect.

Appx. O.5

22. Adams and the classes shall request that the Adams Court approve the fee and expense awards at the same time as the Final Approval Order is entered. The awards shall be deemed final at the same time that the Final Approval Order becomes final, as described in 21 above. 23. In the event any court disapproves this Settlement Agreement or any material part thereof for any reason, or declines to enter the Final Approval Order, or overturns or reverses the Final Approval Order or any material part thereof, then: a. If all parties hereto do not agree jointly to appeal such ruling, this Settlement Agreement shall become null and void; the litigation shall continue; and the parties shall move jointly that any order except the order certifying the classes entered pursuant to this Settlement Agreement be vacated; or b. If all parties hereto agree to jointly appeal such ruling and if the final approval order or its equivalent in all material respects is not in effect after the termination of all proceedings arising out of such appeal, this Settlement Agreement shall become null and void; the litigation shall continue; and the parties shall jointly move that any order, except an order certifying the classes, entered pursuant to this Settlement Agreement be vacated. 24. At least seven days prior to the final approval hearing, Predatory Finance shall prepare a list of the persons who have excluded themselves from the classes and shall handdeliver or telecopy that list to class counsel. If persons with loans aggregating $500,000 or more in original principal amount exclude themselves, then Predatory Finance may, at any time prior to the hearing, withdraw from the Settlement Agreement, in which case: the Settlement Agreement shall become null and void; the litigation shall continue; and the parties shall jointly move that any order entered pursuant to this Settlement Agreement, except an order certifying the classes, be vacated. 25. The Effective Date shall be the 14th day after the Final Approval Order becomes final, as described in 21 above. 26. On the Effective Date, Predatory Finance shall change its policies and practices as described in 10 above; shall begin making the payments to Adams, and the class members as approved by the Court; and within five days after the Effective Date shall make payments to counsel for the classes as determined by the Court in the Fee Order, provided, however, that if the Fee Order has not become final as of the Effective Date, Predatory Finance shall make these fee payments 14 days after the Fee Order becomes final. 27. In connection with the distribution of funds, Predatory Finance will prepare, or have prepared, envelopes in which to mail each class members check by addressing such envelopes to the last address shown in Predatory Finances records for such class members, or to such other address as is supplied by counsel for the classes, inserting the correct check in the envelopes, and then mailing the envelopes to the class members by first class mail. The envelopes will bear the return address of class counsel. In the event any class members envelope is returned, Predatory Finance will timely provide reasonable assistance in determining the location of such class member, if entitled under this Settlement Agreement to a payment. Such assistance will

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been asserted or could have been asserted in the lawsuits brought by Adams, based on the Illinois Interest Act, the Illinois Consumer Fraud Act, the Truth in Lending Act, or any other statute or principle of law, arising out of or relating to the mortgage loans described in paragraph 3, except that such release will not apply to any claim, if any do in fact exist, against Predatory Finance or an assignee arising as a result of 16 C.F.R. part 433 (for defective construction work or damages caused thereby pursuant to the Federal Trade Commission regulation abrogating the holder in due course rule with respect to certain consumer transactions where a seller of goods or services refers a consumer to a lender). 31. This Settlement Agreement may not be changed orally. It may be changed without the consent or approval of any nonsignatory by a writing signed by all signatories hereto, any of whom may sign by counsel of record (whose ability to make changes and signature is hereby authorized as between all parties hereto). 32. As agent for receipt of communications relating to this Settlement Agreement, Adams and the class appoint [plaintiffs attorney], [address], Chicago, Illinois, and Predatory Finance appoints [defendants attorney], [address], Chicago, Illinois. The persons and addresses designated in this paragraph may be changed by any signatory hereto by written notice to the other signatories hereto. 33. This Settlement Agreement may be executed in counterparts, in which case the various counterparts shall be and constitute one instrument for all purposes. The several signature pages may be collected and annexed to one or more documents to form a complete counterpart. Photocopies of executed copies of this Settlement Agreement may be treated as originals. 34. Each and every term of this Settlement Agreement shall be binding upon and inure to the benefit of Adams, the members of the class, and any of their successors and personal representatives, and shall bind and shall inure to the benefit of the released parties, which persons and entities are intended to be beneficiaries of this Settlement Agreement. 35. All time periods and dates relating to the approval of this Settlement Agreement and the notification of the classes (but not those relating to the substantive rights of the parties and class members, such as those which are part of the class definition) are subject to approval and change by the Court in the Adams case. 36. This Settlement Agreement shall be interpreted in accordance with the laws of Illinois. [Plaintiffs Attorney] [Defendants Attorney]

include furnishing the information on the application as to the class members social security number, prior names, banking and credit relationships, date of birth, and past and present home and business addresses (assuming that the information is available to Predatory Finance and has not already been furnished). 28. Ninety days after the Effective Date, Predatory Finance shall provide to counsel for the classes a list of all checks which have been cashed. This list shall be supplemented 150 days after the Effective Date. 29. Counsel for the classes shall establish and maintain control over the return of undeliverable checks. The address of class counsel shall be used as the return address on the envelopes used to mail the distribution checks. Counsel for the class may communicate with the class members in order to effect payment on the check. If class counsel notifies Predatory Finance that a class member has not received a distribution check within six months of the Effective Date, Predatory Finance shall have the right to stop payment on the original check and reissue a new check to such class member in the original amount and mail it to the address specified by class counsel within 14 days after receipt of notice by Predatory Finances counsel. If it is impossible to arrange for a distribution check to be cashed within one year after the effective date, it shall be null and void and Predatory Finance shall have no obligation to honor the check or issue a new one. Counsel for the class may, if necessary, employ a skiptracer to locate any missing class members and deduct the expense of distributing a check from the amount of the check. Predatory Finance will cooperate in effectuating such deduction in such cases by issuing checks reflecting the amount due the skip-tracer and the remaining amount to be distributed to the class member. 30. When the Final Approval Order becomes final, each class member who has not timely and properly excluded himself or herself from the class hereby releases and shall be barred from suing Predatory Finance, any assignee (including but not limited to Reckless Savings & Loan Association), the loan broker disclosed on the class members Truth in Lending statement, each officer, director, principal, agent, attorney, employer, employee, partner, division, or owner of Predatory Finance, Reckless, assignee, or loan broker, and any successor, predecessor, direct or indirect subsidiary, direct or indirect parent, personal representative, estate, heir, beneficiary, administrator, or executor of any such person on the released claims, defined as any and all claims, actions, causes of action, rights or liabilities, known or unknown, which have

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Appendix P

Sample Memoranda in Support of Final Approval of Class Settlement

P.1 TIL Rescission CaseHome Improvement Contract (Ogden)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) WALTER OGDEN and ) MAYE OGDEN, ) Plaintiffs, ) ) v. ) ) MEGALITH MORTGAGE ) COMPANY, INC. ) Defendants. ) ) PLAINTIFFS MEMORANDUM IN SUPPORT OF APPROVAL OF CLASS SETTLEMENT Plaintiffs submit this memorandum in support of the proposed settlement in this matter. NATURE OF THE ACTION This action arose from a home improvement transaction. The plaintiffs, Mr. and Mrs. Walter and Maye Ogden, purchased home improvements from Haphazard Construction Company that were financed by Megalith Mortgage. Plaintiffs initially asserted four claims. The first was that the transaction involved a hidden finance charge. The second was that their rescission rights had been interfered with. The third was that the points charged by Megalith were not properly disclosed, being included in the amount financed instead of the finance charge. The fourth was that the work done was defective. The first, second and third claims were brought on behalf of a class. On Megaliths motion, the Court dismissed the first and second claims for failure to state a claim. Megaliths motion to dismiss the third claim was denied. The fourth claim involves a factual dispute concerning the quality of Haphazards work. Because Haphazard referred to Ogdens to Megalith, Haphazard is subject to claims and defenses the Ogdens have against Megalith under the Federal Trade Commission regulation abrogating the holder in due

course doctrine in consumer transactions, 16 C.F.R. part 433. Such construction claims are excluded from the class settlement and release. CLASS DEFINITION Plaintiffs allege two classes with respect to the third claim. Class I consists of all persons who satisfy the following criteria: (a) they obtained a loan from Megalith in Illinois on or after January 19, 1987; (b) Megalith imposed a prepaid finance charge in connection with the loan; and (c) the prepaid finance charge was included in the amount financed on the Truth in Lending statement issued by Megalith in connection with the transaction rather than in the finance charge. Class II consists of all persons who satisfy the following criteria: (a) they obtained a loan from Megalith in Illinois on or after January 19, 1985; (b) the loan is secured by a lien or other security interest on their home; and (c) the loan was not (according to the loan file) used to purchase or construct the home; (d) the borrowers interest in the home has not been transferred or sold; (e) Megalith imposed a prepaid finance charge in connection with the loan; and (f) the prepaid finance charge was included in the amount financed on the Truth in Lending statement issued by Megalith in connection with the transaction rather than in the finance charge. Plaintiffs seek to recover for both classes actual damages equal to the amount of the points, statutory damages under the Truth in Lending Act, and attorneys fees. With respect to the members of Class II, plaintiffs also seek a declaration that each class member has the right to rescind the loan. Defendant has represented in discovery that there are a total of 40 borrowers who are potential class members. Although there are more than the minimum number of class members necessary to certify a class, the number of members is smaller than that of a class on whose behalf plaintiffs would normally consider bringing a class action. Defendant is opposing class certification; no ruling has yet been made on that issue by the Court. TERMS OF SETTLEMENT Plaintiffs and defendant have reached a classwide settlement. The key features of the settlement are: 1. All persons in Class I will receive, in cash, a full refund of the prepaid finance charge. The amounts vary from $300 to $1,000 per person. 2. Megalith will make or forgive (depending on whether the loan has been transferred to a third party) the last two payments of each member of Class II whose subject loan is still outstanding, and whose loan is current when the two pay-

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for a declaration that the class members have a continuing right to rescind their transactions. Again, while plaintiffs believe that such an action can be brought, the possibility that this type of relief might not be available should be given consideration appropriate to the case. 3. Even if the class members are entitled to rescind, they still have an obligation to return to Megalith the principal amounts of their obligations, minus payments made. In light of the demographic characteristics of the borrowers (generally working class individuals), it is conjectural whether many class members would be able to tender the amounts due. Litigation and appeal of that issue on behalf of a small class would likely create a high ratio of attorneys fees to potential benefits distributed. A payment or credit in lieu of any rescission rights is thus a desirable alternative to exercise of those rights. The potential benefits to a larger class might lead to a different conclusion in such a situation. 4. It is not entirely clear that the class members are entitled to receive the prepaid finance charge in cash, as opposed to a credit against their obligations. 5. As a result of the proposed settlement, all aggrieved parties will receive their full actual damages, in cash, without any diminution for fees or costs. The Megalith practice complained of has been effectively ended by this lawsuit. Thus, while plaintiffs have a strong case on the existence of a violation, they are getting 100% of what they are entitled of a violation, they are getting 100% of what they are entitled to, with the exception of the disputed rescission rights. Furthermore, some payment is being made to the class members in recognition of potential rescission rights. 6. It appears that the prepaid finance charge violation was not fraudulently motivated or intended to gouge consumers. The annual percentage rates disclosed appear to have been within the tolerances specified by the Federal Reserve Board regulations. A relatively small number of consumers were affected. This is not a defense per se, but has a bearing on the equities of the situation. 7. Further litigation would require a fight over class certification and the merits, with a likely appeal and very substantial attorneys fees. A controversy over whether the class members are entitled to a drastic remedy (rescission) for a relatively technical, probably nonfraudulent violation, and which the class members may not be in a position to take advantage of does not warrant this. 8. The attorneys fees are not being paid from the class members recovery and will amount to not more than half the total benefit to the class. It is not uncommon in Truth in Lending and other consumer protection litigation for the attorneys fees to enormously exceed the amounts paid to the aggrieved consumers. Poussard v. Commercial Credit Plan, Inc., 479 A.2d 881 (Me. 1984) ($20,000 fees even though only $10,000 benefit); Welmaker v. W. T. Grant Co., 365 F.Supp. 531 (N.D. Ga. 1973) ($380.28 recovery and $17,500 attorneys fees). The theory on which such fees are allowed is that, in view of the statutory caps on damages, any requirement of proportionality between the recovery of the fees would be inconsistent with the policy of encouraging private enforcement of the Act. Hayer v. National Bank of Alaska, 663 P.2d 547, 550 n. 7 (1983).

ments become due. In exchange, the class members waive their rescission rights. The amount of this benefit will vary between $400 and $1,500 per person. 3. Each class member will therefore receive between $300 and $2,500 in benefits. The total benefit to the class is estimated at approximately $60,000. 4. The Ogden will receive a credit of $1,350 on their loan for a release of claims relating to defective work. Individual class members will not receive any money for defective work, but any claims on this account are excluded from the release. No claims for defective work furnished to class members were asserted in the action. 5. Megalith will pay attorneys fees of $30,000 through October 31, 1989. This represents close to 1.5 times the hours expended multiplied by counsels current hourly rate. Any fees incurred since the date of the settlement agreement, such as for responding to inquiries from class members, are additional and will be paid by defendant on a straight hourly rate. REASONS FOR APPROVAL In deciding whether to approve a proposed settlement, the Court must determine whether it is fair, reasonable, and in the best interests of the class which will be affected by it. Gautreauz v. Pierce, 690 F.2d 616, 631 (7th Cir. 1982). Relevant factors to this determination are (1) the strength of the case for plaintiffs on the merits, balanced against the extent of the settlement offer, (2) the complexity, length and expense of further litigation, (3) the extent of opposition to the settlement, (4) the reaction of members of the class to the settlement, (5) the opinion of competent counsel, (6) the progress of the proceedings. Id. The opinion of plaintiffs counsel as to the desirability of settlement is an important consideration: Judges should not substitute their own judgments as to optimal settlement terms for the judgment of the litigants and their counsel. Id. Indeed, there is a strong initial presumption that an arms-length settlement arrived at by counsel experienced in the type of litigation involved on the basis of sufficient information concerning the claims at issue is fair. Feder v. Harrington, 58 F.R.D. 171 (S.D.N.Y. 1972). Counsel for plaintiffs and the class have had substantial experience in class action litigation, including consumer litigation against financial institutions, as well as pension, securities and antitrust cases. Heastie v Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D. Ill. 1989) (class of 6,200 borrowers certified) in their view, there are a number of factors that make the proposed settlement at this juncture fair, reasonable, and appropriate. These include: 1. Subsequent to the filing of the lawsuit, and obviously motivated by its pendency, defendant refunded the prepaid finance charges to a number of class members. Defendant claims that its actions in this regard bar any further claim (e.g. for rescission) on behalf of these individuals, and that variations among the class members created by defendants actions impair the commonality of the class. Plaintiffs filed a motion with the Court seeking to prevent such conduct on the part of defendant, but this Court declined to interfere. While plaintiffs disagree that a payment subsequent to the filing of suit can extinguish anyones rights, the possibility that some class members might not obtain further relief should be given some consideration. 2. There is a division of authority on the subject of whether a class action can be brought under the Truth in Lending Act

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9. As of the date of this memorandum, which is well past the scheduled date for filing objections and opt out requests (January 6, 1990), no one has filed any objections to the settlement or opted out. CONCLUSIONS Plaintiffs respectfully request that the Court enter an order (a) determining that this action is a class action for settlement purposed, (b) finding that the named plaintiffs fairly and adequately represent the interests of the class, (c) finding the proposed settlement is fair and reasonable, and (d) approving payment of attorneys fees. I. NATURE OF THE CASE

Appx. P.2

This case concerns automobile leasing practices. Count I of the complaint alleged that a standard printed form of automobile lease used by defendant Volvo Finance North America (VFNA) and serviced by defendant Volvo Car Finance, Inc. (VCFI) disclosed excessive early termination charges, in violation of the Federal Consumer Leasing Act, 15 U.S.C. 1667 et seq., and otherwise failed to comply with the CLA. Count II alleged that the early termination charges were unenforceable under state common law and Count III that their imposition constituted an unfair or deceptive trade practice. II. STANDARD OF REVIEW

P.2 Consumer Leasing Act and Deceptive Practices CaseCar Lease (Shepherd)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) ) Plaintiff, ) ) v. ) ) VOLVO FINANCE NORTH ) AMERICA, INC. and VOLVO ) CAR FINANCE, INC., ) Defendants. ) ) IAN SHEPHERD, MEMORANDUM IN SUPPORT OF FINAL APPROVAL OF CLASS SETTLEMENT Plaintiff, Ian Shepherd (Shepherd), submits this memorandum in support of the parties request that the settlement agreement (Exhibit A) [not attached herein] be given final approval. The Court has given preliminary approval to a classwide settlement. Individual mail notice has been given by first class mail to approximately 90,000 persons.1 In addition, notice was published on two occasions in USA Today, and the settlement received television coverage in Atlanta. Of the class members, [number] excluded themselves. There are no outstanding objections. One person, [name], filed an objection based on a gross misreading of the settlement and then withdrew it after plaintiffs counsel wrote to him explaining his error. A copy of the objection is attached as Exhibit B [not attached herein] and the document withdrawing the objection (which has counsels letter appended) is attached as Exhibit C [not attached herein]. It should be noted that the economic status and sophistication of Volvo lessees is probably above averagethe cars list from $16,000 to $35,000 and are marketed as intelligent and safe vehicles to drive. Thus, the response from the class to the notice is overwhelmingly favorable.

In deciding whether to approve a proposed settlement, the Court must determine whether it is fair, reasonable, and in the best interests of the class that will be affected by it. Bennett v. Behring Corp., 737 F.2d 982, 986 (11th Cir. 1984); Gautreaux v. Pierce, 690 F.2d 616, 631 (7th Cir. 1982); In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. 297, 312 (N.D.Ga. 1993). Relevant factors to this determination are (1) the strength of the case for plaintiffs on the merits, balanced against the extent of the settlement offer, (2) the complexity, length and expense of further litigation, (3) the substance and extent of opposition to the settlement by the class members, (4) the reaction of members of the class to the settlement, (5) the opinion of competent counsel, and (6) the progress of the proceedings. Bennett v. Behring Corp., 737 F.2d at 986; In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. at 312; Gautreaux v. Pierce, 690 F.2d at 631; Armstrong v. Board of School Directors, 616 F.2d 305, 314 (7th Cir. 1980). A settlement need not even obtain 100% of actual damages. Bennett v. Behring Corp., 737 F.2d at 987 (settlement providing for $675,000 of maximum possible $12 million recovery adequate). The essence of a settlement is a compromise. Thus, even if the relief afforded by the proposed settlement is substantially narrower than it would be if the suits were to be successfully litigated, this is no objection to a class settlement, since the public interest may indeed be served by a voluntary settlement in which each side gives ground in the interest of avoiding litigation. Air Line Stewards & Stewardesses Assn v. American Airlines, Inc., 455 F.2d 101, 109 (7th Cir. 1972). [S]ettlements of class actions are highly favored in the law and will be upheld whenever possible because they are means of amicably resolving doubts and preventing lawsuits. In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. 297, 312 (N.D.Ga. 1993). The opinion of experienced plaintiffs class action counsel with substantial experience in lease litigation as to the desirability of settlement is an important consideration. In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. at 312. Judges should not substitute their own judgments as to optimal settlement terms for the judgment of the litigants and their counsel. Gautreaux, supra. Indeed, there is a strong initial presumption that an arms-length settlement arrived at by counsel experienced in the type of litigation involved on the basis of sufficient information concerning the claims at issue is fair. Feder v. Harrington, 58 F.R.D. 171 (S.D.N.Y. 1972). Mr. Edelman has extensive experience in consumer class actions generally and auto leasing issues in particular. (Exhibit C) [not attached herein]

1 This number includes a considerable number of duplicates.

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ing $7 million actual damages in cash or credit. While it is reasonable to anticipate that the number of persons who will terminate early during the next two years is similar to the number who terminated during the last two years, we have no way of estimating the number, so the number given in the notice was that for the excess charges assessed during the last two years. In addition, some people terminated more than two years ago, but we didnt count them if they didnt pay the charge because it is probably not collectable if Volvo hasnt been able to collect the charge during the last two years. Persons who already terminated early will have the charge recalculated and receive appropriate refunds or credits, depending on whether they paid the excess charges or were merely billed for them. Persons who have not yet terminated early, but who do so in the future, will have the charge computed using new method. An additional $70,000 was included because Volvo wanted a release from persons who either terminated on time within the last year or who purchased the leased vehicles. Such persons may have a technical claim for statutory penalties under the Truth in Leasing Act, because of the inclusion of an improper early termination formula2 or because of the other, technical disclosure violations alleged in the complaint. They quite clearly have not suffered any actual damages on account of improper early termination penalties. Since persons who were not subjected to early termination charges in the past and cannot be subjected to such charges in the future are not receiving any other benefit under the settlement (i.e., a refund/credit or a revision of the lease), and since Volvo cannot ask for a release from someone without offering them some consideration, the settlement provides that anyone that cares to send in a proof of claim will have the $70,000 divided up among them. IV. FACTORS RELEVANT TO SETTLEMENT APPROVAL A. LIKELIHOOD OF SUCCESS COMPARED TO RESULT As noted above, the VFNA lease, as written, provides that in order to terminate early the lessee must either (a) buy the car or (b) pay all remaining lease installments, without adjustment to account for the fact that they are being accelerated, plus interest thereon. Plaintiffs counsel believe that they had an excellent chance of success on their claim that this termination formula imposed an unreasonable penalty. The failure to adjust the future payments in some manner3 has been found unreasonable by many decisions, and we know of no other leasing company that requires purchase of the car. Corresponding to this expectation, the settlement substitutes a more conventional and appropriate formula. Under the new formula, lease payments are applied towards the eco2 Whether a claim based on the inclusion of an improper early termination formula can be maintained by a lessee against whom the formula was not applied is debatable. Two decisions from the Northern District of Illinois and one from the Northern District of Georgia hold that a lessee has no claim for the inclusion of improper early termination charges unless and until the charges are imposed. However, there is a contrary unreported decision from the District of Connecticut. 3 This can be done by either reducing the payments to present value or by giving a credit for the economic equivalent of unearned interest.

If the Court considers the settlement within the range of reason and fairness, its decision is reviewable only for abuse of discretion. In re U. S. Oil & Gas Litigation, 967 F.2d 489, 4934 (11th Cir. 1992). A settlement compromising conflicting positions in class action litigation serves the public interest. Armstrong v. Board of School Directors, 616 F.2d 305, 313 (7th Cir. 1980). In evaluating a settlement, the trial court should not decide the merits, or proceed from the assumption that victory is 100% assured and that all claimed damages are properly recoverable. In re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. at 31213; Armstrong, 616 F.2d at 31415. III. TERMS OF THE SETTLEMENT The principal benefit of the settlement is that the early termination formula of the lease is rewritten to eliminate the aspects of the early termination and default charges which plaintiff contended were penal. As written, the leases required a person who wished to terminate early without defaulting to purchase the leased vehicle. Any lessee who defaulted, or who did not wish to purchase the leased car, had to make immediately all remaining payments under the lease, without adjustment to account for the fact that they were due immediately rather than over time, and pay 12% interest on the total. The settlement eliminates both the requirement that the car be purchased on early termination and the liability for all remaining lease payments plus interest. Instead, it substitutes a more common and reasonable formula, under which the lease payments are allocated between the equivalent of principal and interest. The total payments under a lease represent (i) compensation to the lessor for the depreciation of the leased vehicle during the expected term of the lease and (ii) compensation to the lessor for the use of its moneythe equivalent of interest. The interest-equivalent is usually called lease charge in the industry. The depreciation and lease charge components of each payment vary, just as in the case of a mortgage, with more of the earlier payments being allocable to interest and more of the latter to depreciation. The revised formula takes the initial value of the leased car (capitalized cost) and applies each monthly lease payment to depreciation and lease charge in the same manner that mortgage payments are applied between principal and interest. The rate used to make the allocation is whatever rate was used in determining the total lease charge when the lease was written. In this manner, one can determine for each month of the lease the portion of the capitalized cost that has not yet been paid for (unamortized capitalized cost). On early termination, the lessee is liable for the difference between the unamortized capitalized cost and the actual value of the leased car, as determined by agreement, appraisal or sale. In other words, the lessee is liable for any difference between the depreciation that has been paid for through the monthly lease payments and the actual depreciation of the vehicle. The economic benefit to the class of this change is in excess of $7 million. During the last two years, about $28 million in early termination charges were assessed by Volvo. As a result of the revised formula, these charges are being reduced by over $7 million. We used the number $7 million in the settlement notice to be conservative: past lessees are receiv-

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nomic equivalent of principal and interest, just as mortgage payments amortize a mortgage. This eliminates the penal aspect of the early termination. Furthermore, because termination charges previously imposed are being recalculated, the class receives essentially 100% compensation on this claim. We qualify the statement with essentially because there is an argument that if the formula specified in the lease is invalid, the lessor cannot specify a reasonable formula, but must prove its actual damages in each case, which may be cumbersome. On the other hand, defendants would undoubtedly argue otherwise, and any benefit to lessees from the lessors difficulties in proving actual damages are essentially a windfall. Thus, the class is receiving appropriate relief for the principal issue that led to the filing of the complaint, the early termination formula. The other issues raised by the complaint are relatively technical in nature (e.g., some lease disclosures were on a separate piece of paper whereas the CLA requires that they all be on one piece of paper), and probably did not cause actual harm to anyone. In compromise of such claims, defendants are paying attorneys fees and $70,000 to the class. The Truth in Leasing Act incorporates the civil remedies provision of the Truth in Lending Act, 15 U.S.C. 1640. Section 1640 provides that in a class action, the class may recover any actual damages proved and statutory damages in such amount as the court sets, not to exceed the lesser of $500,000 or 1% of the defendants net worth. Statutory damages were provided because the legislators thought it difficult to claim, much less prove, actual damages in a Truth in Lending or Truth in Leasing case. TILA is a prophylactic measure that creates a system of private attorneys general to aid its enforcement. [citations] In order to penalize noncomplying creditors and to deter future violations, these private attorneys general may recover the statutory penalties even if they have not sustained any actual damages, or even if the creditors are guilty of only minute deviations from the requirements of TILA and implementing Regulation Z. [citations] Davis v. Werne, 673 F.2d 866, 869 (5th Cir. 1982). The statutory damages maximum is just thatthe court is directed to award damages up to the cap based on the defendants culpability. There can be no assurance that the maximum will be awarded. There is no minimum. Given the nature of the non-termination-charge claims, we believe that the consideration paid is reasonable. B. EXTENT OF FURTHER LITIGATION AND POTENTIAL FOR FURTHER RECOVERY The filing of the case resulted in a flurry of motions relating to class certification, dismissal, and discovery. It can safely be expected that if the settlement is not approved, extensive litigation will continue. There is relatively little law under the Consumer Leasing Act, so there is fertile ground for litigation. Given the extent to which the class is obtaining relief, the benefit of such litigation is not apparent. C. PROGRESS OF THE LITIGATION Plaintiffs counsel have obtained sufficient discovery to conclude that the settlement is beneficial and should be recommended to the class.

Appx. P.2

D. PAYMENT TO CLASS REPRESENTATIVE Mr. Shepherds termination liability is being waived as consideration for bringing the action. This is entirely appropriate. At least one appellate court has approved paying the class representatives for serving the public interest in bringing the action: As for Stapletons payment for his representing the class, such payments are not atypical in class action cases (e.g., Bryan v. Pittsburgh Plate Glass Co. (W. D. Pa. 1973), 59 F.R.D. 616 [affd 497 F.2d 799 (3d Cir. 1974)]($ 17,500 award to class representatives)) and serve to encourage the filing of class actions suits. (See C. Krislov, Scrutiny of the Bounty: Incentive Awards for Plaintiffs in Class Litigation, 78 Ill. B.J. 286 (June 1990).) (GMAC Mtge. Corp. v. Stapleton, 236 Ill.App.3d 486, 603 N.E.2d 767 (1st Dist. 1992)) Numerous other decisions are in accord. Kazanas v. Millcom, Inc., CCH Fed.Sec.L.Rptr. k97,255 (S.D.N.Y. 1992); Luevano v. Campbell, 93 F.R.D. 68, 90 (D.D.C. 1981); In re Jackson Lockdown/MCO Cases, 107 F.R.D. 703, 70910 (E.D. Mich. 1985); Harris v. Pernsley, 654 F.Supp. 1042, 1053 (E.D. Pa. 1987); Bell v. Automobile Club, 34 FEP Cas. 3, 7 (E.D. Mich. 1980) (there is something to be said for rewarding those drivers who protest and help to bring rights to a group of employees who have the victims of discrimination). E. MR. BAKERS OBJECTION Although the only objection has been withdrawn, we do wish to point out that it was filed under the mistaken belief that the class was receiving $70,000 in compromise of claims worth over $7 million, while counsel is receiving $200,000. As we pointed out to Mr. Baker, this is not the case: the excess early termination charges, amounting to over $7 million, are being eliminated in their entirety. The $70,000 is a reasonable penaltyit is just thatfor other claims, which are unlikely to have caused any tangible harm. F. ATTORNEYS FEES Attorneys fees in the Eleventh Circuit are required to be computed as a percentage of the benefit conferred on the class. Camden I Condominium Assn v. Dunkle, 946 F.2d 768 (11th Cir. 1991). In Camden, the Court of Appeals stated that the normal range is 2030% and that 25% represents a benchmark. Other courts have likewise concluded that 2030% represents the normal range of reasonable compensation. E.g., Bebchick v. Washington Metropolitan Area Transit Commission, 805 F.2d at 407 (25% of the recovery is a reasonable percentage fee for otherwise uncompensated attorneys); Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir. 1989) ([w]e note with approval that one court has concluded that the bench mark percentage for the fee award should be 25 percent); Mashburn v. National Healthcare, Inc., 684 F.Supp. 679, 692 (M.D.Ala. 1988) (The majority of common fund fee awards fall between 20% to 30% of the fund); In re Warner Communications Securities Litigation, 618 F.Supp. 735, 74950 (S.D.N.Y. 1985) (Traditionally, courts in this Circuit and elsewhere have awarded fees in the 20%50% range in class ac-

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charges, from the $270,000 fund established to pay for attorneys fees and provide an additional benefit to the class. Under Camden, such a request is reasonable and appropriate. WHEREFORE, plaintiff respectfully requests that the Court overrule the objection, give final approval to the proposed settlement, and approve the award of attorneys fees. Respectfully Submitted, [Attorney]

tions); In re Workers Compensation Ins. Antitrust Litigation, 771 F.Supp. 284 (D.Minn. 1991) (22.5%); Sanders v. Robinson Humphrey/American Express, Inc., [1990 Transfer Binder] Fed. Sec.L.Rep. (CCH) k95,315 (N.D.Ga. May 23, 1990) (awarding 30% of $16.84 million settlement fund). In this case, plaintiffs counsel have requested approval for $200,000, representing not more than 3% of the total economic benefit to the class. Furthermore, that amount is being paid (subject to Court approval) in addition to the recalculation and refund/credit of the early termination and default

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Appendix Q

Sample Objections to Settlement and Request for Fees

This appendix provides two sample objections to a class settlement, and also a sample request for attorney fees for a party who successfully objected to the settlement. Another example of an objection to a class action settlement and intervention in a class action settlement (in print and on a WordPerfect disk) is included in National Consumer Law Center, Consumer Law Pleadings With Disk, Number Four 12.1 (1998). A supporting affidavit is also found at CLP# 4 in 12.3. In the second sample objection featured in this appendix, Buchet v. ITT Financial Corp. (D. Minn.), the named plaintiffs brought class claims that the defendant ITT Financial had illegally deferred monthly loan payments, allowing interest charges to accrue to class members. Controversy arose in the settlement stage of the case when ITT offered class members coupons or scrips redeemable only on its non-credit life insurance or thrift club memberships, in exchange for a broad release of all claims against the company. The First Amended Settlement plan offered no monetary recovery for the majority of the class, with only small sums designated for the named plaintiffs, but provided for $2.6 million in cash for attorneys fees. This plan was preliminarily approved and notice was sent to members in October of 1993. Several class members objected to the proposed settlement through their legal services attorneys. They objected on both procedural and substantive grounds which included: that the notice of settlement was not readable by the majority of class members, that the time allowed to opt out of the class (approximately three to four weeks) was not sufficient for due process, and that the coupons were costly and unlikely to be redeemed by members as they required an additional purchase from defendant. One of these objections is reprinted at Appx. Q.2, infra. A final fairness hearing was held on November 23, 1993. The court concluded that the proposed settlement plan was not adequate and the court did not grant approval, as required by Fed. R. Civ. P. 23(e). See Buchet v. ITT Financial Corp., 845 F. Supp. 684 (D. Minn. 1994), amended 1994 U.S. Dist. LEXIS 10020 (D. Minn. 1994). A revised settlement offer was subsequently approved by the court which included a 6.5 million dollar fund to be shared by class members. The final settlement agreement also contained a narrower release than contained in the first proposed plan. The attorneys for the objecting class members sought their attorney fees out of this common fund. See Appx. Q.3, infra.

Q.1 Objections to Settlement Agreement and Fee Petition (Robinson)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS ) ) ) ) ) ) v. ) ) MARINE MIDLAND ) MORTGAGE ) CORPORATION, ) Defendant. ) ) GAIL L. ROBINSON and ALL OTHERS SIMILARLY SITUATED, Case No. 95-C-5635 Plaintiff, OBJECTIONS OF CLASS MEMBER MARGARET QUINN TO SETTLEMENT AGREEMENT AND FEE PETITION TABLE OF CONTENTS Facts Page Argument I. The One-Way Gag Order Is an Unconstitutional Prior Restraint Of Speech II. The Settling Parties Have Failed To Meet Their Burden Of Establishing That The Settlement Is Fair A. The Selling Parties Have Not Met Their Burden Of Demonstrating That The Claims Process Is Fair To Class Members Who Are Former Mortgagors B. The Settling Parties Have Not Met Their Burden Of Demonstrating That The Coupons Are Fair To Class Members Who Are Current Mortgagors 1. The Settling Parties Have Not Produced Any Evidence To Demonstrate That A Significant Number Of Class Members Will Actually Attempt To Redeem Their Coupons 2. The Settling Parties Have Given Marine Midland The Ability To Easily Strip The Certificates Of Any Value To Those Class Members Who Actually Attempt To Redeem Them

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are nontransferable; and may not be redeemed for cash. Id. k 11. Any class member whose loan was in foreclosure or bankruptcy is ineligible for the relief. Id.k 12. Class members who do not qualify for a loan cannot use the certificates. Settlement Notice k b.4. In exchange for this relief, class members would release every conceivable claim they might have against Marine Midland (and its affiliates and successors) relating to Marine Midlands escrow practices and, in addition, all claims and causes of action that have been or that could have been brought in this Litigation. Agreement k 28. Class Counsel would receive up to $665,000 in attorneys fees and expenses. Id. k 14. Notice of the proposed settlement was given to current mortgagors via direct mail and to former mortgagors via a onetime notice published in the New York Times or U.S.A. Today. Agreement k 17. The Agreement also contains a one-way gag order that forbids Class Counsel and counsel for any objecting class membersbut not Marine Midlandfrom saying anything to anyone except their clients about the case. See Agreement k 31. This provision forbids attorneys for any class members from refer[ring] to, reveal[ing], or characteriz[ing] the Settlement Agreement or any of its terms . . . Id. Class Counsel have entered into at least eight other settlements with mortgage banks that contain relief similar to the coupons provided to the current mortgagors in this case, and have entered into a number of other settlements with mortgage banks that establish claims processes similar to the one established for former mortgagors in this case. One of the earlier coupon settlements was reached well over two and one half years ago. See Settlement Agreement, Bay v. Citicorp. Mortgage, Nos. 90 C 5357, 91 C 7020, and 93 C 3137 (N.D. Ill.) (providing a claims process for former mortgagors, and sevenyear, nontransferable coupons worth $125 and $50 off closing costs of new or refinanced mortgages to current mortgagors) (Exhibit 1) [not reprinted herein]. ARGUMENT I. THE ONE-WAY GAG ORDER IS AN UNCONSTITUTIONAL PRIOR RESTRAINT ON SPEECH. Generally speaking, any order that prohibits the utterance or publication of particular information or commentary imposes a prior restraint on speech. See United States v. Salameh, 992 F.2d 445, 447 (2d Cir. 1993). A prior restraint on constitutionally protected expression carries a heavy presumption against its constitutional validity. See, e.g., New York Times Co. v. United States, 403 U.S. 713, 714 (1971). Although the speech of a litigant participating in judicial proceedings may be subjected to greater limitations than could constitutionally be imposed on the press, the limitations on litigant/attorney speech may be no broader than necessary to protect the integrity of the judicial system. . . . Salameh, 992 F.2d at 447. Thus, gag orders on litigants in pending cases violate the First Amendment unless they are narrowly tailored to prohibit only statements posing a substantial likelihood of material prejudice to an ongoing adjudicative proceeding. Gentile v. State Bar of Nevada, 501 U.S. 1030, 107475 (1991). See also Chicago Council of Lawyers v. Bauer, 522 F.2d 242, 249 (1975) (district courts rules that barred lawyers from making public comments about

C. Class Counsel Have Produced No Evidence To Support Their Claim That They Have Already Obtained Refunds For Class Members III. By Agreeing To A Settlement That Contains An Unconstitutional One-Way Gag Order And Will Provide No Recovery To The Class, And By Seeking Attorneys Fees Very Likely To Exceed the Classs Recovery, The Class Representatives And Class Counsel Demonstrated Their Inadequate Representation Of The Class IV. The Proposed Settlement And Class Counsels Attorney Fee Request Should Be Rejected Because The Former Permits And The Latter Seeks More Money For Class Counsel Than The Class Is Likely To Receive V. The Court Should Require The Parties To File A Public Report On The Number Of Former Mortgagors Who File Claims And Receive Reimbursement, And The Number of Current Mortgagors Who Redeem Their Coupons Class member Margaret Quinn, by and through her counsel Trial Lawyers for Public Justice (TLPJ), hereby objects to the proposed settlement of this action and Class Counsels fee petition in this action. These objections shall also serve as Margaret Quinns notice that she intends to participate in this Courts fairness hearing through counsel.1 FACTS This class action was filed in 1995 on behalf of a nationwide class of current and former mortgagors of Marine Midland Mortgage Corp. (Marine Midland). In the course of servicing its customers residential mortgages, Marine Midland required homeowners to maintain excess cushions in their escrow accounts. Complaint k 1. This practice allegedly deprived homeowners of substantial sums of money, in violation of the Real Estate Settlement Procedures Act, various state laws, and the class members contracts with Marine Midland. Id. kk 13. In March 1998, the parties filed the proposed Settlement Agreement (Agreement), which gives different sets of relief to the current and former mortgagor class members. The Agreement permits former mortgagor class members who learn of the settlement to apply for a rebate of some undetermined figure that will be less than $10. Agreement k 9. Marine Midland need not pay out more than $1 million in such rebates, but no minimum payment is specified. Id. The Agreement would give each current mortgagor class member a discount certificate worth either $175 or $250 (depending on the date of the class members mortgage form) off the closing costs of any new or refinanced mortgage with Marine Midland. Id. kk 1112. The certificates are only redeemable on Marine Midland loans; expire after five years;
1 These objections are based upon the information currently available to Mrs. Quinn. The Settling Parties possess a good deal of additional information that is highly relevant to the adequacy of the settlement and the appropriateness of the fee petition, however, and Mrs. Quinn has moved to intervene and sought this information through discovery filed concurrent with these objections. When Mrs. Quinn has received answers to that discovery (and when she has been served with the Settling Parties papers in support of final approval), she intends to supplement these objections.

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Sample Objections to Settlement and Request for Fees

ongoing civil and criminal cases deprived litigants of their free speech rights under the First Amendment). Finally, this Court has also previously noted that such a gag order is improper. See Hearing Transcript, Cusack v. Bank United of Texas, No. 95 C 544, at 14 (N.D. Ill. March 4, 1998) (excerpts of which are attached as Exhibit 2 hereto [not reprinted herein]) (Im glad that the parties agreed to get rid of the one-way gag order, because once objected to, I would not approve it). II. THE SETTLING PARTIES HAVE FAILED TO MEET THEIR BURDEN OF ESTABLISHING THAT THE SETTLEMENT IS FAIR. Class Counsel have made the following claims: (1) the coupons provided to current mortgagors will likely amount in the several millions of dollars by the time the credits expire in year 2003, Memo in Support of Preliminary Approval at 3-4; (2) [t]he settlement also creates a $1,000,000 cash fund for former mortgagors, id. at 16; and (3) [d]uring this litigation, plaintiff achieved the refund of overages for the class, id. at 14. Class Counsel have cited no evidence for any of these propositions. Marine Midland has not yet claimed, and also has produced no evidence whatsoever to suggest, that this settlement produces any benefits for the class. In fact, as these objections will establish, each of Class Counsels claims is extremely unlikely at best. Unless the Settling Parties present actual evidence to support their claims, or rework this settlement to guarantee that class members will receive meaningful benefits, this settlement should be rejected. The Settling Parties have the burden of establishing that this settlement is fair. See Newberg & Conte, 1 Newberg on Class Actions 11.42, at 11-94 (3d ed. 1993) (citing, inter alia, In re General Motors Corp. Engine Interchange Litig., 594 F.2d 1106 (7th Cir. 1979)). Class Counsel have cited several older cases for the proposition that reviewing courts need not worry much about the fairness of class action settlements. In fact, the most recent pronouncement by the Supreme Court mandates that this Court closely scrutinize the fairness of this settlement. In Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997), the Supreme Court held that the rights of absent class members must be the dominant concern of the court, especially in the settlement context. The Supreme Court held that courts should provide undiluted, even heightened attention in the settlement context to certain Rule 23 requirements in order to protect absentees. . . . Id. In fact, the Settling Parties had set out to design a claims distribution process that would discourage class members from participating in the settlement, they could hardly have done better than the process set forth in the Settlement Agreement. It is clear that the settling parties have the names and identifying information for all class members. Accordingly, Marine Midland could simply issue an automatic refund to all present mortgagors and send a check to all former mortgagors. Instead, the Agreement provides coupons to current mortgagors and virtually ensures that the vast majority of former mortgagors will receive nothing.

Appx. Q.1

A. THE SETTLING PARTIES HAVE NOT MET THEIR BURDEN OF DEMONSTRATING THAT THE CLAIMS PROCESS IS FAIR TO CLASS MEMBERS WHO ARE FORMER MORTGAGORS. Attached, as Exhibit 3 hereto [not reprinted herein], is an affidavit from Todd Hilsee, a nationally recognized expert on class action notices and an expert on financial institution marketing. Mr. Hilsee concludes that less than 1% of the former mortgagors will recover any money under the claims process. Ex. 3 at k 6. In particular, Mr. Hilsee testifies that it is likely that less than 5% of all former mortgagors nationwide even saw the publications that contained the notice to them, id. at k 8 (although a higher portion of New York residents may have seen these publications). Of course, many former mortgagors who did see these publications would never notice, much less read, the small box containing the notices fine print. Id. at k 9(a). Even if a former mortgagor actually read the notice, moreover, a review of relevant marketing and class action data reveals that not more than 5%, and possibly less than 1%, of these persons would make claims under this process. Id. at kk 910 . Accordingly, the process essentially ensures that Marine Midland will end up paying next to no money to former mortgagor class members. The result, for Marine Midland, is a complete release of its liability for paying only a fraction of the claims against it. This Court should find that an Agreement that effectively divides the class into two subclasses, and then creates a process that will predictably ensure that at least 99% of the members of the largest subclass receive no recovery at all, is unfair. This Court should reject the settlement unless it is revised to require Marine Midland to automatically send a check to former mortgagors owed money under the applicable formula. Alternatively, the settlement should be rejected unless the Settling Parties either (1) demonstrate that a significant number of former mortgagors will use the claims process, by producing all data from previous similar settlements and/or other evidence establishing that fact; or (2) guarantee some minimum payment to former mortgagors (with any amount not paid out being spent for the indirect benefit of the class via cy pres principles). With respect to the first point, Class Counsel have a very good idea of how many people will make claims because they have represented plaintiffs in a number of similar deals. Accordingly, they should be required to disclose the claims rates in the various other settlements. The Citicorp settlement has been in place for more than two and one half years. The claims rates in that and Class Counsels other claims process cases are crucial evidence for evaluating the value of the relief for former mortgagors provided in the Agreement.2
2 Mrs. Quinn has sought this information through discovery in this case and intervention in the Citicorp case (see Exhibit 7 hereto [not reprinted herein]). This Court should not approve this settlement unless (a) this evidence is produced; and (b) it shows that the class will receive meaningful relief. It should be noted, however, that the number of former mortgagor class members who made claims in Citicorp are likely to be far higher than the number making claims here, as the Citicorp settlement offered recoveries

417

Appx. Q.1

Consumer Class Actions: A Practical Litigation Guide

1 Many consumers will perceive the coupons to be a solicitation, and as much as 75% of such mail is thrown out. Hilsee at k 12(d). Consumers are particularly unlikely to respond to mailings from the mortgage industry. Id. at k 13. 1 Redemption rates will be enormously affected by whether Marine Midlands loans are competitive with those offered by the hundreds of other mortgage lenders in the United States. Renuart at k 9. The evidence here suggests that the difference between Marine Midlands terms and those of other lenders with better rates would be more than enough to offset the value of the coupons. Hilsee at k 14(b). 1 If past data is a reliable guide, only 43% of class members are even likely to refinance or obtain a new mortgage, Hilsee at k 14(a), indicating that at least 57% of the current mortgagor class members will receive no value from the coupons. In fact, it appears likely that refinancing rates will decline in the next few years, in light of the recent dynamics of the market. Renuart at k 10. 1 Marketing evidence shows that half or more of all consumers who refinance their loans do so with a different bank than the lender from their first loan. Hilsee at k 14(c). In light of the foregoing, the Court should reject the Agreement unless the settling parties either (a) come forward with evidence (if any exists) to demonstrate that the certificates will be redeemed by a significant number of class members and will provide meaningful relief to the class; or (b) guarantee some minimum payment to the class (or, via cy pres principles, for the indirect benefit of the class members). With respect to the first point, as noted above, Class Counsel have engaged in several similar coupon deals, and they should be required to reveal the coupon redemption rates in cases such as Citicorp. Alternatively, the settling parties could rework the agreement to ensure that it would contain meaningful relief for class members. The limited value of the coupons here is underscored by the fact that the Settlement Agreement includes no minimum guaranteed sum to go to the class. Thus, if only 0.01% of the class were to redeem the Rebate Certificates, then Marine Midland would simply keep the other 99.99% of the multi-million dollar recovery claimed by Class Counsel. In a case where there is no strong evidence indicating that a sizeable portion of class members will actually redeem the coupons, this failure to include a guaranteed minimum payment justifies rejecting the settlement. See Buchet, 845 F. Supp. at 696 ([T]he Court can only assume that ITTs refusal to establish a minimum cash contribution reflects the economic value it places on the possibility that these certificates will not be redeemed at the rates predicted by its expert.) (denying approval to proposed settlement of class action). See also the National Association of Consumer Advocates Standards and Guidelines for Litigating and Settling Consumer Class Actions, 176 F.R.D. 375, 384 (1997):3

With respect to a minimum payment, authorities calling for such guarantees in the closely analogous coupon context are set forth in Part II-B-1 below. B. THE SETTLING PARTIES HAVE NOT MET THEIR BURDEN OF DEMONSTRATING THAT THE COUPONS ARE FAIR TO CLASS MEMBERS WHO ARE CURRENT MORTGAGORS. 1. The Settling Parties Have Not Produced Any Evidence to Demonstrate that a Significant Number of Class Members Will Actually Attempt to Redeem Their Coupons. While Class Counsel assert that the coupons will lead to plaintiffs enjoying several millions of dollars in benefits, they offer no evidence to support that claim. In fact, a large body of evidence suggests that the coupons will be redeemed by very few class members. The coupons established in the Agreement are a fairly common device in class action settlements. Similar coupons have been used in other cases over the last decade, and similar types of coupons are offered in a wide variety of other commercial settings. A number of marketing experts, academics, and diligent courts have taken a hard look at the percentage of consumers who actually redeem such coupons and certificates. Such information bears heavily upon the fairness of this settlement and the propriety of class counsels requested fee. Nationwide, relatively few consumers expend the time and effort to redeem coupons. [O]nly 2% of the nations $180 billion of money-off coupons are redeemed annually. P & Gs Sticky Bid to End Coupons, Wall Street Journal at A-1 (April 17, 1997), attached as Exhibit 4 hereto [not reprinted herein]. Coupon redemptions in many class action cases have been even lower. In Buchet v. ITT Consumer Fin. Corp., 845 F. Supp. 684 (D. Minn. 1994), amended, 858 F. Supp. 944, for example, the court noted that the percentage of certificates actually redeemed in four class action settlements was 0.074%; 0.002%; 0.110%; and 0.103%. It should go without saying that if 99.998% of the current mortgagor class members were to receive nothing from this deal, the settlement would not be reasonable. See also Barry Meier, Fistfuls of Coupons: Millions for ClassAction Lawyers, Scrip for Plaintiffs, New York Times, p. C1 at C-5 (May 26, 1995) (attached as Exhibit 5 hereto [not reprinted herein]) (only 1% of 300,000 Chrysler owners used coupon in Renault Encore case); and Strong v. Bellsouth Telecommunications, Inc., 173 F.R.D. 167, 172 (W.D. La. 1997), affirmed, 137 F.3d 844 (5th Cir. 1998) (class counsel characterized the agreement as producing a $64.5 million common fund; the value of the actual credit requests submitted was $1,718.594.40. . . .). A number of factors set forth in the attached affidavit of Mr. Hilsee, and the attached affidavit of Elizabeth Renuart (Exhibit 6 [not reprinted herein]), an attorney with the National Consumer Law Center who is an expert on the mortgage lending industry, indicate that the redemption rates are likely to be particularly low for the coupons in this case:

up to $50 (as opposed to $10 here) and the Citicorp notice included the actual claims form, while former mortgagors here must write to request the form.

3 Background about these important guidelines is given in a forward to them. 176 F.R.D. at 37074 [Editors Note: reprinted as Appx. B, infra].

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Sample Objections to Settlement and Request for Fees

A settlement involving certificates should require a minimum level of redemption by the class members within a reasonable period of time. In the event actual redemption does not meet this minimum level, the defendant should provide alternative relief in the form of a common fund. This requirement protects against the use of a meaningless certificate settlement that has little or no impact on a defendant, and little or no compensatory value to the plaintiff class. 2. The Settling Parties Have Given Marine Midland the Ability to Easily Strip the Certificates of Any Value to Those Class Members Who Actually Attempt to Redeem Them. Redemption rates aside, the certificates could have little or no value even to class members who attempt to use them. Bluntly put, Marine Midland is in the very unusual position of having complete control over whether it will provide any value to class members through the discount certificates. First, the Agreement imposes no obligation on Marine Midland to treat class members like all other applicants for Marine Midland loans. Thus, Marine Midland could easily inflate a number of the costs charged to class members to offset the discount offered by the certificates. Renuart at k 11. Second, Marine Midland could use different underwriting criteria to either deny class members with coupons refinancing altogether or to charge class members with coupons higher points and fees. Id. k 13. This problem could easily be solved by the addition of antidiscrimination language to the settlement. For example, the settlement agreement negotiated by these same Class Counsel and approved by this Court in Gallardo v. PHH US Mortgage Corp., No. 97 C 0844 (N.D. Ill.), addresses the first point about potentially inflated fees. It states PHH will not discriminate against any Class member who seeks to redeem a coupon by intentionally increasing its closing costs or fees to that Class member specifically in an effort to offset the value of the coupon presented. See Gallardo Agreement, attached hereto as Exhibit 8 [not reprinted herein], at page 10, k 9. The Settling Parties here have chosen not to include nondiscrimination language related to inflated fees or underwriting criteria in the Agreement, rendering this settlement potentially worthless. Thus, it is quite possible that the certificates provided by the Agreement will have no value to the class. If true, then the sole beneficiary of this deal will be Marine Midland, which will obtain a complete release from liability in exchange for an Agreement that could yield additional customers for the bank at no additional cost. Viewed this way, class members would be better off with a settlement that provided an actual refund of the interest earned on the inflated escrow accounts maintained by Marine Midland, rather than a deal that entices them into a refinancing that costs more than the face value of the certificate. Renuart at k 16. This Court should not approve the settlement unless the Agreement is amended to provide that class members loans will not be subject to any different terms, conditions, costs, and/or underwriting criteria than loans sought by other Marine Midland customers.

Appx. Q.1

C. CLASS COUNSEL HAVE PRODUCED NO EVIDENCE TO SUPPORT THEIR CLAIM THAT THEY HAVE ALREADY OBTAINED REFUNDS FOR ANY CLASS MEMBERS. As noted above, Class Counsel claim to have achieved the result of Marine Midland refunding monies to class members. Memo in Support of Preliminary Approval at 14. Class Counsels assertion is unaccompanied by any evidentiary support. Tellingly, Marine Midland has not made any such representation in this case. In fact, Marine Midland has already advised this Court because of the change in federal regulations . . . MMMC has changed its method of escrow calculations to the aggregate method, and distributed refunds, for all MMMCs mortgage portfolio. Response to Plaintiffs Motion for Class Cert. at 67. In the absence of any evidence on the matter, the sequence of events suggests that the activities of the state and federal governmentsand not Class Counsels handling of this case led to changes by Marine Midland. Years before this litigation began, several Attorneys General published a comprehensive report on this problem; the Attorneys General of 17 states brought a test case against GMAC Mortgage Company; and Congress conducted hearings on this topic. See Overcharging on Mortgages: Escrow Account Limits: Hearings Before the Senate Comm. On Governmental Affairs, 102nd Cong. 1st Sess. at 1011, 83101 (1991). In 1993, well before this case was filed, the U.S. government issued a proposed regulation that would require banks to change their accounting practices to eliminate excess escrow charges. See 58 Fed. Reg. 64066 (December 3, 1993). Those regulations were made final before this case was brought in this Court. Class Counsel are apparently suggesting that it is acceptable for this settlement to provide little or no new relief beyond that required by the regulation, and for Class Counsel to receive a fee greatly exceeding the new relief provided in the settlement, because Class Counsel supposedly caused Marine Midland to change its practices. If this is indeed the proposed factual predicate for approving this deal and this fee, Class Counsel must produce substantial admissible evidence to support this claim. III. BY AGREEING TO A SETTLEMENT THAT CONTAINS AN UNCONSTITUTIONAL ONE-WAY GAG ORDER AND WILL PROVIDE NO RECOVERY TO THE VAST MAJORITY OF THE CLASS, AND BY SEEKING ATTORNEYS FEES VERY LIKELY TO EXCEED THE CLASSS RECOVERY, THE CLASS REPRESENTATIVES AND CLASS COUNSEL DEMONSTRATED THEIR INADEQUATE REPRESENTATION OF THE CLASS. One of the essential requirements of the Federal Rules of Civil Procedure and Constitutional due process in class actions is that the representative partiesand their counsel fairly and adequately represent the interests of the class. See Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997); Fed. R. Civ. P. 23(a)(4). That requirement has not been met here. As noted above, the proposed settlement in this case contains an unconstitutional one-way gag order and ensures that the vast majority of class members will very likely receive no compensation. This Court should hold that when class representatives and class counsel agree to such a settlement, those representatives and counsel have not adequately represented

419

Appx. Q.1

Consumer Class Actions: A Practical Litigation Guide

as the court can accurately assess the actual value of the settlement (i.e. after the deadline for class member claims [or] after the certificates expire).) Class Counsel have not yet provided any information about their actual time spent on the case. This Court should review counsels lodestar as a reality check upon the reasonableness of the requested fee award. This is particularly necessary where, as here, the amount of the benefit actually conferred is imprecise. See Charles v. Goodyear Tire and Rubber Co., 976 F. Supp. 321, 326 (D.N.J. 1997) (any settlement based upon an award of certificates may prove to be too speculative a value on which to base a fee award). V. THE COURT SHOULD REQUIRE THE PARTIES TO FILE A PUBLIC REPORT ON THE NUMBER OF FORMER MORTGAGORS WHO FILE CLAIMS AND RECEIVE REIMBURSEMENT, AND THE NUMBER OF CURRENT MORTGAGORS WHO REDEEM THEIR COUPONS. The question of how many coupons are actually redeemed in class action settlementsand thus whether those settlements actually confer meaningful value on class membersis an issue of concern to courts, policymakers, legal scholars, and the media. See, e.g., Buchet, 845 F. Supp. 684 (court rejected a proposed coupon settlement after finding that the coupon redemption rates in other, similar cases were so low that the settlement offered no real value to the class); Class Action Lawsuits: Examining Victim Compensation and Attorneys Fees, Hearing of the U.S. Senate Judiciary Committees Subcommittee on Administrative Oversight and the Courts, October 30, 1997 (witnesses debated whether coupon settlements provide genuine benefits to class members); and Meier, Fistfuls of Coupons, supra, (Exhibit 5 [not reprinted herein]) (illustrative news article discussing whether coupons offer real value to consumers). Class counsel and defendants should submit to the court and all counsel of record detailed information about redemption rates and coupon transfers during the entire life of the coupon. By doing so, a public record will be made of what works and what does not work in non-cash settlement cases. NACA Guidelines, 176 F.R.D. at 384. Accordingly, this Court should reject the settlement because it does not require the settling parties: (1) to keep precise records of the number of class members who actually redeem their discount certificates; and (2) to file publicly with the Court both those records and a report summarizing their contents. Respectfully submitted, Trial Lawyer for Public Justice, P.C. Attorney for Margaret Quinn Date: May 20, 1998 EXHIBIT LIST [not reprinted herein]

the class. In addition, as shown above and below, it is likely that the requested fee will greatly exceed the actual benefit conferred upon the class. In several states (and this is a nationwide class action, with class counsel claiming to represent plaintiffs from across the nation), it is normally a violation of the professional responsibility code for attorneys to charge a fee that exceeds their clients recovery. E.g., Attorney Grievance Commn of Maryland v. Korotki, 569 A.2d 1224, 1233 (Md. 1990) (Without passing upon whether there can ever be circumstances justifying a contingent fee in excess of fifty percent, it is generally a violation of the rule for the attorneys stake in the result to exceed the clients stake.) This Court should find that a practice that violates the ethical codes of a number of states cannot constitute adequate representation under Rule 23 (a)(4). The excessive fee request is per se proof of inadequate representation. IV. THE PROPOSED SETTLEMENT AND CLASS COUNSELS ATTORNEY FEE REQUEST SHOULD BE REJECTED BECAUSE THE FORMER PERMITS AND THE LATTER SEEKS MORE MONEY FOR CLASS COUNSEL THAN THE CLASS IS LIKELY TO RECEIVE. Class Counsel have asked this Court to award them $665,000. As set forth above, the demonstrable reality is that only a tiny number of class members are likely to receive anything from this settlement. As a result, it is likely that the requested fee will greatly exceed the actual benefit conferred upon the class. For example, if 1% of the 100,000 former mortgagors receive $10 each, that group will receive a net benefit of $10,000. If 2% of the 90,000 current mortgagors redeemed their coupons for $250 each, that group will receive a net benefit of $450,000. Accordingly, under these fairly generous estimates (and the real numbers are likely to be much lower), the $665,000 attorneys fee requested here will greatly exceed the actual recovery to the class. The Agreement here allows, and Class Counsel request, a fee based upon Class Counsels prediction of the classs recovery. Unlike the contingent claims applications and coupons to be given to the class, Class Counsel propose to take their fee immediately in non-contingent, guaranteed cash. This Court should reject this proposal because an attorneys fee award should properly be based upon the financial benefits actually provided to the class. See, e.g., Voege v. Ackerman, 67 F.R.D. 432, 43637 (S.D.N.Y. 1975) (the fee determination will be reserved until all claims of shareholders entitled to participate in the settlement have been filed and determined.); Petruzzis v. Darling Delaware Co., 1997 U.S. Dist. LEXIS 15073, *13 (M.D. Pa. Aug. 18, 1997) (noting that the requested fee was nearly 12 times the sum that the settling class actually received, to base class counsels fee on the defendants potential liability if all class members submitted verifiable claims plus the value of the settling defendants obligation to pay counsels fees, would base class counsels fee upon a phantom common fund, and would lead to a perverse result); Goodrich v. E.F. Hutton Group, Inc., 681 A.2d 1039, 1049 (Del. 1996) (basing attorneys fee upon actual, not potential, benefit conferred); NACA Guidelines, 176 F.R.D. at 399 (in cases involving certificates and no minimum settlement level, class counsel should not request a percentage fee until such time

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Sample Objections to Settlement and Request for Fees

Appx. Q.2

Q.2 Objections to Settlement (Buchet)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA THIRD DIVISION ) Clarise Buchet, Jeff Mason and ) all others similarly situated, ) Plaintiffs, ) ) v. ) ) ITT Consumer Financial ) Corporation, A Delaware ) corporation; Thorp Credit ) and Thrift, a Minnesota ) corporation; Aetna Finance, a ) Wisconsin corporation; and ) ITT Financial Corporation, a ) Delaware corporation, ) Defendant ) ) PRELIMINARY STATEMENT Plaintiff-Objector Meg Blesi, an unnamed class member, submits this brief in support of her objections to the proposed settlement and plan of distribution in this action. With exception to the sections that are specific to Wisconsin Law and claims thereunder, Ms. Blesi joins in the brief submitted on behalf of Mark Jones, and adopts those arguments by reference. Ms. Blesi will attempt to limit her comments in this brief to raising new or additional arguments in support of her objections and to supplemental comments to [Jones attorneys] brief where necessary. STATEMENT OF FACTS For purposes of this brief, Plaintiff Blesi accepts the statement of facts presented in the second amended complaint as well as the additional facts stated in Mr. Joness brief. In addition, and based upon the Affidavit filed in support of her Motion for Enlargement of Time and her further Declaration, Exhibit 1, [not attached herein] Ms. Blesi supplements these facts as follows: Ms. Blesi is a Minnesota resident. She received the Notice of Pendency of Class Action, Proposed Settlement and Hearing Thereon, and Right to Settlement Proceeds in early October, 1993. Ms. Blesi was also an unnamed class member in classes 2 through 5 of Hawkins, et al. v. Thorp, et al, a prior consumer class action settled on behalf of Minnesota customers of defendants. As a result of the settlement of that action Ms. Blesi received at least 15 scrip certificates. Exhibit 2 [not attached herein] Ms. Blesi received one property insurance certificate with a face value of $39.00, one Thrift Club certificate with a face value of $29.00, seven Credit Disability scrip certificates with a face value of $19.00 each, and she still has remaining six Credit Life scrip certificates with a face valueof $39.00 each. The total alleged face value of the certificates Ms. Blesi still has in her possession is $435.00.

Ms. Blesi did not understand how to use the scrip certificates she received as a result of the Hawkins litigation. She recalls trying to use the certificates on one occasion, and being told that she could only use one of the certificates at that time. Because Ms. Blesi could not use the certificates when she attempted to, she formed the opinion that they were virtually worthless. Ms. Blesis last series of loans with the defendants were secured by her real property. When she was unable to continue to make payments on those loans, the defendants foreclosed against her property. Most of the scrip certificates issued in Hawkins require that they be used in connection with loans made by defendants in their Minnesota offices. Only the Thrift Club certificates can be used without making a loan. Defendant ITT-CFC has now closed many of its branch offices in Minnesota and is no longer making loans other than those that can be secured by real property. Consequently, it now appears that Ms. Blesi will not be able to redeem or otherwise use the $435.00 in Hawkins certificates that remain in her possession. When Ms. Blesi received the Notice of Proposed Settlement in this action, together with the scrip certificates, she could not understand the notice. The scrip certificate she received with the notice in this action appeared similar to her to the scrip certificates she received as a result of the settlement of the Hawkins litigation. Therefore, Ms. Blesi concluded that the scrip certificates she received with the notice of this action were more of the same and equally worthless to her. ARGUMENT I. THE NOTICE OF PROPOSED SETTLEMENT AND PLAN OF DISTRIBUTION FAILS TO FULLY AND FAIRLY APPRISE CLASS MEMBERS OF THEIR RIGHTS, AND IS INSUFFICIENT TO MEET THE NECESSARY DUE PROCESS REQUIREMENTS OF RULE 23. A. THE NOTICE VIOLATES DUE PROCESS REQUIREMENTS FOR ALL CLASS MEMBERS. Grunin v. International House of Pancakes, 513 F.2d 114, (8th Cir. 1975) sets the minimum due process standards for notice to absent class members under Fed. R. Civ. P. 23. Citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950) the Court in Grunin confirms that the notice must be reasonably calculated, under all of the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. Additionally, the notice . . . must afford a reasonable time for those interested to make their appearance . . . Id. at 120. Other courts have provided guidance on the type of notice required under this standard. Due Process requires that members of the class be provided with enough information to make an informed choice. In re Federal Skywalk Cases, 97 F.R.D. 365,367 (D.C. Mo. 1982) (emphasis added). The notice issued in Skywalk Cases was one . . . which adequately summarizes, in the language of lay persons, the existence and purpose of a voluntary Class action. Id. (emphasis added) The best notice practicable under the circumstances must contain an adequate description of the

421

Appx. Q.2

Consumer Class Actions: A Practical Litigation Guide

cannot be understood by the average class member. It is also inapplicable where the more complete settlement agreement available upon request would be equally difficult to understand by the average class member. While the point may be disputed, both counsel for defendants and class counsel noted during the course of the previous preliminary approval hearings that the class members are at the low end of the consumer credit market. See e.g. Tr. 2-22-93, p. 60, l. 6-7. Arguably, they are the least sophisticated and the least educated consumers in this market, and due process requires that the notice be drafted in such a way that they will be fully and fairly informed of the settlement. It also requires that they be provided sufficient time to make the necessary inquiries if they still have questions or concerns about the settlement of their claims. Meg Blesi has an eleventh grade education. While she can read, she did not understand the notice, and does not understand legal matters. She is in all likelihood very typical of many, if not most, of the absent class members in this litigation. To send a notice nationwide to Ms. Blesi and all other class members which they cannot understand violates the due process requirements of Fed.Rules Civ.Pro.Rule 23 (b)(3), (d)(2) and (e), 28 U.S.C.A. B. THE PARAGRAPH CONTAINING THE RELEASE OF CLAIMS INFORMATION RENDERS THE NOTICE VIOLATIVE OF DUE PROCESS. In addition to being overly complex, the Notice of Pendency of Class Action and Proposed Settlement contains a very short statement which releases any further claim or action against the defendants and a host of others which . . . (ii)arises out of or is in any way related to the consumer loans of any and all class members. This statement is buried within an extremely complex paragraph at the end of the third page. Ms. Park rated the beginning of the paragraph that contains this statement as off the Flesch Scale, and the section of the paragraph where the statement is located as requiring a college reading level to comprehend. Park exhibits 3 and 7 within Blesi Exhibit 4. While the settlement agreement provides more detail concerning how defendants expect to use this release, neither document fairly advises the class members of the potential claims included in such a broad statement of release. More importantly, most class members attempting to read this paragraph would not be able to. Even if a minority of class members could comprehend this paragraph, to determine the global effect of this very short and hidden statement, a class member would have to consult an attorney in the state in which they live and have the attorney review all of the class members borrowing history with the defendants. The attorney would then have to review all of the applicable state and federal law before being able to advise the class member whether there were significant claims being released. Even with this thorough review, the attorney would not be able to inform the class member whether there exist other claims similar to the claims in this litigation which were fraudulently concealed by the defendants or their employees. This places an unreasonable encumbrance on the class members. It prohibits them from making an informed choice whether to remain a member of the class, or request exclusion.

proceedings written in objective, neutral terms, that, insofar as possible, may be understood by the average absentee class member. In re Nissan Motor Corporation Antitrust Litigation, 552 F.2d 1088,1104 (5th Cir. 1977). (emphasis added) An overly detailed notice would confuse class members and encumber their rights to benefit from the action. Id. Notice must contain information reasonably necessary to make a decision to remain a class member and be bound by the final judgment or opt out of the action. Id. at 1105. The notice must convey its message in a meaningful way. In re Domestic Air Transportation Antitrust Litigation, 141 F.R.D. 534, 553 (N.D.Ga. 1992). A notice that is confusing to class members is not the best practicable under the circumstances. Id. Perhaps the clearest statement of the law in this circuit is found in Reynolds v. National Football League, 584 F.2d 280 (8th Cir. 1978), wherein the court stated: Due process requires that notice of a hearing to review the compromise of a class suit be structured in terms of content in a manner that enables class members rationally to decide whether they should intervene in the settlement proceedings or otherwise make their views known, and if they choose to become actively involved, to have sufficient opportunity to prepare their position. Id. at 285. See In re Auto-Train Corporation, Inc., 810 F.2d 270, 278279 (D.C. Cir. 1987), (The content of the notice must reasonably inform the recipient of the nature of the upcoming proceeding, and, citing the Manual for Complex Litigation, Second, 30.21, it should be understandable by the typical member of the class.) The notice of pendency of class action sent to absent class members in this case fails to meet this standard, and is therefore defective. A computer readability program determined that some sections of this notice required 25+ years of education to understand. The notice as a whole required 17 years of education to understand. Exhibit 3. [not attached herein] Rosemarie Park, an expert on readability, also reviewed the notice sent to class members in this case. Ms. Parks assessment, while not identical to the computer assessment, reaches similar results. The vast majority of this document is written at the 13th16th grade level, and at least one section was off the Flesch Scale entirely. It is my professional opinion that a person would need the equivalent of a college education to read and understand this notice. Exhibit 4, n. 4. [not attached herein] Ms. Park concludes that the notice is very difficult to read and comprehend, and that the general public would find it inaccessible. Exhibit 4, n. 5. Without question, a notice of proposed settlement that requires this level of reading sophistication cannot be meaningful in any sense of the word. Grunin, Id. at 122, and a line of cases considering the minimum due process requirements of Rule 23 indicate that the notice only needs to generally inform class members of the settlement, and that they can be expected to take additional steps if they want more complete information. Although the Court in Grunin noted that any ambiguities regarding the substantive aspects could be cleared up by obtaining a copy of the complete settlement agreement, this reasoning is inapplicable in a situation where the Rule 23(e) notice is so complex that it

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In Robinson v. Union Carbide Corp., 544 F.2d 1258 (5th Cir. 1977), the court noted: courts should not issue (d)(2) notices that require complicated legal responses. First, notices should not place the burden on class members to discover what remedies might be available to them. Open ended requests for them to come forward and make their cases would require them to seek legal advice, a substantial financial burden, to discover whether they had cases to advance. Id. at 1265. While the notice approved and sent to class members in this case does not require them to respond and assert claims, it does require them to seek legal advice in order to adequately understand the contents of the notice, and to determine whether they have other unrelated claims that may be forever released if they choose to remain in the class. As one court noted when reviewing an overly broad release in a 23(b)(2) class: a court confronted with a settlement must assess whether the class in the case is a pure subsection (b)(2) class or is a hybrid of subsections (b)(2) and (b)(3), with the result that the individual claims of class members cannot be cut off without their permission. 706 F.2d at 115161. Reynolds v. King, 790 F.Supp. 1101 and 1106 (M.D.Ala. 1990). While the Reynolds court was reviewing a release of claims in a 23(b)(2) class, the key distinction is that as it approaches a 23(b)(3) class, the class members claims cannot be released without their permission. Rule 23(b)(3) requires that class members be given a realistic opportunity to choose whether to opt out of the class. Where, as in the case now before the Court, the class members were not adequately informed of the release of claims because it was drafted in a manner which precluded comprehension, the Court cannot find that due process requirements have been fulfilled. C. THE NOTICE FAILED TO GIVE CLASS MEMBERS ADEQUATE TIME TO RESPOND. To the best of her recollection, Ms. Blesi received her notice in early October. Mark Jones did not receive his notice until October 12, 1993. Under the terms of the notice, persons wishing to exclude themselves or object had to respond by November 1, 1993. Neither Ms. Blesi nor Mr. Jones had any prior knowledge of this litigation. Since the litigation was only expanded to a nationwide class in the settlement negotiations, it is equally unlikely that other class members had prior knowledge of the litigation. For all of the reasons in parts A and B above, three to four weeks is simply insufficient time for the class members to make a meaningful decision whether to request exclusion or object to the terms of the settlement. The Grunin court rejected the appellants argument that 19 days was insufficient time in which to respond. However, the basis for this rejection was that the class members had been engaged in the ongoing action for almost two years, there was

Appx. Q.2

a previous hearing where 75 objectors were represented by attorneys and for which a longer notice period was given, and that appellant was on the board of directors of an association which endorsed the settlement agreement. Supra at 121. None of these factors are present in this case. In view of the complexity of the notice, the proposed global release of claims wholly unrelated to the issues involved in this litigation, the requirements of local rule 83.5(d) if an out of state class member wishes to retain an attorney to enter an appearance to object, and the barrier of geographic distance from the Court for most class members, the short amount of time permitted in this case in which to object or request exclusion also violates the due process requirements of Rule 23. For the absent class members in this case to be fully and fairly apprised of their rights concerning any settlement of this action, the notice must be drafted in plain English, and the consumers must be encouraged to contact their local legal aid office if they are low income and need help understanding their rights. A more preferable notice would also inform counsel from out of state forums with the requirements of entering an appearance under the local rules. D. INCLUDING THE SCRIP CERTIFICATES WITH A NOTICE OF PROPOSED SETTLEMENT ALSO RENDERS THE NOTICE DEFECTIVE AT LEAST WITH RESPECT TO MINNESOTA CLASS MEMBERS. Ms. Blesi was an unnamed class member in Hawkins, and as a result, she received at least 15 scrip certificates. Pursuant to the settlement terms in Hawkins, the defendants issued scrip certificates with an alleged value of approximately $30,000,000.00. These were sent to members of Hawkins classes 2 through 5. Very few of these Hawkins scrip certificates were ever redeemed by Hawkins class members.4 Tr. 4-9-93, p. 5, l. 23-25, and p. 16, l. 23-25. Ms. Blesi tried to redeem her Hawkins certificates, but was told she could only use one. Consequently, she thought the Hawkins certificates were worthless. Ms. Blesi still has 15 unused Hawkins scrip certificates with a face value of $435.00. Exhibits 2. [not attached herein] It appears that she will not be able to redeem 14 of these certificates since the defendants are no longer making consumer loans in Minnesota, and they have already foreclosed on Ms. Blesis real estate. The scrip certificates issued in settlement of Hawkins, while not identical, are similar in appearance to the certificates sent with the Notice of Proposed Settlement in this action. Compare Buchet scrip to Exhibit 2. The Hawkins certificates were also similar in concept and content to the extent they could only be used in the future, and only redeemed if the certificate holder incurs additional indebtedness either in the form of a loan (at which time you could redeem a certificate if you purchased insurance), or toward the purchase of Thrift Club membership. Ms. Blesi was confused when she received the
4 To the extent this brief discusses the unused scrip remaining from the Hawkins case, it only refers to estimated values. Counsel attempted to ascertain the actual number of scrip certificates issued and redeemed by requesting this information from both class counsel and defendants counsel on November 5, 1993. However, to date neither have responded with the requested information.

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Appx. Q.2

Consumer Class Actions: A Practical Litigation Guide

efits to Minnesota class members simply to satisfy defendants desire for global peace. The Court should learn from the experience in Hawkins and disapprove any settlement where all defendants offer the class is scrip. In discussing the alleged value of scrip, class counsel readily invoked the name of the National Consumer Law Center. Indeed he acknowledged that the Center is considered the premier organization that studies this particular area, consumer class actions. Tr. 4-9-93, p. 43, l. 15-21. Perhaps nothing is more revealing than the opinion of Kathleen Keest, a staff attorney with the National Consumer Law Center and a specialist in consumer credit transactions. Affidavit of Kathleen Keest, Exhibit 5. Upon request of counsel, Ms. Keest clarified the National Consumer Law Centers position on scrip. In her view, While it sometimes may have value, it often does not, particularly with respect to finance company litigation. I am sorry that we may have been viewed as endorsing the use of scrip certificates simply by viewing the Hawkins case as a landmark case. Exhibit 6 [not attached herein]. Ms. Keest then clarifies that the National Consumer Law Center considered Hawkins a landmark case only for the cash settlement and the injunctive relief. See also NCLC Reports, Consumer Credit and Usury Edition, 1991, pp. 2627. Exhibit 7 [not attached herein]. Considering the lack of use of Hawkins scrip, and the opinion of the National Consumer Law Center on the value of scrip, the proposed settlement is not fair, adequate, or reasonable, wherein the only benefit for the class is scrip with an as yet unproved value. B. THE SETTLING PARTIES HAVE BEEN UNABLE TO DEMONSTRATE THAT THE PROPOSED SCRIP WOULD CREATE ANY GREATER VALUE THAN THAT OF HAWKINS. 1. Dr. Nantells Analysis Is Fatally Flawed. The proponents repeatedly assert that most of the value of the scrip in this action will result from customers redeeming that scrip on new or refinanced loans (after they have understood the notice, held onto the certificates and instructions, applied for a loan, been approved for that loan by a new lender, and made three payments on the loan). The defendants hired Dr. Timothy Nantell to estimate what that value will be.5 At the outset, it appears that Dr. Nantells job was limited to solely determining the value of the certificates based upon his estimates of how many certificates would be used. Tr. 4-993, p. 34, l. 19-23, and p. 28, l. 1. Dr. Nantell was not asked to consider the cost of refinancing to customers when determining the value of the certificates. To the contrary, Professor Nantell mistakenly assumes that there is a low cost to refinancing, and that consequently, there is a high incentive for class

Buchet certificates because they looked like the ones she received following the Hawkins settlement. Because she did not understand the notice, she did not understand why she received the certificates. However, because they were similar to the Hawkins certificates which she could not use, she believed the certificates issued with the notice in this case were worthless, too. Because of the confusion created by sending certificates that appear similar to the Hawkins certificates, the notice to members of the Buchet class who were also members of one or more of Hawkins classes 2 through 5, was defective. II. THE SCRIP CERTIFICATES ISSUED IN SETTLEMENT OF THIS CASE ARE NOT FAIR, ADEQUATE, OR REASONABLE COMPENSATION, AND PROPONENTS HAVE FAILED TO ESTABLISH THAT THE SCRIP HAS SUFFICIENT VALUE. A. THE MOST RELIABLE EVIDENCE OF SCRIP VALUE SUGGESTS THAT IT HAS LITTLE REAL VALUE. The most reliable evidence of the value of scrip issued by the defendants is the scrip that was issued in settlement of Hawkins. The experience of class members in Hawkins demonstrates that accepting this kind of scrip from the settling defendants is a real mistake. It has very little real value. To the contrary, its real value is de minimis when compared to its face value. In Hawkins the defendants issued in excess of $30 million in scrip certificates. The rate of use of the Hawkins certificates is abysmally low. Only 2.48 percent of class 2, .002 percent of class 3, 3.27 percent of class 4, and 1.9 percent of class 5 scrip certificates were redeemed. Tr. 4-9-93, p. 5, l. 23-25. It appears from this that after more than a year, that perhaps as much as $30 million in scrip is still unused and, if not discarded, still in the hands of Minnesota customers. Although the Hawkins certificates purport to be valid until the end of this decade, it is not clear whether or how certificate holders will be able to redeem the majority of them since ITT-CFC is no longer making consumer loans. The Hawkins scrip remains relevant for the Courts consideration in this case for three reasons. First, it does provide some indication of how little customers value the defendants scrip. They simply do not use it. Second, it presents the very real likelihood that, as with Meg Blesi, Minnesota class members who received the scrip issued with the notice in this case, will mistake it for the Hawkins scrip which now appears virtually worthless. And finally, if the Court approves this settlement, unnamed Minnesota class members in this action, like Ms. Blesi, will only be able to use the Buchet scrip on either the Thrift Club or a new or refinanced loan. Many class members will not want or need a new or refinanced loan. Defendants data suggests that a large percentage of the class members will not qualify for a new loan. Both of these groups are limited to using their scrip to purchase Thrift Club. With approximately 96,000 unused Hawkins Thrift Club certificates in circulation, each having a face value of $29.00, there is very little likelihood that a $25.00 Buchet certificate will be used to purchase Thrift Club. This action was commenced on behalf of Minnesota, Wisconsin, and Illinois customers of defendants. The only named plaintiffs to date are from Minnesota. The Court should not approve any settlement that so unfairly compromises the ben-

5 Apparently plaintiffs counsel intend to hire an expert to evaluate the scrip. Tr. 4-9-93, p. 64, l. 24-25. However, we have not yet been provided with their experts analysis, and therefore are unable to offer any comments on the results of that analysis.

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Sample Objections to Settlement and Request for Fees

members to use the certificates or coupons by refinancing loans. Tr. 4-9-94, p. 32, l. 18-25; p. 33, l. 1-8; p. 36, l. 1-10 and 14-21. There is a cost to the class members when they refinance a loan. As Ms. Keest notes: In many casesperhaps in mostthe costs of refinancing will more than offset the value of the script (sic). Thus, again, the consumer actually loses money when he or she tries to take advantage of this incentive. Exhibit 6 [not attached herein]. Ms. Keest demonstrates the validity of this statement in her Affidavit by citing several examples which . . . show that the benefit of the script (sic) when used toward making installment payments on a refinanced loan are minimal when the cost of refinancing are accounted for, and in fact are more likely to end up costing the borrowers more. Exhibit 5, k 3 [not attached herein]. See: example A, Refinancing Option #1, in Exhibit 5 where Customer A has to pay $493.12 more if he refinances his loan simply to get the $125.00 benefit from scrip. Exhibit 5, k 6. In this example, scrip actually has a negative value to the customer. The other examples reveal that upon refinancing many of the scrip certificates will have a negative value because of the cost to the customer of refinancing the loan. Because of the negative value obtained through refinancing, Dr. Nantells assumption that there will be a high incentive to use certificates in order to refinance is fatally flawed. It simply fails to recognize the disincentive to refinancing where the cost of doing that exceeds the value of the scrip. The only way that Dr. Nantells assumption could prove correct would be if the Court approves this settlement and no one educates the absent class members that it is often not in their best interest to refinance an existing loan simply to redeem the certificates. To the extent the certificates can be redeemed through refinancing they become no more than a marketing gimmick that will cost the absent class members more than they will gain in return. This is both an inadequate and an unreasonable result. Dr. Nantells analysis submitted in support of the preliminary approval of this settlement and as updated in August, is flawed in many other respects as well. Professor Nantell assumes that many customers will either take out new loans with the defendants or refinance loans because of customer loyalty. There are two problems with this assumption. First, it is no longer a valid assumption that customer loyalty to ITT will survive ITTs withdrawal and transfer of business to another entity. ITT-CFC has sold its consumer lending business to Household Finance Company (Hfc), and closed its consumer lending offices. The scrip certificates if they are to be used on new or refinanced loans will only be honored by The Associates. However, existing customers of the defendants had their loans transferred to Hfc and presumably many of those customers may seek refinancing through Hfc if they need additional money. Additionally, former customers of defendants

Appx. Q.2

may have already found alternative sources for loans and will not need new loans from The Associates. Therefore, relying on ITT historical data of its customers and their instances of borrowing with ITT will not help in determining how many of these customers will take out new loans with The Associates. Second, the assumption that ITT customers were generally loyal and would return to ITT-CFC is also not supported by the evidence. In a survey and report filed in support of the Motion for Class Certification in Billy James, et al. v. ITT Financial Services, No. 155436, Court of Common Pleas, Cuyahoga County, OH, Professor Hartley reported that over 90% of the surveys returned demonstrated a dissatisfaction with the defendants. Exhibit 8 [not attached herein]. Moreover, it stands to reason that many repeat customers receiving news of a class action lawsuit against their loan company may have second thoughts about bringing their business back to that company. The return rate on the Hawkins scrip also suggests the virtual absence of customer loyalty in such circumstances. See Tr. 4-9-93, p. 5, l. 23-25. Although this information was made available to him, Tr. 4-9-93, p. 26, l. 19-21, Professor Nantell failed to consider the actual use of scrip certificates in Hawkins. When questioned about this by the Court he simply said that the incidence of use in that case would not tell him anything. Tr. 4-9-93, p. 38, l. 4-5. Instead, he relied on research studies on promotional coupon use to determine his estimate of how many Buchet certificates will be redeemed. Contrary to Professor Nantells assertion, an analysis of the use of the Hawkins scrip when matched with the defendants data, could have demonstrated how many customers who had the Hawkins scrip certificates could have used them when purchasing products on a new loan but failed to do so. In his analysis, Professor Nantell also fails to consider the likely reduced redemption rate of scrip due to the confusion that is created by issuing scrip certificates in this case that are very similar to the scrip certificates issued in Hawkins. Many customers may come to the same conclusion as Meg Blesi: the Buchet scrip certificates are as worthless to them as were the Hawkins scrip certificates. Professor Nantell concedes that a much lesser part of the value of the settlement can be attributed to the scrip certificates for Thrift Club and SPT-5 insurance products. Still he grossly overestimated the number of borrowers who would use these certificates. Professor Nantell assumes that because of the incentive created by the certificate, the class members will purchase twice the historical amount of Thrift Club sold by the defendant. The class members in Hawkins were provided with a $29.00 certificate toward the purchase of Thrift Club. Nevertheless, only two out of 96,000 of these certificates were used. Tr. 4-9-93, p. 16, l. 23-25. Last, Professor Nantells report relies on research studies on promotional coupon use. It is not clear from Professor Nantells analysis what kind of coupons were used in the studies he relied on to value the certificates in this case. There is certainly a great deal of difference between coupons that simply provide $1.00 off toward the one-time purchase of a product, and a coupon like the Buchet certificates which are extremely difficult to understand and require the borrower to jump through several hoops to redeem. Without being afforded an opportunity to review Professor Nantells underly-

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certificates, Ms. Symchych noted that the defendants did not think it would be fair . . . to settle it for some fixed cash amount. It would be so low, frankly, if we were to value it, it would be less than this. Tr. 8-13-93, p. 12, l. 7-10. This suggests that the defendants lack confidence in their own experts lowest estimate of how much scrip will be redeemed, since they are unwilling to guarantee even this most minimal rate of return. 3. Buchet Scrip Certificates Are Not Equivalent To Other Scrip Offerings. Contrary to the arguments of the proponents of this settlement, the scrip is not a cash equivalent. It is also not a coupon that can be used toward the purchase of a single product. Rather, to use the certificate, the class member must agree to become indebted for a period of perhaps 36 to 48 months, and pay a very high interest rate on the indebtedness with serious consequences if they fall behind in their payments. Certificates issued in this case are unlike certificates issued in many other settlements. Here, consumers are not able to use a certificate to purchase a product in one easy transaction. And, if they use those certificates as is suggested by Professor Nantell to refinance a loan, the certificates may actually have a negative value. See Keest Affidavit, Exhibit 5 [not attached herein]. In discussing other scrip settlements, defendants counsel noted court approval of the Fisher Food coupons for $1.00 and the Nintendo coupons for $5.00. Defendants counsel cites these examples to argue that the proposed certificates in this case are not at the low end of coupons or scrip approved by other courts. However, in light of the very real possibility of negative value if the scrip is used to refinance a loan, the scrip in this case has perhaps the lowest value ever proposed for coupons. 4. The Ability To Use The Buchet Certificates To Purchase Thrift Club Is of No Value Whatsoever. As is noted above, from the Hawkins use of scrip to purchase this product we now know that there is no value to the class in offering certificates to purchase this product. Furthermore, proponents have not offered any evidence to the Court which would demonstrate that this product has value. Indeed, the results of Professor Hartleys survey in Ohio supports the conclusion that there is an extremely high degree of consumer dissatisfaction with this product. Exhibit 8. See also Exhibit 6, p. 2 [not attached herein]. Nevertheless, in Minnesota, if class members do not want or do not qualify for a loan, this is the only benefit they will receive. This is not adequate consideration for their claims. 5. The Ability To Use The Buchet Certificates To Purchase SPT-5 Insurance Is Also Of Very Little Value. While it is not available to customers in Minnesota, the opportunity to redeem the certificates for SPT-5 is also problematic. This insurance is overpriced in value. See Keest Letter, Exhibit 6. Mr. Reinhardt, when referring to an exhibit in a brief filed with the Court in Hawkins stated: SPT-5 is grossly over-priced when compared to similar policies. Exhibit 9, p.

ing data and ask him questions about how he arrived at his assumptions, all objectors can do is question whether he considered this factor as well as others. Yet another question arises because of the ordering of the different products on the Buchet certificates. The Buchet certificate provides first that it can be used toward the purchase of SPT-5 insurance. One can only question how many absent class members have received numerous solicitations to purchase credit insurance, life insurance, or any other insurance in the mail and are simply programmed to disregard these solicitations and throw them away. Given that both plaintiffs counsel and defendants counsel, as well as Professor Nantell, view the SPT-5 insurance product as perhaps the least likely to be purchased, it was improper to have this product listed first. In view of the complexity of the notice, there appear to be a number of very possible factors that Professor Nantell does not consider when estimating the alleged value of the scrip certificates. Consider the following possible class responses: 1. Many will discard it because they dont understand the notice or anything that came with it; 2. Some will look at the first product, insurance, which they do not want, and discard it; 3. In Minnesota, some will discard it because it is similar to the Hawkins scrip; 4. Some will discard it because they do understand it but do not wish to take out a loan with defendants and make three payments before being able to redeem the coupons; 5. Many will be unable to use the certificates because they are only interested in a loan and will discover they do not qualify for a new loan; 6. Some will decide they do not want any of the three products offered; and 7. A few may actually realize that refinancing a loan to redeem these certificates may very well cost them more than the face value of the certificates are worth. If you subtract all of these individuals it would not be at all surprising if you were to get a redemption response rate equally as low as that of Hawkins. 2. The Defendants Unwillingness To Guarantee That At Least A Minimum Number Of Certificates Will Be Redeemed Casts Further Doubt On Their Value. The defendants counsel viewed Professor Nantells analysis as highly realistic. Tr. 4-9-93, p. 18, l. 7. Nevertheless, the defendants refused to guarantee that at least the minimum amount of value reported by Dr. Nantell will be paid to the class members. This raises serious questions about the credibility of Professor Nantells analysis as well as the historical data defendants provided him. In spite of numerous queries from the Court, defendants remain unwilling to deposit a fund that would insure that the class will receive, at the very least, the minimum level of redemption reported by Professor Nantell. If anything, it suggests that while the defendants will argue that this is the value of the scrip, they do not believe this much scrip will be redeemed. Defendants own counsel appears to contradict the analysis of their expert, Professor Nantell. While on the one hand they offer the report to demonstrate the alleged value of the Buchet

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Sample Objections to Settlement and Request for Fees

2 [not attached herein], with the supporting Affidavit, excerpted from Reply to Defendant Thorps Memorandum in Support of Their Motion for Summary Judgment. Mr. Reinhardts expert noted that it would be advantageous for insureds to obtain term insurance from a policy other than the SPT-5 policy.While it is possible that the rates for insurance in this exhibit have changed, the point here is that plaintiffs counsel have failed to meet their burden of demonstrating to the Court that it is in the class members best interest for them to be permitted to purchase this overpriced product even at a discount. 6. It Is Not In The Best Interests Of The Class To Approve The Settlement. Regardless of the face value of the certificates redeemed, the Court must consider whether providing scrip certificates to the class is in their best interests. The Keest affidavit and letter (Exhibits 5 and 6) demonstrate that it is not. In fact, borrowers who would be induced by the certificates to refinance their loan may very well pay more than the benefit they will receive from the certificates. These certificates are, in fact, no more than a marketing tool. The customer gets an illusory benefit, and The Associates will get a new customer who may be qualified for a much better rate of interest through a different lender. Additionally, the steps a borrower has to take to redeem the certificates in this case are simply unreasonable. Since refinancing results in a negative value for many customers who would utilize the scrip, the only class members who will likely receive any value will be those persons using the scrip in connection with new loans. According to Professor Nantell, new loans are less likely than refinancings. Under his preliminary analysis, there is a possibility that only five percent (5%) of the class members will obtain new loans. In fact, it appears from his explanation to the Court that all he got from the data (ITTs historical data) was this low end number (5%). Tr. 4-9-93, p. 31, l. 18-20. Considering the size of the class, the fact that the only other products the scrip can be used to purchase are virtually worthless, that the settlement may only provide benefits to 5% of the class members, the Court should find the settlement to be wholly unreasonable, utterly inadequate, and grossly unfair. Given the cost to the customer of refinancing a loan and the relatively low number of certificates that could be used on new loans, if scrip certificates are approved in settlement of this action at all, they should only be approved if those certificates can be applied toward existing loans. Class members who do not have existing loans should also receive something of real value. Alternatively, defendants should guarantee a minimum floor of benefits through cash payments, or simply provide direct cash payments in lieu of scrip. C. THE GROSS DISPARITY BETWEEN THE NEGATIVE VALUE RECEIVED BY THE CLASS AND THE MULTI-MILLION DOLLAR ATTORNEY FEE AWARD RENDERS THE SETTLEMENT UNREASONABLE. In determining whether to approve a class action settlement, the issue for determination is whether the settlement is fair, adequate and reasonable. That is, does it protect the

Appx. Q.2

interest of the class members, and is the settlement the product of fraud and collusion. Van Horn v. Trickey, 840 F.2d 604, 606 (8th Cir. 1988); In re Flight Transp. Corp. Sec. Litig., 730 F.2d 1128, 1135 (8th Cir. 1984). Cert. Den. 469 U.S. 1207, 105 S.Ct. 1169 (1985). The Court must keep in mind that a potential conflict of interest always exists between an attorney and a class. Welsch v. Gardebring, 667 F.2d 1204, 1295 (D.Minn. 1987). The Court herein has previously expressed concern about whether the class is adequately protected, and rightly so. Clearly, the interests of defendants, named plaintiffs, and class counsel have been well protected. The parties have chosen to convert a regional class action into a nationwide class action, with an extremely broad release of claims by class members, in order to provide defendants with global peace. The named plaintiffs are also provided for, receiving $5,000 payments and complete releases from all indebtedness. Class counsel is compensated in the sum of $2.6 million, an extraordinary fee in any case. And what does the class receive? Certificates which are difficult to understand, difficult to use, worth a tiny sum of money, and which require users to incur new and expensive long-term debts if they use them at all. Objectors have no evidence or indication that collusion has occurred. Yet, collusion need not be present for the Court to find treatment of the class to be inadequate. Defendants counsel, in past hearings before the Court, has implicitly conceded the low value of this settlement by stressing the weakness of plaintiffs case. Plaintiffs counsel, on the other hand, have been generally silent on the merits. Objector Blesi is not in a position at this point to offer an opinion on the strength of plaintiffs case. However, either the case has some merit, or it does not. If it is does have merit, then the class deserves to receive something of real value. If plaintiffs claims are largely meritless, why should plaintiffs counsel receive $2.6 million dollars? The gross disparity between the attorney fee award and the class benefit cries out for modification, not to penalize counsel, but to provide some real benefit to the class. III. THE RELEASE OF CLAIMS IS UNREASONABLE AND NOT IN THE BEST INTEREST OF THE CLASS Ms. Blesi also objects to the Release of Claims contained in both the Notice of Pendency of Class Action, and the Settlement Agreement. She relies on her objections on file herein and the brief of Mr. Jones to support these objections. Such a global release of claims of the absent class members is unwarranted considering the limited issues alleged in the complaint. While defendants and class counsel assert that the scrip certificates have value, Ms. Blesi, as is set forth above, asserts that they do not have real value. See TBK Partners Ltd. et al., v. Western Union Corp. et al., 675 F.2d 456 (2nd Cir. 1982) where the court stated: We recognize, however, that in fulfilling the courts responsibility to scrutinize the fairness of a class action as required by Fed. R. Civ. P. 23(e), special care must be taken to ensure that the release of a claim not asserted with a class action or not shared alike by all class members does not represent an

427

Appx. Q.3

Consumer Class Actions: A Practical Litigation Guide

Mfg. Co., 613 F.2d 527, 547 (5th Cir. 1980). An attorney whose argument against a low settlement figure results in withdrawal of the settlement offer and submission of a higher one is entitled to a fee for creating the larger fund. A. Conte, 2.25 at 92. Objectors have a valuable and important role to perform in preventing an unfavorable settlement and they are entitled to an allowance as compensation for attorneys fees and expenses where a proper showing is made that the settlement has been improved as a result of their efforts. White v. Auerbach, 500 F.2d, 822, 828 (2nd Cir., 1974). In some cases, objectors are awarded fees even if their efforts do not result in a better settlement, but simply aid the court in making its determination. In Frankenstein v. McCrory Corp., 425 F.Supp. 762 (S.D.N.Y. 1977) the Court awarded objectors attorneys fees because the objections produced a beneficial effect upon the progress of litigation even though the objections raised were ultimately overruled. The Courts rationale was that the objectors assisted the court in assessing the settlement and placed in sharp focus the question of fairness and adequacy of the settlement. Id. 767. Other courts have noted that through participation at settlement hearings objectors contribute to the adversarial nature of the proceedings. Elliott v. Sperry Rand Corp., 680 F.2d 1225, 1227 (8th Cir.1982). One court, upon a finding that counsel for objectors ably played the role of devils advocate, awarded objectors counsel 10% of the settlement fund even though the settlement was not improved. Howes v. Atkins, 668 F.Supp. 1021, 1027 (E.D.Ky.1987). As will be demonstrated below, Objectors herein have played a substantially greater role in improving the settlement than that of several of the objectors in the cases cited above. II. OBJECTOR/INTERVENORS CONFERRED SIGNIFICANT BENEFIT UPON THE CLASS As the Court is no doubt aware, the initial settlement of this action was an all scrip settlement that provided no cash to plaintiff classes. The scrip was of questionable value and the most meaningful part of it could only be redeemed by refinancing or taking out a new loan and making several payments on that loan. Half of all class members would not be able to use the scrip because they were not eligible for a new loan. The certificates issued were confusing to class members, and the settlement contained a release of claims which was not clearly explained and which far exceeded the claims raised in the litigation. Mark Jones and Meg Blesi entered this case to object to the settlement as initially formulated and to ensure that the class was provided fair and adequate consideration for its participation and release of claims. By objecting to the First Amended Settlement Agreement, the objector/intervenors opened the door for a full and adversarial consideration of the terms contained in that initial settlement. Through their objections and accompanying arguments, they assisted the court in assessing, and ultimately rejecting, the original proposed settlement. As a direct result, an impasse was broken and all class members are now poised to receive an improved cash settlement, while granting a narrower release of claims. For these efforts, the objector/intervenors now ask the court to reimburse their counsel fees and expenses.

advantage to the class . . . by the uncompensated sacrifice of claims of members whether few or many. Id. at 461, citations omitted. Respectfully Submitted, [Attorney] [date]

Q.3 Memorandum in Support of Counsel for Objectors Request for Attorneys Fees (Buchet)
UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA THIRD DIVISION ) Clarise Buchet, Jeff Mason and ) all others similarly situated, ) Plaintiffs, ) ) v. ) ) ITT Consumer Financial ) Corporation, A Delaware ) corporation; Thorp Credit ) and Thrift, a Minnesota ) corporation; Aetna Finance, ) a Wisconsin corporation; and ) ITT Financial Corporation, ) a Delaware corporation, ) Defendant. ) ) MEMORANDUM IN SUPPORT OF COUNSEL FOR OBJECTORS REQUEST FOR ATTORNEYS FEES Counsel for Objector/Intervenor Meg Blesi, and Objector Mark Jones submit this joint memorandum in support of their request for attorneys fees. The all scrip settlement initially proposed in this action was unlike any other scrip settlement approved by the Courts. Objecting to this settlement involved a very detailed analysis of the settlement and significant research of the related issues and procedure on very short notice. Objectors are entitled to their attorneys fees because their efforts conferred a substantial benefit to the class and their request is reasonable. I. OBJECTORS ARE ENTITLED TO AN AWARD OF ATTORNEYS FEES FROM THE COMMON FUND. As a general rule the prevailing party does not recover their attorneys fees. However an exception to this rule exists where the plaintiffs efforts have created a common fund for a class. A. Conte, Attorney Fee Awards, 103 at 4 (2nd Ed. 1993). Courts have awarded counsel for objectors their attorneys fees if the court finds that the objections were valid or otherwise conferred benefits upon the class. Id. 2.25, at 92. See also In Re Domestic Air Transportation Antitrust Litigation, 148 F.R.D. 297, 358 (N.D.Ga. 1993); Fisher v. Proctor & Gamble

428

Sample Objections to Settlement and Request for Fees

Mark Jones initiated the involvement of counsel for the objector/intervenors by alerting his attorneys to a confusing and troubling notice on October 14, 1993. After consulting with his attorney, and upon further review of the settlement notice, Jones decided to object to the original settlement. Since Joness counsel was not licensed to practice in Minnesota, counsel sought the assistance of the Legal Aid Society of Minneapolis, Inc. to support his Petition for admission to the District of Minnesota pro hac vice. Shortly thereafter, Meg Blesi, through counsel the Legal Aid Society of Minneapolis, also objected to the settlement, and requested to intervene for purposes of participating in further settlement negotiations. Objector/Intervenor Blesi and Objector Jones each raised a number of objections to the initial settlement proposal of this action. They challenged the adequacy of the scrip on several grounds including: that the parties had not sufficiently proved its value; that it was too difficult to redeem; and that the release was both overly broad and ambiguous. Objectors Blesi and Jones offered the affidavit of Kathleen Keest, a staff attorney with the National Consumer Law Center and a specialist in consumer credit transactions, in order to provide the court with the factual information necessary to determine that for many class members the cost of redeeming their scrip would exceed its value. This seriously undermined the parties claim of purported value of the scrip. In addition to the above, Objector/Intervenor Blesi objected to the scrip settlement because the scrip was similar to scrip issued to Minnesota class members in an earlier case, and as a result would lead to confusion. Ms. Blesi also objected to the manner, content, and timing of the notice to class members. Most importantly, Objector/Intervenor Blesi objected to the settlement because half of all of the class members would not even be eligible to redeem the scrip. Following the final approval hearing on November 23, 1993, after weighing all of the evidence and arguments before it, the court rejected the initial settlement proposal. Buchet v. ITT Consumer Financial Corporation, 845 F. Supp. 684 (D. Minn. 1994). The court found the arguments against approval so compelling that it rejected a settlement which had been initially approved and upon which hundreds of thousands of notices were sent to class members. In its Opinion the court noted: There has not been a great deal of opposition to the proposed settlement in terms of sheer numbers. However, two class members, appearing through their attorneys, have set forth serious objections to the proposed settlement. Id at 691. In reaching its decision, the Court relied in part on both the objections and evidence presented by the Objectors, including: that half the class members would be unable to qualify for a new loan and therefore unable to redeem the scrip; that use of the scrip certificates to refinance an existing loan greatly diminished the value of the scrip; that the scrip certificates were similar to the certificates provided in Hawkins and that confusion could result from that; that the failure to guarantee a minimum redemption rate cast doubts on the value of the certificates; and finally, that there were inherent difficulties with the vagueness of the release. As part of this opinion, counsel for Objector/Intervenor Blesi was permitted to intervene for purposes of participating in further settlement proceedings.

Appx. Q.3

In response to both inquiries from the court and objectors arguments, counsel for defendants steadfastly insisted in earlier proceedings that a cash settlement of this litigation was not possible. On February 22, 1993, defendants counsel stated We dont think that the merits of the case deserved a class settlement with cash to class members. TR. 2-22-93 Hearing at 59, l. 25. Plaintiffs counsel, Karl Cambronne, in response to a suggestion from the court that the clean way to settle this case would be to provide the class members with money stated: That wasnt going to be the way this case could be settled. TR. 2-22-92, Hearing at 25, l. 4. Although Professor Nantells analysis of the possible redemption of scrip coupons resulted in a low-end redemption rate for coupons of $5.3 million, Ms. Symchych insisted in response to a question from the court that . . . we dont think that it is fair . . . to settle it for some fixed cash amount. It would be so low, frankly, if we were to value it, it would be less than this. TR 8-13-93 Hearing at 12, l. 6. Counsel for ITT reiterated this position to the court at the final settlement hearing. Buchet. supra at 696. When the court asked why plaintiffs would not insist on some minimal contribution from defendants, plaintiffs class counsel responded that this is the best settlement we could find. TR. 8-13-93, Hearing at 23, l. 15. In fact, the settlement ultimately reached after the courts rejection of the First Amended Settlement Agreement and Objector/Intervenor Blesis counsels participation in subsequent settlement negotiations is better in every respect than that provided earlier. See Second Amended Settlement Agreement. Now, all class members will be able to share in the settlement. 2nd. ASA at 8. Each class member who chooses to participate will receive a check payable on demand. Id. The 6.5 million dollar settlement fund created by the new agreement exceeds by 1.2 million dollars the expected value placed on the old Agreement by the parties own expert, Professor Timothy Nantell. 2nd ASA at 7; Buchet at 693. The release is now clear and relates only to the claims involved in this lawsuit. Finally, the notice sent out to class members was simpler, more readable and more accurate than the notice announcing the initial settlement. Summary Notice of Proposed Settlement, October 5, 1994. All of these improvements, coupled with the prevention of a settlement potentially harmful to the consumer class, have conferred a substantial benefit to each class member and to the class as a whole. The objectors arguments helped to clarify the issues for both the court and the parties. Thus both objectors/intervenors counsel respectfully ask that they be reasonably compensated for their efforts. III. OBJECTORS REQUEST FOR FEES ARE REASONABLE. Counsel for Objector Jones, and counsel for Objector/ Intervenor Blesi request attorneys fees, not as a percentage of the fund as is requested by plaintiffs class counsel, but rather on an hourly basis. Objectors counsel total request is less than 1.4% of the common fund and only a fraction of the percentage of the fee requested by plaintiffs class counsel.

429

Appx. Q.3

Consumer Class Actions: A Practical Litigation Guide

vailing market rate in Wisconsin for attorneys with the level of experience of [attorneys] is between $110 and $150 per hour. Affidavit of Jeffery Myer, Exhibit 6 [not attached herein]. A local court, ruling on a settlement of a consumer lending class action, found that $220 an hour is a reasonable rate for this type of litigation in the Minneapolis-St. Paul metropolitan area. Burleson et al. v. Independence One Mortgage Corp. State of Minnesota, Second Judicial District, Ramsey County District Court No. C9-93-003278 (Oct. 1994). Exhibit 7 [not attached herein]. The hourly rate of $190 requested by [attorney] and the hourly rate of $210 requested by [attorney] were viewed as below the prevailing market rates by two private attorneys familiar with this kind of litigation and both [attorneys] levels of experience. See Affidavit of Jerry Snider, Exhibit 5, and Declaration of Seymour Mansfield, Exhibit 8 [not attached herein]. The hourly rate of $130 requested by [attorneys] is less than the $150 per hour that Mr. Myer stated would be reasonable for [attorneys] efforts. Exhibit 7 [not attached herein]. Objector/Intervenor Blesis counsel, the Legal Aid Society of Minneapolis, Inc., request a fee award for [attorney] for 242.3 hours of work totalling $46,037.00, and for [attorney] for 53.2 hours of work totalling $11,172.00. Additionally, Objector/ Intervenor Blesis counsel request reimbursement for costs totalling $563.11 as is set forth in the Declaration of [Attorney], Exhibit 1 [not attached herein]. Objector Joness counsel, Legal Services of Northeastern Wisconsin, request a fee award for [attorney] for 198.3 hours of work totalling $25,779.00, and for [attorney] for 7.7 hours of work totalling $1,001.00. Respectfully Submitted, [Attorney] [date]

A. OBJECTORS HOURS SPENT ON THE CASE ARE REASONABLE. Objecting to the settlement of this case involved complex class litigation issues. Objector/Intervenor Blesis participation in the subsequent settlement negotiations involved a significant level of familiarity with settlement issues. Objectors counsel have exercised prudent billing judgment to exclude a number of hours deemed inappropriate for billing. Hours claimed by consulting attorneys do not reflect any duplication of effort. Although objecting to the initial settlement was procedurally and substantively very complex, objectors have not requested a multiplier on their hourly fee request for work on this case. The 295.5 total hours for which Objector/Intervenor Blesis counsel seek compensation for the case is reasonable and should be fully allowed. See Declarations of [Attorneys], Exhibits 1 and 2 [not attached herein]. The 206 total hours for which Objector Joness counsel seek compensation for the case is reasonable and should be fully allowed. See Declarations of Daniel Idzikowski and Craig Hanson, Exhibits 3 and 4 [not attached herein]. B. OBJECTORS HOURLY RATES ARE REASONABLE. Hourly rates for attorneys fees are calculated according to the prevailing market rates in the relevant community, regardless of whether plaintiff is represented by private or nonprofit counsel. Blum v. Stenson, 465 U.S. 886, 895, 104 S.Ct. 1541. To determine the reasonable hourly rate, the court must determine the prevailing market rate. See Blum, Fn. 11, Id. The prevailing market rate in Minneapolis for attorneys with the experience level of [attorney] in complex consumer class action litigation falls within a range between $200 and $230, while the prevailing market rate in Minneapolis for attorneys with the experience level of [attorney] in consumer class action litigation falls with a range between $220 and $240. Affidavit of Jerry Snider, Exhibit 5 [not attached herein]. The pre-

430

Index

ACTIONS see CLASS ACTIONS ADDRESSES class mailings, selection of return address, 13.2.4 class members, updating, 13.2.3 AFFIDAVITS motion for summary judgment, attacking, 6.7 AGREEMENTS attorneys fees assignment of rights, 1.2.4, 15.3.2 sample agreements, Appx C.2 waiver, agreement not to, 15.3.2 binding arbitration, see BINDING ARBITRATION AGREEMENTS class settlement, see STIPULATION OF PROPOSED SETTLEMENT non-representation of opt-outs, 11.5.7 ANNIHILATING DAMAGES see also CLASS DAMAGES avoiding potential, 1.5.4 APPEALS class certification, 9.8 NACA guidelines, Appx B APPENDICES attorneys fees attorney fee agreement, Appx C.2 objectors counsel, memorandum in support, Appx Q.3 authorization to represent, Appx C.1 certification motion for, Appx K notice of, Appx N.1 notice of certification and settlement, Appx N.3 opening memoranda in support, Appx L reply memoranda in support, Appx M class motion FDCPA case, Appx K.1 opening memoranda, Appx L reply memoranda, Appx M TIL case, Appxs K.2K.4 UDAP case, Appxs K.2, K.5 class notice certification, Rule 23(c), Appx N.1 combined Rule 23(c) and (e) notice, Appx N.3 settlement notices, Rule 23(e), Appx N.2 communication, brief in support of motion to restrict, Appx I complaints FDCPA, Appx D.1 RICO, Appxs D.6, D.9

state usury, Appx D.8 TIL, Appxs D.2D.4 UDAP, Appxs D.2, D.5, D.6, D.7, D.9 discovery CLA case, Appx E.2 compelling, pleadings, Appx G FDCPA case, Appx E.1 motion to stay, response, Appx F state usury case, Appx E.4 UDAP case, Appx E.2, Appx E.3 document requests CLA case, Appx E.2.2 FDCPA case, Appx E.1.2 named plaintiff, objection, Appx J state usury case, Appx E.4.2 UDAP case, Appx E.2.2, Appx E.3.2 interrogatories car lease case, Appx E.2.1 FDCPA case, Appx E.1.1 state usury case, Appx E.4.1 UDAP case, Appx E.2.1, Appx E.3.1 VSI insurance case, Appx E.3.1 memorandum in support of class settlement CLA, Appx P.2 TIL rescission, Appx P.1 UDAP, Appx P.2 opening memorandum FDCPA case, Appx L.1 state usury case, Appx L.8 TIL case, Appxs L.2L.5 UDAP case, Appxs L.2, L.3, L.6, L.7 overview of appendices, Intro to Appx protection of files, sample motion and order, Appx H reply memorandum CLA case, Appx M.5 hospital collection case, Appx M.7 TIL case, Appx M.3, Appx M.4 UDAP case, Appxs M.3, M.5, M.6 settlement combined notices, Appx N.3 memorandum in support, Appx P notices, Appx N.2 objections, Appx Q stipulation of proposed settlement, Appx O settlement notices combined notice, Appx N.3 Rule 23(e) notice, Appx N.2 stipulation of proposed settlement CLA case, Appx O.3 FDCPA case, Appx O.1 revolving repossession case, Appx O.4

431

ARBITRATION

Consumer Class Actions: A Practical Litigation Guide References are to sections

APPENDICES (Cont.) stipulation of proposed settlement (Cont.) state usury case, Appx O.5 TIL case, Appx O.2 UDAP case, Appx O.3 using, Intro ARBITRATION see also FEDERAL ARBITRATION ACT (FAA) binding arbitration agreements, see BINDING ARBITRATION AGREEMENTS classwide arbitration availability, 2.8.2 court supervision, 2.8.3 generally, 2.8.1 disadvantages, 2.8.1 ATTORNEYS see also ATTORNEY-CLIENT PRIVILEGE adequacy of representation, 9.4.1 authorization to represent generally, 1.2.4 sample form, Appx C.1 communication with class members ethical constraints, 5.3.4 motion to restrict, brief in support, Appx I control over the litigation, effect on certification, 9.4.5 fees, see ATTORNEYS FEES AND COSTS history of representation, discovery preparation, 8.4.2 legal services attorneys, see LEGAL SERVICES ATTORNEYS litigation costs, advancing, 1.1.4, 1.2.4, 9.4.3 objections to settlement, advising, 12.8.4 opted-out class members, representing, 11.5.7, 13.5 telephone inquiries, dealing with, 13.4 ATTORNEYS FEES AND COSTS see also ATTORNEYS advancing, 1.1.4, 1.2.4, 9.4.3 assignment of rights agreements, 1.2.4, 15.3.2 burden, see BURDEN OF COST calculation of fees common fund doctrine, 15.1.1, 15.2 competing methods, 15.2.2 general considerations, 11.9.3, 15.2.1 hourly rate, 15.2.5.2 lodestar method, 15.2.2, 15.2.5 NACA guidelines, 15.2.3, 15.2.4, 15.2.5.1 percentage approach, 15.2.2, 15.2.4 charging liens, perfection, 1.2.6 class representative, ability to pay, 9.4.3 common fund payments, 15.1.1, 15.2 compensable time, 15.2.5.3 co-counsel, division among, 15.5 court approval, 11.9.1, 15.3.3 cy pres distributions, 11.7.5 federal diversity jurisdiction calculations, 2.2.3 fee negotiations approval of negotiated fee, 11.9.1, 15.3.3 generally, 15.3.1 NACA guidelines, 15.3.1 percentage cases, 15.2.4 simultaneous negotiation, 11.9.1, 15.3.2 fee petition circumstances, 15.3.1

objections to, Appx Q.1 time, 15.4 hourly rates, 15.2.5.2 lump sum offers, 11.9.2, 15.3.2 multipliers, fee shifting statutes, use, 15.1.2 NACA guidelines, Appx B non-cash recoveries, 11.6.5, 15.2.5.1 notice to class, 15.3.3 objections to, Appx Q.1 objectors counsel, sample request memorandum, Appx Q.3 right to, 15.1 sample fee agreement, Appx C.2 sample fee objection, Appx Q.1 settlements administrative costs, 11.5.5 disclosure, 15.3.3 litigation expenses, reimbursement, 11.5.6 lodestar method, use, 11.9.3, 15.2.5 lump sum settlements, 11.9.2, 15.3.2 non-cash settlements, 11.6.5, 15.2.5.1 percentage of recovery, 11.9.3, 15.2.3, 15.2.4 post-settlement work, 11.9.4 scrip settlements, 11.6.5 separate negotiations, 11.9.1, 15.3.1 simultaneous negotiations, 11.9.1, 15.3.2 statutory fee awards, 15.1.2 waiver of fees, agreement not to, 15.3.2, Appx C.2 ATTORNEY-CLIENT PRIVILEGE see also ATTORNEYS deposition of class representative, objections based on, 8.5.2, 8.5.3 BAD FAITH delaying tactics as, 6.2 BANKRUPTCY class actions, federal jurisdiction, 2.4 effect on class settlement negotiations, 11.5.2 BINDING ARBITRATION AGREEMENTS see also FEDERAL ARBITRATION ACT (FAA) avoiding, 2.7 barrier to class action, 2.1, 2.6, 6.1 classwide arbitration, availability, 2.8 consumer agreement, 2.7.6 coverage of dispute, 2.7.8 coverage of parties, 2.7.9 effect, 2.6 enforceability, 2.7 federal enforcement policy, 2.6, 2.7.2 forum selection, effect on, 2.1 one-sided, 2.7.5 state law limitations, 2.7.2 statutory claims, 2.7.4 TIL rescission, application, 2.7.6 unconscionable, 2.7.5 unilateral notice, 2.7.6 waiver by defendant, 2.7.7 warranty claims, 2.7.3 widespread use, 2.6 BRIEFS see CLASS BRIEFS

432

Index References are to sections

BURDEN OF COST see also ATTORNEYS FEES AND COSTS addresses, updating, 13.2.3 administrative costs, 11.5.5 advancing of costs by attorney, 1.1.4, 1.2.4, 9.4.3 class list, assembling, 13.2.1 class notice combined notices, 10.2.2.4 generally, 13.2.1 mailing, 10.1.1 shifting the burden, 10.2.2 class representative, 8.5.4, 9.4.3 deposition questions re, 8.5.4 skip tracing, 11.5.5, 13.2.3 BURDEN OF PROOF class certification, 9.1.1 class size, 9.7 federal jurisdiction, 2.3 noncommunication orders, 5.3.3 CANCELLATION see EQUITABLE RELIEF CASE LAW resources, Intro summaries, Intro to Appx unreported, obtaining, Intro CERTIFICATE SETTLEMENTS see SCRIP SETTLEMENTS CERTIFICATION see CLASS CERTIFICATION CHARGING LIENS attorneys fees, perfection, 1.2.6 CHARITABLE DISTRIBUTIONS see CY PRES DISTRIBUTIONS CHECKS distributing to class, 13.6.3 undeliverable, 13.6.4 CLAIM FORMS acknowledgment of receipt, 10.3.2, 13.3 opt-out alternative, 10.3.2 post-judgment notice, inclusion, 10.4 settlement notice, inclusion, 10.3.2 CLAIMS see CLASS ACTIONS; CLASS COMPLAINT; MULTIPLE CLAIMS CLASS ACTIONS administration, generally, 13.1 advantages generally, 1.1.1 individual damages small, 1.1.2 annihilating damages, effect, 1.5.4 arbitration, availability, 2.8 arbitration to avoid, 2.6 attorneys fees, see ATTORNEYS FEES AND COSTS authorization form generally, 1.2.4 sample form, Appx C.1 case law summaries, Intro to Appx case selection

CLASS

class representative, reliability, 1.2.1 defendant, investigating, 1.3 facts underlying claim, 1.1.3 resources required, 1.1.4 suitability, 1.1.3, 1.5 certification, see CLASS CERTIFICATION claim selection multiple claims, 1.6 well suited claims, 1.5 class benefits, see CLASS BENEFITS class definition, see CLASS DEFINITION class representative, see CLASS REPRESENTATIVE client, keeping track of, 1.2.5 co-counselling attorneys fees, division, 15.5 circumstances, 1.1.5 collateral proceedings, effect, 5.4 communication by defendant motion to restrict, brief in support, Appx I named plaintiff, with, 1.2.6 complaint, see CLASS COMPLAINT consumer protection device, 1.1.1 contract claims, see CONTRACT CLAIMS costs, see ATTORNEYS FEES AND COSTS; BURDEN OF COST counterclaims, effect on manageability, 9.6.2 damages, see CLASS DAMAGES defendants, see DEFENDANTS defense tactics, see DEFENSE TACTICS discovery, see DISCOVERY dismissal, court approval, 11.2 equitable relief circumstances, 1.5.5 Rule 23(b)(2), 9.1.2.1, 9.1.2.2 federal court, see FEDERAL COURT ACTIONS filing considerations, 1.1 individual settlement attempts prior to, 1.2.3 related law suits, checking first, 1.4 forum selection, 2.1 fraud claims, see FRAUD CLAIMS intervention by settlement objector, 12.8.5.2 joinder alternative, 1.1.6 jurisdiction, 1.5.6, 2.1-2.4 jury trials, 14.4 leases, see CONSUMER LEASING CLASS ACTIONS limitations, tolling, 9.2.1 limiting of issues, 1.6.1 mandatory class actions, 9.1.1 merits, inquiry before certification, 7.1, 9.2.3.1 motion for certification, see CLASS MOTION multiple actions, consolidation, 1.1.5, 1.4, 11.4 multiple claims, see MULTIPLE CLAIMS multiple defendants, 11.3 multistate actions, see MULTISTATE CLASS ACTIONS NACA guidelines, Appx B NCLC manual, overview, Intro notice, see CLASS NOTICE numerosity, 9.7 opt-outs, see OPT-OUTS pleadings, see CLASS BRIEFS; CLASS COMPLAINT predominance issues in consumer cases, 9.3.4 preliminary motions, see PRELIMINARY CLASS MOTIONS

433

CLASS

Consumer Class Actions: A Practical Litigation Guide References are to sections

CLASS ACTIONS (Cont.) pre-suit demand letters, 4.3 product liability cases, 9.3.4.4 related class actions coordinating with, 1.4 settlement considerations, 11.4 releases, see RELEASES representativeness, see REPRESENTATIVENESS res judicata effect, 14.3 RICO, see RICO CLASS ACTIONS sample pleadings, see Appendices settlement, see CLASS SETTLEMENTS small classes, 1.1.6, 3.7 standard form agreements, 9.3.4.1 state court, see STATE COURT ACTIONS superiority, 9.6 surveys, use, 7.6 technical claims, 1.5.1 TIL, see TIL CLASS ACTIONS trial of, 14.1 typicality, see TYPICALITY UDAP, see UDAP CLASS ACTIONS usury, see USURY CLASS ACTIONS venue, 2.5 warranty-type claims, 9.3.4.4 CLASS BENEFITS see also CLASS DAMAGES cy pres distributions, see CY PRES DISTRIBUTIONS distribution of fund, see CLASS FUND, distribution fee awards based on, 15.1.1, 15.2 fluid recoveries, 9.6.3 individual v. fund recoveries, 11.5.3 settlements evaluating case, 11.5.1 NACA guidelines, Appx B non-monetary benefits, see SCRIP SETTLEMENTS value, determination, 11.6.3, 15.2.4 CLASS BRIEFS see also CLASS MOTION drafting, 9.2.5 filing prior to discovery, 9.2.2 timeliness, 9.2.1 named plaintiff, familiarity with, 9.4.4 opening memorandum commonality section, 9.3.3 drafting, 9.2.5 early filing, 9.2.2 sample, Appx L reply memorandum commonality arguments, 9.3.3 importance, 9.2.5 sample, Appx M CLASS CERTIFICATION see also CLASS ACTIONS appeals, 9.8 arbitration proceedings, 2.8.3 class definition, see CLASS DEFINITION conditional certification, 11.2 declaratory relief, 9.1.2.1, 9.1.2.2 delay, effect, 9.2.1 discovery prior to

alternate sources of information, 7.1 bifurcating from merits, 7.3.2 class briefs, timing of filing, 9.2.2 information to be sought, 7.4 motion to compel, 7.3.3 need for, 7.1 right to, 7.1, 7.3.1 time schedule, 7.2 equitable relief, 9.1.2.1, 9.1.2.2 immediate action, benefits, 9.2.1 injunctive relief, 9.1.2.1, 9.1.2.2 memoranda in support, see CLASS BRIEFS merit of claims, 7.1, 9.2.3 motion for, see CLASS MOTION notice of, see under CLASS NOTICE numerosity, see NUMEROSITY predominance of common questions, see PREDOMINANCE OF COMMON QUESTIONS preliminary motions, see PRELIMINARY CLASS MOTIONS prerequisites, 7.1, 9.1.1 Rule 23 procedures comparison, 9.1.1 multiple certification, 9.1.1 Rule 23(b)(1), 9.1.3 Rule 23(b)(2), 9.1.2 Rule 23(b)(3), 9.1.1 settlement prior to classwide settlements, 11.2 individual settlements, 11.1 settlement purposes, 9.2.4, 11.2 stipulation to certification, 9.2.4 subclasses, 3.7, 9.4.7 substantive claims, disposition prior to, 9.2.3 superiority, see SUPERIORITY surveys as support for, 7.6.1, 7.6.3 timeliness, 6.2, 9.2.1 CLASS COMPLAINT see also CLASS ACTIONS class definition, 3.1 drafting the complaint allegations, 4.1.1 exhibits, 4.1.2 format, 4.1.1 individual settlement negotiations after filing, 11.1 insurance coverage defense, avoiding, 1.5.2 merits, inquiry before certification, 7.1, 9.2.3.1 pre-suit notification, 4.3 reviewing with named plaintiff prior to deposition, 8.2, 8.4.1 prior to filing, 4.2 sample complaints car lease, Appx D.5 CLA, Appx D.5 FDCPA, 4.1.1, Appx D.1 fraud, Appx D.9 hidden finance charge, Appx D.3 home improvement contract, Appx D.2 RICO, Appxs D.6, D.9 state usury, Appx D.8 TIL disclosure, Appx D.3 TIL rescission, Appx D.3 UDAP, Appxs D.2, D.5, D.6, D.7, D.9 VSI insurance, 4.1.1, Appx D.7

434

Index References are to sections

CLASS DAMAGES see also CLASS BENEFITS; CLASS FUND annihilating damages, effect on selection of claim, 1.5.4 bottom line calculations, 11.5.1 cy pres distributions, 11.7 damage curves, 9.3.5 fluid recovery, 9.6.3 individual damages, determination individual hearings, 9.3.5, 14.2.1 standard for reprocessing, 14.2.2 individual damages small, 9.6.3 individual differences, effect, 9.3.5 insurance coverage, 1.3.3, 1.5.2 federal diversity jurisdiction, 2.2 lump sum payments, 11.5.3, 11.9.2 settlement, adequacy, 12.5 statutory damages, see STATUTORY DAMAGES CLASS DEFINITION see also CLASS LIST; CLASS MEMBERS amending after case filed, 3.8 change in defendants practices, effect, 6.6 choosing the definition, 3 continuing classes, 3.5.3 drafting, generally, 3.1 ending date, 3.5.3 examples, 3.1, 3.2 geographic limitations, 3.6 identification of class members, 3.2 multiple claims, 1.6.3, 3.5.1 multiple classes, 3.5.1 multistate actions, 3.6 open-ended, 3.5.3 redefinition, 3.8, 6.6 relief sought, considerations, 3.3 reviewing, 3.1 simplicity, requirement, 3.4 small classes, 1.1.6 starting date, 3.5.1, 3.5.2 statute of limitations, effect, 3.5.1 subclasses adequacy of representation, effect, 9.4.7 circumstances, 3.7 multistate actions, 3.6.4 representative, reexamining, 3.5.3 time periods, use in defining, 3.5.1 time periods, 3.5 transactional facts, 3.3 CLASS DISCOVERY see DISCOVERY CLASS FUND see also CLASS BENEFITS attorneys fee awards from competing methods, 15.2.2 computation, generally, 15.2.1 generally, 15.1.1 lodestar method, 15.2.5 percentage approach, 15.2.3, 15.2.4 deposits by defendant, 13.6.1 distribution checks, sending to class, 13.6.3 cy pres distributions, 11.7 delay due to missing members, 13.2.3 deposit of funds, 13.6.1 settlement agreements, 11.5.4, 11.7.1 undeliverable checks, 13.6.4 federal diversity jurisdiction, 2.2.2 individual recovery alternative, 11.5.3 installment payments, 13.6.1 interest income, 11.5.4, 13.6.1 investing, 13.6.1 limited funds, 9.1.3 lump sum payments, 11.5.3, 11.9.2 payment into, 11.5.3, 13.6.1 unclaimed funds, 11.5.4, 11.7.1, 13.6.4 CLASS LIST see also CLASS MEMBERS; NUMEROSITY assembling, 7.4.3, 13.2.2 compilation by defendant, 6.13, 7.4.3, 10.2.2.2, 13.2.2 discovery relating to class size, 7.4.1 identification of members, 7.4.3 final list for distribution, preparation, 13.6.2 identification number list, 13.2.2 identifying class members, 7.4.3, 10.1.3, 10.1.4 members responses, 13.3 opt-out list, 13.3 updating addresses, 13.2.3 CLASS MAILINGS see also CLASS LIST; CLASS NOTICE burden of cost, 10.1.1, 10.2.2, 13.2.1 e-mail, by, 10.1.5 envelope, format, 13.2.5 private company, use of, 13.2.6 procedures, 13.2.6 recording members responses, 13.3 return address e-mail address in addition, 10.1.5 selecting, 13.2.4

CLASS

CLASS MEMBERS see also CLASS DEFINITION; CLASS LIST absent class members counterclaims against, 6.9 discovery from, 6.10, 7.8.2 releases, 12.3.2 communication with defendant ethical constraints on defendant, 5.3.4 improper communication, types, 5.3.1 motion to restrict, brief in support, Appx I named plaintiff, 1.2.6 non-communication orders, 5.3.3 prevention, tactics, 5.3.2 counterclaims against, 6.9 coupons, value to, 11.6.2, 11.6.3 cy pres recipients, relationship, 11.7.3 death, payment to estate, 11.5.4 discovery by defendant, 6.10, 7.8.2 files, see RECORDS identification numbers, see IDENTIFICATION NUMBERS identifying, see CLASS LIST individual damages, determination, 14.2 joinder as alternative to certification, 1.1.6 list of, see CLASS LIST locating inability to locate, 10.1.4

435

CLASS

Consumer Class Actions: A Practical Litigation Guide References are to sections

CLASS MEMBERS (Cont.) locating (Cont.) investigators, use, 10.1.4, 11.5.5 percentage typically located, 11.5.3, 13.2.3 reasonable effort, 10.1.3 shifting the cost, 10.2.2.2 skip tracing, 11.5.5, 13.2.3 updating addresses, 13.2.3 notice, see CLASS NOTICE opt-outs, see OPT-OUTS proof of claim forms, 10.3.2, 10.4, 13.3 releases generally, 11.5.7 NACA guidelines, 12.3.2 representative, see CLASS REPRESENTATIVE settlement objections legal advice, 12.8.4 notice of rights, 10.3.1 procedures, 12.8.5 right to, 12.8.3 surveys, 7.6 telephone inquiries, 13.4 typicality 9.5 unique defenses, effect, 9.5 CLASS MOTION see also CLASS CERTIFICATION burden of proof, 9.1.1 discovery schedule, 9.2.2 drafting the motion, 9.2.5 filing, time, 9.2.1 form, 9.2.5, Appx K merits of case, relevance, 9.2.3.1 motion for summary judgment, timing, 9.2.3.2 motion to dismiss prior to certification motion, 9.2.3.2 prior to discovery, 7.2 named plaintiff, copy to, 8.2, 8.4.1 preliminary motions, see PRELIMINARY CLASS MOTIONS sample motions FDCPA, Appx K.1 home improvement contract, Appx K.2 TIL, Appxs K.2, K.3 UDAP, Appxs K.2, K.5 VSI, Appx K.5 stipulation to certification, 9.2.4 supporting memoranda, see CLASS BRIEFS CLASS NOTICE see also CLASS LIST; CLASS MAILINGS administrative aspects, 13.113.5 arbitration proceedings, 2.8.3 best notice practicable, 10.1.3 certification, Rule 23(c) content, 10.2.1 generally, 10.1.1 return postcards, inclusion, 10.2.1 sample notice, Appx N.1 shifting the cost, 10.2.2 combined notice of certification and settlement circumstances, 10.1.1, 10.2.2.4, 10.3.1 cost burden, 10.2.2.4 sample notices, Appx N.3 common problems and inquiries, 10.1.2

cost burden, 10.1.1, 10.2.2 drafting the notice, 10.1.2 electronic notice, 10.1.5 e-mail inquiries, 10.1.5 exclusion requests, 10.2.1 internet notice, 10.1.5 mailing the notice, see CLASS MAILINGS motion for summary judgment, effect, 6.7 multistate actions, 3.6.1, 3.6.2 post-judgment, Rule 23(e) format, 10.4 generally, 10.1.1 proof of claim form, 10.4 publication, 10.1.4, 13.2.7 responses, recording, 13.3 settlement, Rule 23(e) attorneys fees disclosure, 15.3.3 content, 10.3.1 court approval, 12.5 fairness hearing date, 12.7, 13.2.3 generally, 10.1.1 NACA guidelines, 10.3.1, Appx B nonpublicity clauses, 11.5.8 proof of claim form, 10.3.2 publication, 11.5.5, 13.2.7 sample notices, Appx N.2 skip tracing costs, deduction, 11.5.5, 13.2.3 specificity as to claims, 14.3 telephone inquiries, 13.4 tombstone notice, 10.1.4 translation, 10.1.2 types, 10.1.1 CLASS REPRESENTATIVE see also REPRESENTATIVENESS ability to pay litigation costs, 8.5.4, 9.4.3 adequacy of representation, 8.4.3, 9.4 antagonistic interests, 9.4.2 authorization to represent generally, 1.2.4 sample form, Appx C.1 binding arbitration agreements coverage, 2.7.9 effect, 2.6 burden of costs, 9.4.3 buying-off, 6.3 character, relevance, 9.4.4 claims, typicality, 9.5 communication with defendant deterring, 1.2.6 motion to restrict, brief in support, Appx I conflict of interest, 9.4.2 control over litigation, 9.4.5 deposition advice on answering questions, 8.3.2 class issues, review prior to, 8.4.1, 8.4.3, 9.4.4 complaint, review prior to, 8.2, 8.4.1 defense tactics, 8.1 demeanor and conduct, 8.3.4 document request, sample objection, Appx J information on the process, 8.3.1 limiting, 8.1 objections to questions, 8.3.3, 8.4.3, 8.5 preparation for, generally, 8.2

436

Index References are to sections

CLASS REPRESENTATIVE (Cont.) deposition (Cont.) privileged communications, 8.5.2, 8.5.3, Appx J procedural preparation, 8.3 protective orders, 8.5.1 questions challenging adequacy of representation, 8.4.3 questions regarding counsels representation, 8.4.2, 8.5.3 questions regarding financial ability, 8.5.4 settlement offers, review prior to, 8.4.3 typical questions and answers, 8.4.3 federal diversity jurisdiction, computing monetary amount, 2.2.3 incentive awards, 11.8 individual settlement, 1.2.3, 1.2.6, 6.3, 11.1 information sheet, 1.2.5 keeping track of, 1.2.5 mental illness, 9.4.4 multiple defendants, standing to sue, 1.3.4 multiple representatives, 1.2.2 pleadings, familiarity with, 8.2, 8.4.1, 9.4.4 reliability, 1.2.1 relief sought, typicality, 9.5 representativeness, see REPRESENTATIVENESS settlement negotiations additional recovery, 11.8 expenses, reimbursement, 11.5.6 individual settlements, 1.2.6, 6.3, 11.1 pre-certification, 11.1 pre-filing, 1.2.3 subclasses, 3.7, 9.4.7 substitution, 9.4.6 typicality, 9.5 understanding of case, 9.4.4 unique defenses, effect, 9.5 CLASS SETTLEMENTS administrative aspects and costs, 11.5.5, 12.4 agreement, see STIPULATION OF PROPOSED SETTLEMENT attorneys fees disclosure, 15.3.3 liens, effect, 1.2.6, 15.3.2 lodestar method, use, 11.9.3, 15.2.5 lump sum offers, effect, 11.9.2, 15.3.2 notice to class, 15.3.3 percentage of recovery, 11.9.3, 15.2.3, 15.2.4 post-settlement work, 11.9.4 separate negotiation of fees, 11.9.1, 15.3.1 bottom line calculations, 11.5.1 claim forms, 10.3.2, 13.3 class benefits, individual v. fund recoveries, 11.5.3 coupon settlements, see SCRIP SETTLEMENTS court approval, fairness test, 11.2, 12.5, 12.7, 12.8.5.5 cy pres distributions, 11.7 fairness hearing, 12.5, 12.7, 13.2.3 final order, 12.6 fund, see CLASS FUND incentive awards, 11.8 individual settlements, restrictions, 1.2.6, 6.3, 11.1 installment payments, 13.6.1 interest income, 11.5.4 memorandum in support, samples, Appx P multiple claims, 1.6.3 multiple defendants, 11.3 NACA guidelines, 11.4, Appx B

COMMUNICATION

named plaintiff additional to class recovery, 11.8 restrictions, 1.2.6, 6.3, 11.1 negotiations, timing, 11.2 non-monetary benefits, see SCRIP SETTLEMENTS non-publicity clauses, 11.5.8 non-representation agreements, 11.5.7 notice, see under CLASS NOTICE objections to settlement advising class members, 12.8.4 court evaluations, 12.8.5.5 how to object, 12.8.5 limits, 12.8.3 non-class members, 12.8.2 non-settling defendants, 12.8.1 notice of rights, 10.3.1 sample objections, Appx Q.2 opt-out of settlement, 12.8.5.4 partial settlements, 11.3 potential other claims, 12.3.2, 12.3.3 poverty plea by defendant, 11.5.2 pre-certification classwide settlements, 11.2 individual settlements, 11.1 related class actions pending, 11.4 release of claims, 11.5.7, 12.3 review of offers prior to deposition, 8.4.3 scrip settlements, see SCRIP SETTLEMENTS settlement fund, see CLASS FUND stipulation to certification, 9.2.4 terms, 11.5 CLASS SIZE see also NUMEROSITY discovery to ascertain, 7.4.1 estimates prior to certification, 7.1 exact size, necessity of proof, 9.7 limiting, 3.4 CLEARINGHOUSE NUMBERS see also NATIONAL CENTER ON POVERTY LAW unreported cases, Intro COLLATERAL ACTIONS dealing with, 5.4 COLLECTION ACTIONS collateral to class action, 5.4 COMMON QUESTIONS see COMMONALITY; PREDOMINANCE OF COMMON QUESTIONS COMMONALITY see also PREDOMINANCE OF COMMON QUESTIONS prerequisite to certification, 1.5.3, 9.3.1 COMMUNICATION defendant with class members motion to restrict, brief in support, Appx I preventing, 1.2.6, 5.3 ethical constraints, 5.3.4 improper minimizing, 5.3.2 types, 5.3.1 noncommunication orders, 5.3.3, Appx I privileged communications, see ATTORNEY-CLIENT PRIVILEGE

437

COMPLAINTS

Consumer Class Actions: A Practical Litigation Guide References are to sections

COMPLAINTS see CLASS COMPLAINT CONFLICT OF LAWS multistate actions, 3.6.2, 3.6.4 CONSUMER LEASING CLASS ACTIONS see also CLASS ACTIONS case summary, Intro to Appx federal jurisdiction, 1.5.6 predominance of common questions, 9.3.4.3 sample complaint, Appx D.5 sample discovery, Appx E.2 sample memorandum in support of motion to compel, Appx G.4 sample memorandum in support of settlement, Appx P.2 sample opening memorandum, Appx L.6 sample reply memorandum, Appx M.5 sample stipulation of proposed settlement, Appx O.3 CONSUMER PROTECTION class actions as, 1.1.1 CONSUMER REPORTS class members, using to locate, 13.2.3 CONTRACT CLAIMS sample memoranda in support of certification opening memorandum, Appx L.2 reply memorandum, Appx M.2 standard form contracts, predominance issues, 9.3.4.1 state law, uniformity, 3.6.3 COSTS see ATTORNEYS FEES AND COSTS; BURDEN OF COST COUNTERCLAIMS class members, against generally, 6.9 superiority requirement, effect on, 9.6.2 COUPON SETTLEMENTS see SCRIP SETTLEMENTS CREDIT REPORTS addresses, obtaining from, 13.2.3 CY PRESS DISTRIBUTIONS see also CLASS BENEFITS appropriateness, 9.6.3, 11.7.2 authorization, 11.7.1 generally, 11.7.1 monitoring, compensation, 11.7.5 NACA guidelines, Appx B negotiating, 11.7.4 recipients relationship to class, 11.7.3 responsibilities, 11.7.5 selecting, procedure, 11.7.4 small individual damages, 9.6.3 standard settlement provision, as, 11.7.1 DAMAGES class actions, see CLASS DAMAGES statutory damages, see STATUTORY DAMAGES DECEPTION see FRAUD CLAIMS; UDAP CLASS ACTIONS DECLARATORY RELIEF see EQUITABLE RELIEF

DEFENDANTS see also DEFENSE TACTICS binding arbitration agreements coverage, 2.7.9 waiver, 2.7.7 cessation of unlawful conduct, 6.6 change in practices, redefinition of class, 6.6 communication with class members ethical constraints, 5.3.4 improper, 5.3.1, 5.3.2 motion to restrict, brief in support, Appx I named plaintiff, 1.2.6 noncommunication orders, 5.3.3, Appx I compilation of class list, 6.13, 7.4.3 coupon settlements, 11.6 deposition of agents, 7.4.4 distribution checks, issuance, 13.6.3 document preservation, 5.2 information from sources other than, 7.1 insurance coverage, 1.3.3 investigating before filing, 1.3.1 evaluating information, 1.3.3 techniques, 1.3.2 multiple defendants settling with, 11.3 standing to sue, 1.3.4 venue, 2.5.4 payment, receiving from, 13.6.1 poverty plea, 11.5.2 presuit notification, 4.3 public companies, 1.3.2 records, see RECORDS release of claims, 11.5.7, 12.3 residence, venue based on, 2.5.2 selecting, 1.3 settlement objections by non-settling defendants, 12.8.1 poverty plea, effect on negotiations, 11.5.2 restrictions, 1.2.6 unclaimed funds, reversion, 11.5.4, 11.7.1 DEFENSE TACTICS see also DEFENDANTS adequacy of representation, attacking, 8.4.3, 9.4.2 aggressiveness, 1.3.3 arbitration clauses, 2.6, 6.1 class list, refusal to supply, 6.13 counterclaims against class members, 6.9, 9.6.2 delaying tactics, 6.1, 6.2, 6.5, 7.8.2 discovery tactics absent class members, discovery from, 6.10 bifurcating discovery, 7.3.2 deposition of class representative, 8.1 disputes, creating, 6.11 harassing tactics, 7.8.1, 8.1 motion to stay discovery, 6.5, Appx F protective order, 6.11 document production copying of documents, 6.12.3 obstacles to access, 6.12.1 sampling of documents, 6.12.2 individual settlement attempts, 6.3, 11.1 jurisdictional manoeuvres, 2.3, 6.1

438

Index References are to sections

DEFENSE TACTICS (Cont.) mooting of claim, 9.2.1 motion for extension of time, 6.8 motion for protective order, 6.11 motion for summary judgment, 6.7 motion to dismiss, 6.4, 7.3.1, 9.2.3.2 motion to redefine class, 6.6 motion to stay discovery, 6.5, Appx F predominance, arguments against, 9.3.3 DEFINITION see CLASS DEFINITION DEMAND LETTERS presuit notification, 4.3 DEPOSITION see DISCOVERY DISBURSEMENTS see ATTORNEYS FEES AND COSTS DISCOVERY absent class members, 6.10, 7.8.2 bifurcating between class and merits, 7.3.2 class briefs, filing, timing, 9.2.2 class list, compilation, 6.13, 10.2.2.2 class members, 6.10, 7.8.2 class motion, filing prior to, 9.2.2 class representative, see CLASS REPRESENTATIVE, deposition contention interrogatories, 7.8.1 copying of documents, 6.12.3 defendants discovery, 7.8 defendants recordkeeping system, 7.7 delaying tactics, 6.2, 6.5, 7.8.2 discovery conferences, 8.4 document requests, see DOCUMENT REQUESTS early initiation, 5.2.2, 6.7, 7.2 FDCPA cases, 7.4.1, Appx E.1 finances of named plaintiff, 9.4.3 harassment tactics by defendant, 7.8.1, 8.1 individual issues, standardized discovery, 14.2.1 information to be sought, 7.4 interrogatories, see INTERROGATORIES motion for summary judgment, effect, 6.7 motion to compel generally, 7.3.3 sample pleadings, Appx G motion to dismiss prior to, 6.5, 7.3.1 motion to stay defense tactics, 6.5 sample response, Appx F notice of deposition, quashing, 6.11 objectors to settlement, rights, 12.8.5.3 obstacles to access, 6.12.1 pre-certification common questions, 7.4.2, 7.4.4 depositions, 7.4.4 identifying class members, 7.4.3 information to be sought, 7.4 motion to compel, 7.3.3 need for, 7.1 numerosity, 7.4.1 requests for admissions, 7.5 right to, 7.1, 7.3.1

EXHIBITS

sample interrogatories and requests, 7.4.1, 7.4.2, Appx E time schedule, 7.2 privileged communications, 8.5.2, 8.5.3 protective orders, see PROTECTIVE ORDERS requests for admissions generally, 7.5 sample, Appxs E.1.3, E.2.3, E.4.3 requests for production, see DOCUMENT REQUESTS sample discovery car lease case, Appx E.2 FDCPA case, Appx E.1 state usury case, Appx E.4 UDAP case, Appxs E.2, E.3 VSI insurance case, Appx E.3 sample pleadings to compel inability to resolve dispute, certificate of counsel, Appx G.2 memorandum in support of motion to compel answers, Appx G.4 motion to compel answers, Appx G.1 proposed order compelling response, Appx G.3 sampling of documents, production, 6.12.2 settlement negotiations, right to, 12.8.5.3 standard form documents, challenges, 7.4.2 surveys as informal discovery, 7.6.3 DOCUMENT REQUESTS see also DISCOVERY common questions, relating to, 7.4.2 compelling response, 7.3.3 immediate requests, 5.2.2, 7.2 numerosity issues, 7.4.1 request to admit, after denial, 7.5 sample requests car lease case, Appxs E.2.2, E.2.4 FDCPA, 7.4.1, Appx E.1.2 second request, C.2.4 standard form document challenges, 7.4.2 state usury case, Appx E.4.2 TIL, 7.4.2 UDAP, Appxs E.2.2, E.3.2 VSI insurance case, 7.4.2, Appx E.3.2 service, timing, 7.2 DOCUMENTS see also EXHIBITS; RECORDS preservation duty, 5.2.2 enforcement, 5.2.3, 5.2.4 importance of, 5.2.1 production, see DISCOVERY; DOCUMENT REQUESTS EQUITABLE RELIEF binding arbitration agreements, validity, 2.7.4 collateral collection or foreclosure proceedings, 5.4 requests for, considerations, 1.5.5 Rule 23(b)(2) certification, 9.1.2.1, 9.1.2.2 ESTATES class benefits, recovery, 11.5.4 EVIDENCE see AFFIDAVITS; EXHIBITS; EXPERT WITNESSES EXHIBITS see also DOCUMENTS class complaint, 4.1.2

439

EXPERT

Consumer Class Actions: A Practical Litigation Guide References are to sections

EXPERT WITNESSES survey consultants, 7.6.2 FAIR DEBT COLLECTION PRACTICES ACT (FDCPA) binding arbitration agreements, enforceability, 2.7.4 class actions under case summaries, Intro to Appx class definition, example, 3.2 class size, limiting, 3.4 federal jurisdiction, 1.5.6, 2.4 individual damages differences, effect, 9.3.5 predominance of common questions, 9.3.4.3 sample combined notice, Appx N.3.1 sample complaints, 4.1.1, Appx D.1 sample discovery, Appx E.1 sample interrogatories and requests, 7.4.1, Appx E.1 sample motion and proposed order, Appx K.1 sample objection to defendants document request, Appx J sample opening memorandum, Appx L.1 sample reply memorandum, Appx M.1 sample stipulation of proposed settlement, Appx O.1 counterclaims as violations of, 6.9 FEDERAL ARBITRATION ACT (FAA) see also ARBITRATION; BINDING ARBITRATION AGREEMENTS application, 2.7.2 classwide arbitration, application, 2.8.2 federal policy, 2.6 Magnuson-Moss Warranty Act, preemption by, 2.7.3 FEDERAL COURT ACTIONS see also CLASS ACTIONS classwide arbitration, 2.8.2 forum selection, 1.5.6, 2.1 jurisdiction avoiding, 2.3 diversity jurisdiction, 2.2 generally, 1.5.6 obtaining federal jurisdiction, 2.4 multiple claims, 1.5.6 sample class complaints, Appx B venue, 2.5 FEDERAL RULE OF CIVIL PROCEDURE 23 see RULE OF CIVIL PROCEDURE 23 (FEDERAL) FILES see RECORDS FLUID RECOVERY class actions, 9.6.3 FORECLOSURE PROCEEDINGS collateral to class action, 5.4 FORMS class action authorization, 1.2.4 proof of claim forms, see CLAIM FORMS sample forms, see APPENDICES standard form agreements, 9.3.4.1 standard form documents, 7.4.2 FRAUD CLAIMS see also CLASS ACTIONS case summaries, Intro to Appx class action suitability, 1.5.3 damages, individual differences, 9.3.5

jurisdiction, 1.5.6 predominance of common questions, 9.3.4.2 reliance issue, 9.3.4.2 sample complaint, Appx D.9 sample notices certification, Appx N.1 settlement, Appx N.2.1 FTC HOLDER RULE case summaries, Intro to Appx sample pleadings complaint, Appx D.6 notices, Appxs N.1, N.2.1 FUND see CLASS FUND HEIRS recovery of class members share, 11.5.4 HOME IMPROVEMENT CONTRACTS sample class complaint, Appxs D.2, D.8 sample class motion, Appx K.2 sample combined notice, Appx N.3.3 sample discovery, Appx E.4 sample memorandum in support of class settlement, Appx P.1 sample opening memorandum, Appxs L.3, L.8 sample reply memorandum, Appx M.3 sample stipulation of proposed settlement, Appx O.5 HOSPITAL COLLECTION ACTIONS case summary, Intro to Appx sample pleadings objection to defendants document request, Appx J reply memorandum in support of certification, Appx M.7 IDENTIFICATION NUMBERS class members, 13.2.2 distribution checks, on, 13.6.3 INJUNCTIVE RELIEF see EQUITABLE RELIEF INSURANCE CLAIMS see also INSURANCE COVERAGE Arbitration Act (FAA), application, 2.7.2 class actions class definition, example, 3.2 declaratory judgments, 1.5.3 reprocessing standards, determination, 14.2.2 sample complaint, 4.1.1 sample interrogatories and requests, 7.4.2 INSURANCE COVERAGE see also INSURANCE CLAIMS defendant, significance, 1.3.3 pleading to avoid coverage defense, 1.5.2 INTEREST settlement funds, 11.5.4 INTERNET class notice, use to send, 10.1.5 INTERROGATORIES see also DISCOVERY common questions, relating to, 7.4.2 contention interrogatories, 7.8.1 numerosity issues, 7.4.1

440

Index References are to sections

INTERROGATORIES (Cont.) sample interrogatories car lease case, Appx C.2.1 FDCPA case, 7.4.1, Appx E.1.1 state usury case, Appx E.4.1 UDAP case, Appxs E.2.1, E.3.1 VSI insurance case, Appx E.3.1 service, timing, 7.2 JOINDER alternative to class action, 1.1.6 impracticality as prerequisite to class certification, 9.7 JURISDICTION counterclaims, 6.9 diversity jurisdiction common fund exception, 2.2.2 monetary floor, 2.2.1 named plaintiff, computing monetary floor, 2.2.3 federal court, 1.5.6, 2.2 forum selection, 2.1 manoeuvering as defense tactic, 6.1 multistate actions, 2.1, 3.6.2 state court, 1.5.6, 2.3 supplemental jurisdiction, 2.2.1 JURY TRIALS arbitration agreements waiving, validity, 2.7.5 class actions jury instructions, 14.4.1 special interrogatories, use, 14.4.2 LANGUAGE class notice, 10.1.2 LEGAL SERVICES ATTORNEYS see also ATTORNEYS fee negotiations, assignments and waivers, 15.3.2 hourly rates, 15.2.5.2 LIENS attorneys liens, perfection, 1.2.6 LIMITATIONS see STATUTE OF LIMITATIONS; TIME LIMITS LITIGATION COSTS see ATTORNEYS FEES AND COSTS LODESTAR FORMULA see also ATTORNEYS FEES AND COSTS class actions, use, 11.9.3, 15.2.5 compensable time, 15.2.5.3 continued importance, 15.2.5.1 deficiencies with approach, 15.2.2 hourly rates, 15.2.5.2 multipliers, 15.2.5.2, 15.2.5.4 rejection of, 15.2.3 size of recovery, effect, 15.2.5.5 MANUAL FOR COMPLEX LITIGATION (3d ed. 1995) quick reference, settlement, 12.9 MISREPRESENTATION see FRAUD CLAIMS; UDAP CLASS ACTIONS MOTIONS class motion, see CLASS MOTION

NATIONAL

preliminary motions, see PRELIMINARY CLASS MOTIONS sample pleadings, see APPENDICES MULTIPLE CLAIMS see also CLASS ACTIONS advantage, 1.6.4 class definition, 1.6.3, 3.5.1 federal jurisdiction, 1.5.6, 2.4 generally, 1.6.1 limiting, 1.6.1 practical considerations, 1.6.4 problems, 1.6.2, 1.6.3 related class actions, 11.4 settlement, 1.6.3 statute of limitations, effect, 3.5.1 unmanageability, 1.6.2, 3.6.1 MULTIPLE CLASS ACTIONS see also CLASS ACTIONS consolidation, 1.1.5, 1.4, 11.4 related class actions co-ordination, 1.4 settlement considerations, 11.4 MULTIPLE DEFENDANTS see under DEFENDANTS MULTISTATE CLASS ACTIONS see also CLASS ACTIONS applicable law, 3.6.2 Arbitration Act (FAA), application, 2.7.2 case management, 3.6.1 disadvantages, 3.6.1 forum selection, 2.1 generally, 3.6.1 subclasses, 3.6.3 uniform state law, 3.6.3 venue, 2.5 NAMED PLAINTIFF see CLASS REPRESENTATIVE NATIONAL ASSOCIATION OF CONSUMER ADVOCATES (NACA) consumer class action guidelines attorney fee calculations, 15.2.3, 15.2.4, 15.2.5.1 attorney fee disclosures, 15.3.3 attorney fee negotiations, 15.3.1 release of claims, 12.3.2 scrip settlements, 11.6.1, 11.6.3 settlement notices, 10.3.1 settlement where multiple class actions, 11.4 text, Appx B quick references attorneys fees, 15.6 class notice, 10.5 settlement, 11.10, 12.9 NATIONAL CENTER ON POVERTY LAW unreported cases, obtaining, Intro NATIONAL CLEARINGHOUSE FOR LEGAL SERVICES see NATIONAL CENTER ON POVERTY LAW

441

NEWBERG

Consumer Class Actions: A Practical Litigation Guide References are to sections

NEWBERG ON CLASS ACTIONS (3d ed.) quick reference attorneys fees, 15.6 case selection, 1.7 certification, 9.9 class definition, 3.9 class fund, administration, 13.7 class list, 6.14 class notice, 10.5, 13.7 counterclaims 6.14 discovery, 7.9 improper communications, 5.5 named plaintiff, adequacy, 8.6, 9.9 pleadings, 4.4 settlement, 11.10, 12.9 NOTICE attorneys liens, 1.2.6 class actions, see CLASS NOTICE settlement, related class actions, 11.4 NUMEROSITY see also CLASS CERTIFICATION; CLASS LIST discovery document requests, 7.4.1 interrogatories, 7.4.1 necessity to establish, 7.1, 7.4.1 estimates, certification based on, 7.1 exact class size, necessity of proof, 9.7 joinder impractical, 9.7 limiting class size, 3.4 prerequisite to certification, 9.7 subclasses, requirements, 3.7 OPENING MEMORANDUM see under CLASS BRIEFS OPT-OUTS exclusion requests, 10.2.1 list of, preparation, 13.3 mandatory class actions, no right to, 9.1.1 problems with, 13.5 representing, 11.5.7, 13.5 rights, 10.1.1, 10.2.1, 10.3.2 settlement objections, 12.8.2 settlement, of, 12.8.5.4 PLAINTIFFS individual settlement attempts prior to filing, 1.2.3 joinder as alternative to class action, 1.1.6 named plaintiff, see CLASS REPRESENTATIVE PLEADINGS see APPENDICES; CLASS BRIEFS; CLASS COMPLAINT PREDOMINANCE OF COMMON QUESTIONS see also CLASS CERTIFICATION; COMMONALITY appropriate types of claims, 1.5.3 defense arguments against, 9.3.3 discovery requests, 7.4.2 FDCPA claims, 1.5.3, 9.3.4.3 individual questions of damages, 9.3.5 pattern of conduct, 1.5.3 prerequisite to certification, 9.3.1 product liability claims, 9.3.4.4 reliance issues, 1.5.3, 9.3.4.2 standard form contracts, 9.3.4.1

standards for predominance, 9.3.2 TIL claims, 1.5.3, 9.3.4.3 validity of plaintiff contentions, 9.2.3.1 warranty claims, 9.3.4.4 PRELIMINARY CLASS MOTIONS see also CLASS MOTION defendants motions, 6, 9.2.3.2 discovery, motion to compel document preservation prior to, 5.2.2 generally, 6.2, 7.3.3 sample pleadings, Appx G discovery, motion to stay generally, 6.5 sample response, Appx F discovery, notice of deposition, quashing, 6.11 motion to dismiss, 6.4, 6.5, 7.3.1, 9.2.3.2 noncommunication orders, 5.3.3, Appx I plaintiffs motions, 5 protective order arguing the motion, 5.2.4 defendants motion, 6.11 generally, 5.2.3 sample motion and order, Appx H redefinition of class, 6.6 summary judgment, 6.7, 9.2.3.2 time extensions, 6.8 PRIVILEGE see ATTORNEY-CLIENT PRIVILEGE PRODUCT LIABILITY CLAIMS class certification, 9.3.4.4 PRODUCTION OF DOCUMENTS see DISCOVERY; DOCUMENT REQUESTS PROOF see BURDEN OF PROOF PROTECTIVE ORDERS class representative, 8.4 contention interrogatory requests, 7.8.1 delaying tactic by defendant, 6.11 preservation of documents, 5.2.3, 5.2.4 sample motion and order, Appx H PUBLIC COMPANIES suing, 1.3.2 PUBLICATION class notice, 10.1.4, 13.2.7 nonpublicity settlement clauses, 11.5.8 settlement notice, 11.5.5 RECORDS see also DOCUMENTS access to documents copying of documents, 6.12.3 obstacles, 6.12.1 sample portion, 6.12.2 compilation of class list, 6.13, 7.4.3 defendants recordkeeping system, inspection, 7.7 destruction by defendant generally, 5.2.1 preservation order, 5.2.3, 5.2.4 prior to production request, 5.2.2 discovery prior to certification, 7.2, 7.3.3, 7.4.2, 7.4.3

442

Index References are to sections

RECORDS (Cont.) preservation of files immediate request for production, 5.2.2 importance, 5.2.1 protective orders, 5.2.3, 5.2.4, Appx H recordkeeping system, discovery, 7.7 RELEASES broad releases, 11.5.7, 12.3.1 drafting, 12.3 multiple claims, settlement, effect, 1.6.3 multistate claims, 12.3.1 NACA guidelines, 12.3.2, Appx B specific releases to avoid, 12.3.3 REPLY MEMORANDUM see under CLASS BRIEFS REPOSSESSION revolving schemes, class actions case summaries, Intro to Appx class definition, example, 3.1 sample complaint, Appx D.9 sample motion for protective order, Appx H sample stipulation of proposed settlement, Appx O.4 REPRESENTATIVENESS see also CLASS REPRESENTATIVE adequacy of representation ability to pay costs, 9.4.3 conflicts of interest, 9.4.2 control over the litigation, 9.4.5 generally, 9.4.1 understanding of case, 9.4.4 prerequisite to certification, 9.4 subclasses, 9.4.7 substitution of class representatives, 9.4.6 RES JUDICATA class actions, effect, 14.3 RESCISSION see also EQUITABLE RELIEF binding arbitration clauses, 2.7.6 TIL actions, see TIL CLASS ACTIONS RESEARCH AIDS case law summaries, Intro to Appx generally, Intro Manual for Complex Litigation quick reference, 12.9 NACA guidelines, see NATIONAL ASSOCIATION OF CONSUMER ADVOCATES (NACA) Newberg quick reference, see NEWBERG ON CLASS ACTIONS (3d ed.) sample pleadings, see APPENDICES REVOLVING REPOSSESSION see REPOSSESSION RICO CLASS ACTIONS see also CLASS ACTIONS case summaries, Intro to Appx class certification, 1.5.3 federal jurisdiction, 1.5.6, 2.4 predominance of common questions, 9.3.4.2 reliance, necessity, 1.5.3 sample complaint, Appxs D.6, D.9

STANDARD

sample objections to settlement, Appx Q.2 sample response to motion to stay discovery, Appx F RULE OF CIVIL PROCEDURE 23 (FEDERAL) adequacy of representation, Rule 23(a)(4) certification under, overview, 9.1.1 certification under 23(b)(1) circumstances, 9.1.3 comparison with other types, 9.1.1 certification under 23(b)(2) application to consumer cases, 9.1.2.1 comparison with other types, 9.1.1 general standards, 9.1.2.1 certification under 23(b)(3) comparison with other types, 9.1.1 prerequisites, 9.1.1, 9.3.1 class motion, filing, Rule 23(c), 9.2.1 class notice under certification notice, 10.2 combined notice, 10.2.2.4, 10.3.1 mailing, 13.2.6 post-judgment notice, 10.4 settlement notice, 10.3, 12.5, 12.7 types, 10.1.1 commonality, Rule 23(a)(2), 9.3.1 numerosity, Rule 23(a)(1), 9.7 settlement attempts with named plaintiff, 6.3 superiority, Rule 23(b)(3), 9.6 text, Appx A typicality, Rule 23(a)(3), 9.5 SCRIP SETTLEMENTS see also CLASS SETTLEMENTS attorneys fees, 11.6.5 cash payments in addition, 11.6.3 coupon value comparison to attorney fees, 11.6.5 comparison to claims released, 11.6.4 determination, 11.6.3 redemption likelihood, 11.6.2 court rejection, 11.6.1 NACA guidelines, 11.6.1, 11.6.3 overview, 11.6.1 problems with, 11.6.1 SETTLEMENT class action settlement, see CLASS SETTLEMENTS individual settlement attempts prior to filing, 1.2.3 NACA guidelines, 12.3.2, Appx B named plaintiff, attempts to settle with, 6.3, 11.1 SETTLEMENT AGREEMENT see STIPULATION OF PROPOSED SETTLEMENT SETTLEMENT NOTICE see under CLASS NOTICE SKIP TRACING locating class members by, 11.5.5, 13.2.3 STANDARD FORM CONTRACTS binding arbitration provisions, see BINDING ARBITRATION AGREEMENTS document requests, 7.4.2 predominance of common questions, 9.3.4.1

443

STATE

Consumer Class Actions: A Practical Litigation Guide References are to sections

STATE COURT ACTIONS see also CLASS ACTIONS classwide arbitration, 2.8.2 forum selection, 2.1 keeping action in state court, 2.3 sample class complaints, Appx B STATE LAW binding arbitration agreements, application, 2.7.2, 2.8.2 multistate actions, 3.6.2, 3.6.3 STATUTE OF LIMITATIONS class definitions, effect, 3.5 tolling pending certification, 9.2.1 STATUTORY DAMAGES see also CLASS DAMAGES attorney fee awards, 15.2.5.5 class size, effect on, 3.4 commonality issues, relationship, 9.3.4.3 federal diversity jurisdiction calculations, 2.2.3 STAY OF PROCEEDINGS appeal as, 9.8 discovery, motion to stay, 6.5, Appx F summary judgment, pending certification ruling, 9.2.3.2 STIPULATION OF CERTIFICATION see also CLASS CERTIFICATION circumstances, 9.2.4 STIPULATION OF PROPOSED SETTLEMENT see also CLASS SETTLEMENTS administrative aspects, checklist, 12.4 court approval, 12.5 drafting, 12.1 model provisions, 12.2 objections, sample objections, Appx Q.1 proposed final order, 12.6 release of claims, 12.3 sample stipulations CLA, Appx O.3 FDCPA, Appx O.1 revolving repossession, Appx O.4 state usury case, Appx O.5 TIL, Appx O.2 UDAP, Appx O.3 settlement notice, court approval, 12.5 SUBCLASSES see under CLASS DEFINITION SUMMARY JUDGMENT cost of notice, 10.2.2.3 motion for, 6.7, 9.2.3.2 stay pending ruling on class certification, 9.2.3.2 SUPERIORITY see also CLASS CERTIFICATION counterclaims, effect, 9.6.2 prerequisite to certification, 9.6.1 small recoveries, effect, 9.6.3 SURVEYS class actions advantages, 7.6.1 consultants, 7.6.2 design, 7.6.3 implementation, 7.6.4

TELEPHONE INQUIRIES responding to, 13.4 TIL CLASS ACTIONS see also CLASS ACTIONS binding arbitration agreements, enforceability, 2.7.4 case summaries, Intro to Appx federal jurisdiction, 1.5.6, 2.4 individual damages differences, effect, 9.3.5 predominance of common questions, 9.3.4.3 sample combined notice, Appx N.3.2 sample complaints hidden finance charge, Appx D.3 home improvement contract, Appx D.2 untimely disclosure, Appx D.4 sample memoranda in support of certification opening memoranda, Appxs L.2, L.3, L.4, L.5 reply memoranda, Appxs M.2, M.3, M.4 settlement, Appx P.1 sample motions for certification hidden finance charge, Appx K.3 rescission, Appx K.2 untimely disclosure, Appx K.4 sample objections to settlement, Appx Q.2 sample settlement notice, Appx N.2.2 sample stipulations of proposed settlements dealer settlement, Appx O.2.1 related lender/assignee settlement, Appx O.2.2 standard form documents, production requests, 7.4.2 TIME EXTENSIONS defendants requests for, 6.8 TIME LIMITS see also STATUTE OF LIMITATIONS class definition, 3.5 TRANSLATION class notice, 10.1.2 TRIALS damages determinations, 14.2 jury trials, see JURY TRIALS res judicata effect, 14.3 TRUTH IN LENDING (TIL) see TIL CLASS ACTIONS TYPICALITY see also CLASS CERTIFICATION prerequisite to certification, 9.5 UDAP CLASS ACTIONS see also CLASS ACTIONS binding arbitration agreements, enforceability, 2.7.4 case summaries, Intro to Appx class certification, 1.5.3 predominance of common questions, 9.3.4.2 sample complaints car lease, Appx D.5 FTC holder notice, Appx D.6 home improvement contract, Appx D.2 revolving repossessions, Appx D.9 VSI insurance, Appx D.7 sample discovery pleadings car lease, Appx E.2 compel discovery, Appx G response to motion to stay, Appx F

444

Index References are to sections

UDAP CLASS ACTIONS (Cont.) sample discovery pleadings (Cont.) VSI, Appx E.3 sample memorandum in support of settlement, Appx P.2 sample motion for certification home improvement contract, Appx K.2 VSI insurance, Appx K.5 sample notices certification, Appx N.1 settlement, Appx N.2 sample opening memorandum in support of certification car lease, Appx L.6 credit card refund, Appx L.2 home improvement contract, Appx L.3 VSI, Appx L.7 sample reply memorandum in support of certification car lease, Appx M.5 credit card refund, Appx M.2 home improvement contract, Appx M.3 VSI insurance, Appx M.6 sample stipulation of proposed settlement, Appx O.3 USURY CLASS ACTIONS see also CLASS ACTIONS case summary, Intro to Appx sample combined notice, Appx N.3.3 sample complaint, Appx D.8 sample discovery document requests, Appx E.4.2 interrogatories, Appx E.4.1

WARRANTY

requests for admissions, Appx E.4.3 requests for production, Appx E.4.2 sample opening memorandum, Appx L.8 sample stipulation of proposed settlement, Appx O.5 VENDORS SINGLE INTEREST INSURANCE (VSI) class actions case summary, Intro to Appx production requests, examples, 7.4.2 sample class motion, Appx K.5 sample complaint, Appx D.7 sample discovery, Appx E.3 sample opening memorandum, Appx L.7 sample reply memorandum, Appx M.6 VENUE federal court actions defendants residence, 2.5.2 generally, 2.5.1 multiple defendants, 2.5.4 transaction occurrence, 2.5.3 WAIVER attorney-client privilege, 8.5.2 attorneys fees, agreement not to, 15.3.2, Appx C.2 binding arbitration, 2.7.7 WARRANTY CLAIMS see also CLASS ACTIONS binding arbitration agreements, validity, 2.7.3 class certification, 9.3.4.4

445

Quick Reference to the Consumer Credit and Sales Legal Practice Series
References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series. This Quick Reference pinpoints where to find specific consumer law topics analyzed in the NCLC manuals. References are to individual manual or supplement sections from the National Consumer Law Centers Consumer Credit and Sales Legal Practice Series. For more information on other volumes, see What Your Library Should Contain at the beginning of this volume. This Quick Reference is a speedy means to locate key terms in the appropriate NCLC Manual. More detailed indices are found at the end of the individual NCLC volumes. The detailed contents pages at the beginning of each volume provide further elaboration once the appropriate manual is identified by use of this Quick Reference. All pleadings and most statutory and regulatory appendices are also available from NCLC on disks that accompany the specified volume. Abbreviations
AUS 3Access to Utility Service (1996 and 1998 Supp) Auto 3Automobile Fraud (1998 and 1999 Supp) Bankr 3Consumer Bankruptcy Law and Practice (5th ed. 1996 and 1999 Supp) CCA 3Consumer Class Actions: A Practical Litigation Guide (4th ed. 1999) CLP5 3Consumer Law Pleadings with Disk Number Five (1999) CLP4 3Consumer Law Pleadings with Disk Number Four (1998) CLP3 3Consumer Law Pleadings with Disk Number Three (1997) CLP2 3Consumer Law Pleadings with Disk Number Two (1995) CLP1 3Consumer Law Pleadings with Disk Number One (1994) COC 3The Cost of Credit: Regulation and Legal Challenges (1995 and 1999 Supp) CD 3Credit Discrimination (2d ed. 1998 and 1999 Supp) FCRA 3Fair Credit Reporting Act (4th ed. 1998 and 1999 Supp) FDC 3Fair Debt Collection (3d ed. 1996 and 1999 Supp) Repo 3Repossessions and Foreclosures (4th ed. 1999) TIL 3Truth in Lending (4th ed. 1999) UDAP3Unfair and Deceptive Acts and Practices (4th ed. 1997 and 1999 Supp) Warr 3Consumer Warranty Law (1997 and 1999 Supp) Abandonment of Apartment Building in BankruptcyBankr 17.8.2 Abbreviations Commonly Used by Debt CollectorsFDC App M Abuse of ProcessUDAP 5.1.4; FDC 12.6 AccelerationCOC 5.6.2, 5.7.1; Repo 4.1 AccessionsRepo 3.5.3.2 Accrediting Agencies, Student LoansUDAP 11.8.2 Accurate Information in Consumer ReportsFCRA 9.10 Actual DamagesSee Damages Actuarial RebatesCOC 5.6.3.4 Adhesion ContractsUDAP 5.2.3 Adjustable Rate MortgagesTIL 4.6.4; COC 4.3.6 Administration of Lawsuit, Class ActionCCA Chs 13; CLP1 Admissibility of Other Bad ActsAuto 9.7.1.1 Advertisements as WarrantiesWarr 3.2.2.5 Advertising by Attorneys on the InternetCLP4 Ch 10 Advertising Credit TermsTIL 5.13, 9.4 Affordability Programs, UtilitiesAUS Supp Chs 20, 21, App F After-Acquired PropertyRepo 3.4.5.2 Age Discrimination re CreditCD 3.5.8, 6.3.2 Airline Fare AdvertisingUDAP 2.5, 5.4.10.1 Alimony Discharged in BankruptcyBankr 14.4.3.5 Alimony, Protected Source under CDCD 6.2.1.6 Alternative Dispute MechanismsFDC 13.8; UDAP 7.7.2 Americans With Disabilities Act Complaint, Class Action CLP4 Ch 16 Amortization ExplainedCOC 4.3.1 Amortization NegativeCOC 4.3.1.2 Amount FinancedTIL 4.6.2 Annual Percentage RateTIL 4.6.4, 5.5.9; COC 4.4 Antecedent Debt ClausesRepo 3.9 Anti-Competitive Conduct as UDAP ViolationUDAP 4.10 Anti-Deficiency StatutesRepo 12.4.3 Apartment Buildings Abandoned in BankruptcyBankr 17.8.2 Apartment LeasesBankr 12.9; UDAP 2.2.6, 5.5.2 Applications for CreditCD 4.2.2, Ch 5 Appraisals, Right to a CopyCD 7.11 APRSee Annual Percentage Rate ArbitrationUDAP 7.7; Warr 10.2; FDC 13.8; CLP1 Ch 1; CLP4 1.4; CLP5 Ch 12 Arbitration Agreements Effect on UDAP ActionUDAP 7.7 Arbitration and Class ActionsCCA Ch 2 As IsWarr Ch 5; Auto 7.8.3 Assignee LiabilityUDAP 6.6; TIL 7.3.7 Assignment of Tax RefundsCOC 7.5.4; TIL 2.2.4.3.6 Assistance for the Payment of Utility ServiceAUS Ch 16 Attorney Advertising on the InternetCLP4 Ch 10 Attorney as Debt CollectorFDC 4.2.6, 13.3 Attorney FeesTIL 8.9; Bankr Ch 15; Auto 4.7.3, 9.11; CD 11.6; FCRA 13.6; FDC 6.8, 13.2, 13.3; UDAP 8.8; Warr 10.8; CLP1 Ch 11; CLP5 Ch 8

446

Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Attorney Fees, Class ActionsCCA Ch 15, App C Attorney Fees for CreditorsCOC 7.3.3; FDC 13.7 Attorney Fees, Sample PleadingsAuto Supp. App J; FDC App G; CLP1 2.10, 4.14, Ch 11; CLP2 3.3.11; CLP4 4.3, 15.25 Attorney General EnforcementUDAP Ch 10 Attorneys Liable Under FDCPAFDC 4.2.6, 4.6.2 Attorneys Liable Under UDAPUDAP 2.3.9, 5.12.1 AuctionsRepo 10.7.1, 10.9.2.4; Auto 2.5.4, 2.6.4 Authorization to RepresentCCA App C Authorization to SueCCA 1.2.4 Automatic StayBankr Ch 9 Automobile AccessoriesUDAP 5.4.4.6.5 Automobile AuctionsSee Auctions Automobile Dealer FilesUDAP 5.4.2 Automobile Dealer LicensingAuto Supp 6.4 Automobile Dealers, Bonding RequirementAuto 9.12.3, App C Automobile Dealers, Rebate FraudCLP3 9.2 Automobile FraudAuto; CLP3 Ch 9 Automobile Insurance, Force-PlacedSee Force-Placed Auto Insurance Automobile Leases, Article 9 CoverageRepo 19.2.1 Automobile Leases, Default and Early TerminationTIL Ch 9; UDAP 5.4.6.3; Repo 19.2; CLP1 Ch 9 Automobile Leases, MisrepresentationUDAP 5.4.6 Automobile Leases, Odometer RollbacksAuto 3.6.6.5, 4.2.6; CLP1 Ch 3 Automobile Leases, Sublease ScamsUDAP 5.4.8 Automobile Leases, UnconscionabilityUDAP 5.4.6.5 Automobile Manufacturers, ListWarr Supp App M Automobile Pawn TransactionsBankr Supp 11.9; COC Supp 7.5.2.3; Repo 3.5.5; CLP3 4.2, 4.3 Automobile RentalsUDAP 5.4.7 Automobile RepairsWarr Ch 16; UDAP 5.4.1 Automobile RepossessionSee Repossessions Automobile Safety Inspection LawsWarr 14.7 Automobile SalesWarr Chs 13, 14; UDAP 5.4.2, 5.4.3, 5.4.4; CLP2 Chs 5, 6 Automobile ServiceWarr 16.8; UDAP 5.4.5 Automobile Spot Delivery AbusesUDAP Supp 5.4.4.9a; Repo 4.5; TIL 4.4.1 Automobile Sublease ScamsUDAP 5.4.8 Automobile TitleAuto 2.3, 2.4, App D; Warr 14.3.5 Automobile ValuationBankr Supp 11.2.2.2.1 Automobiles, Theft Prevention, Federal Statutes & RegulationsAuto App B.2 Bad ChecksFDC 5.6.4, 13.8 Bail (i.e. replevin)Repo Ch 5 Bait and SwitchUDAP 4.6.1 Balloon PaymentsCOC 4.6.2, Ch 5; TIL 2.2.4.2.2 Bank Accounts, AttachmentFDC Ch 15; CLP2 12.3 Bank Accounts, JointFDC 15.3 Bank Accounts, Set-OffFDC 15.2 Bank Accounts, Unfair PracticesUDAP 4.4.4, 5.1.14 Bank Loan Discrimination, Dept. of Justice SettlementCD App I.1 Bankruptcy and Debt CollectionFDC 2.2.2, 11.8; Bankr 9.4.3 Bankruptcy and Security InterestsRepo Ch 8 Bankruptcy and Utility ServiceAUS Ch 12, Bankr 9.8 Bankruptcy, Claims Against Landlords inBankr 17.8 Bankruptcy, Claims Against Merchants inBankr Ch 17; UDAP 6.7; CLP1 Ch 10 Bankruptcy Code, TextBankr App A Bankruptcy, Consumer Reports ofFCRA 7.6.8, 9.10.4.10.2, 10.3.7 Bankruptcy Court as Litigation ForumBankr Ch 13, CLP1 Ch 8; CLP4 Ch 14 Bankruptcy Official FormsBankr App D Bankruptcy Petition PreparersBankr 15.6 Benefit Overpayments and BankruptcyBankr 14.5.5.4 BibliographyBankr, CD Billing Error Procedures, Credit CardsTIL 5.8 Blanket Security InterestsRepo 3.4.5.2.2 Boat, Seizure ofCLP2 12.2 Bond, Claims Against SellersUDAP 6.8; Auto 9.12.3, App C Bonding StatutesAuto App C Book-of-the-Month ClubsUDAP 5.8.5 Breach of ContractUDAP 5.2.5 Breach of the Peace and RepossessionRepo 6.4 Breach of WarrantiesWarr; UDAP 5.2.7.1 Briefs, Class ActionCCA Ch 9 Broker FeesTIL 3.6.3.2; COC 7.4.2, 11.2.1.4 Brokers, AutoUDAP 5.4.8 Brokers, LoanSee Loan Brokers Brokers, Real EstateSee Real Estate Brokers Budget Payment PlansAUS 5.5 Burglar Alarm SystemsUDAP 5.6.2 Business Credit, Discrimination reCD 2.2.6.5 Business OpportunitiesUDAP 2.2.9.2, 5.13.1 Buy Here, Pay Here Car SalesUDAP 5.4.3.11 Buying ClubsUDAP 5.10.6 Calculating Interest RatesCOC Ch 4 Campground Resort MembershipsUDAP 2.2.8, 5.10.5; CLP1 Ch 6 Cancellation RightsTIL Ch 6; UDAP 5.2.6, 5.8.2, 9.5 Cardholders DefensesTIL 5.16 CarfaxAuto 2.3.3 CarsSee Automobile Case SelectionCCA 1.2 Case Summaries, ECOACD App F Case Summaries, FDCPAFDC App H Case Summaries, OdometerAuto App I Cash DiscountsTIL 5.7 Chapter 7 BankruptcyBankr Ch 3 Chapter 11 BankruptcyBankr 6.3.3, 17.7 Chapter 12 BankruptcyBankr Ch 16 Chapter 13 BankruptcyBankr Ch 4 Charge CardsTIL 5.3 Charitable ContributionsBankr Supp 1.1.1.5 Charitable SolicitationsUDAP 5.13.5 Check Advancement LoansSee Payday Loans Check Approval CompaniesFCRA 2.3.5.3, 2.6.1, 5.4.2.2.5, 7.2.2, 7.3.5 Check Cashing ServicesUDAP 5.1.14 Check Guarantee CompaniesFDC 4.2.2 Checklist, Automobile Fraud LitigationAuto 1.4 Checklist, Debt CollectionFDC App C Checklist, RepossessionsRepo Ch 1 Checklist, Truth in LendingTIL 1.6, 3.11 Checklist, UsuryCOC 1.6 Checks, BadFDC 5.6.4, 13.8 Checks, Preauthorized DraftUDAP 5.1.14 Child Support, Credit ReportsFCRA 4.3.1, 7.2.7.4 Child Support Discharged in BankruptcyBankr 14.4.3.5 Children in Household, Discrimination Based OnCD 3.5.5 Churning Repossession SchemesRepo 10.9.3 Civil Rights ActCD 1.5

447

Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Class ActionsCCA; AUS 15.5.1; Auto 9.6, App H; FCRA 12.7.2; FDC 6.2.1.2, 6.3.4, 6.6.5, 12.6.2; TIL 6.15, 8.8; UDAP 8.5; CLP15 Class Actions and ArbitrationCCA Ch 2, CLP1 Ch 1; CLP4 Ch 1; CLP5 Ch 12 Class Actions, Evaluating a Potential LawsuitCLP4 9.1 Class Actions Guidelines for Settlement, NACACCA App B; CLP4 12.2 Class Actions in Bankruptcy CourtBankr 13.7, 17.4.2 Class DefinitionsCCA Ch 3; CLP4 9.2 Class NoticesCCA Ch 10; App N Client Authorization to RepresentCCA App C Client Authorization to SueCCA 1.2.4 Client Contacts with Other PartiesCCA 1.2.6, 5.3; FDC 2.5.2, 2.5.3 Client FormsCLP4 15.715.21 Client Handout on BankruptcyBankr App I Client Handout on Credit DiscriminationCD App J Client Handout on Credit ReportingFCRA App K Client Interview Checklist, BankruptcyBankr App H Client Interview Checklist, Debt Collection Harassment FDC App C Client Interview Sheet, WarrantiesWarr App H Client Retainer Forms, SampleCLP4 Ch 8 Closed-End Auto LeasesTIL Ch 9; Repo 19.2; CLP1 Ch 9 Closed-End CreditTIL Ch 4 Coercive Sales TechniquesUDAP 4.8 CollateralRepo Collection FeesFDC 13.7 College Transcripts and BankruptcyBankr 9.4.3, 14.5.5.2 Collision Damage Waiver (CDW)UDAP 5.4.7 Common Law Contract DefensesUDAP 9.5 Common Law Fraud, MisrepresentationWarr 11.3; UDAP 9.6.3; Auto Ch 7 Common Law Right to Utility ServiceAUS 4.1.1 Common Law Violations and Credit ReportingFCRA 12.2 Common Law WarrantiesWarr 16.4 Communications to Client from Other AttorneyCCA 5.3; FDC 5.3.3 Compensating BalancesCOC 7.4.4 Complaint Drafting, Class ActionsCCA Ch 4 ComplaintsSee Sample Complaints Compound InterestCOC 4.6.1 Computers, Sale ofUDAP 5.7.6 CondominiumsUDAP 5.5.4.5 ConsignmentRepo 9.6.3.3 Conspiracy in Odometer CaseAuto 3.7 Constructive Strict ForeclosureRepo 9.4.3, 10.5.2, 11.3.4 Consumer Class ActionsCCA; CLP4 Ch 9 Consumer Complaints to Government AgenciesUDAP 9.7 Consumer Credit Reporting Reform Act of 1996FCRA 1.4.6 Consumer Guide to Credit ReportingFCRA App K Consumer Leasing ActTIL Ch 9, App H.1 Consumer Recovery FundsAuto 9.12.4 Consumer Reporting AgenciesFCRA; CLP2 Ch 10 Consumer Reporting Agencies, Enforcement Agreements FCRA App F Consumer Reporting Agency, Sample User Agreement FCRA App J Consumer Reports, Disputing and Right to UseFCRA Ch 9 Consumer Reports, Keeping Credit Disputes Out ofFCRA 7.5 Consumer Reports for Business TransactionsFCRA 2.3.4.4, 2.3.5, 4.2.4.3, 4.2.9 Consumer Reports for Employment PurposesFCRA 2.3.5.6, 4.2.5 Consumer Reports for Government BenefitsFCRA 2.3.5.8, 4.2.7 Consumer Reports for Insurance PurposesFCRA 2.3.5.7, 4.2.6 Consumer Reports from Non-Reporting AgenciesFCRA 5.4.4 Consumer Representation, Tips ForUDAP 7.11 Consumer Resources ListsUDAP Supp App H Consumer/Seller Liability under Odometer ActAuto 3.8.11 ContestsUDAP 4.6.6, 5.13.4 Contract DefensesUDAP 9.5 Contractual MisrepresentationsUDAP 5.2.4 Correspondence SchoolsUDAP Ch 11 CosignersBankr 9.4.4; CD 5.6; FCRA 6.6, 7.2.7.1; Repo 12.9; TIL 2.2.2.2, 8.2; UDAP 5.1.3.1.8 Counseling the DebtorBankr Ch 6 Coupon Settlement, Class ActionsCCA 11.6; CLP4 Ch 12 Credit AbusesCOC; UDAP 2.2.1, 5.1.8; CLP1 Credit Accident and Health InsuranceCOC 8.3.3; TIL 3.7.8, 3.9.4 Credit BalancesTIL 5.5; UDAP 5.1.6 Credit Card FindersUDAP 5.1.17 Credit Card Issuers, Raising Seller-Related Claims Against UDAP 6.6; TIL 5.8, 5.16 Credit Card Issuers Security Interest in Goods Purchased Repo 3.6 Credit Card SurchargesTIL 5.3 Credit Card Unauthorized UseTIL 5.15; CLP2 Ch 9 Credit CardsTIL Ch 5; UDAP 5.1; FDC 4.2.2 Credit Cards, Reporting Services for LostUDAP 5.1.18 Credit ChargesCOC Ch 5; UDAP 5.1.8.2 Credit Denial, NoticeCD 7.5; FCRA 5.2 Credit Disability InsuranceCOC 8.3.3, 8.5.2.3; Repo 14.7.5; TIL 3.7.8, 3.9.4 Credit EvaluationCD 4.2.3, 9.3 Credit File, Disputing and Right to SeeFCRA Chs 3, 9 Credit InsuranceCOC Ch 8; TIL 3.7.8, 3.9.4; Repo 4.4; UDAP 5.3.9 Credit Life InsuranceCOC 8.3.2, 8.5.3.1.2; TIL 3.7.8, 3.9.4 Credit MathCOC Ch 4 Credit Property InsuranceCOC 8.3.5, 8.5.3.1.4, 8.5.3.3.3, 8.5.4.4; TIL 3.9.4.4, 3.9.4.6, 4.9.7 Credit Rating, Injury toFCRA 7.4; FDC 5.5.1.8, 8.3.7; UDAP 8.3.3.6; CLP2 Ch 10 Credit Regulation, History ofCOC Ch 2 Credit Repair OrganizationsFCRA Ch 8, Apps O, J.5; UDAP 5.1.16 Credit Reporting Agencies, ContactingFCRA 3.4.2 Credit ReportsFCRA; UDAP 5.1.15; TIL 5.15.5; CLP2 Ch 10; CLP4 Ch 7 Credit Reports from Non-Reporting AgenciesFCRA 5.4.4 Credit Reports, Affiliate SharingFCRA 2.4.2, 3.4.1.5, 3.5.8, 5.4.4.4, 5.5.4 Credit Reports, Furnishers of Information Obligations FCRA 7.5.1, 9.3, 9.9 Credit Reports, Keeping Credit Disputes Out ofFCRA 7.5 Credit Reports, Student LoansUDAP 11.6 Credit ScamsUDAP 5.1.95.1.12 Credit ScoringCD 6.3.1, 9.3.2; FCRA 5.6.4 Credit TermsCOC; UDAP 5.1.7 Credit Terms, DiscriminationCD 4.2 Creditor RemediesFDC Chs 9, 1416; UDAP 5.1.3 Creditors Overcharges in BankruptcyCLP3 Ch 7 Creditors, Types ofCOC Chs 2, 9 CreditworthinessCD 6.3.2; Bankr 6.2.2.2

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Criminal Prosecution ThreatsFDC 13.8 Cross-CollateralRepo 3.7.2 Cross Metering, Utility ServiceAUS 14.1, 14.2 Cure of DefaultRepo 4.8, 13.2.4 Cy PresCCA 11.7; CLP1 Ch 12; CLP3 Ch 3; CLP5 Ch 11 DamagesFDC 2.4.2, 6.3, Ch 12; FCRA Ch 13; Repo Ch. 13; TIL Ch 8; UDAP 8.3; Warr 10.410.6; CLP1 Damage to Credit RatingUDAP 8.3.3.6; CLP2 Ch 10 Dance StudiosUDAP 5.10.4 Dealers Only Auto AuctionsRepo 10.9.2.4 Debt Cancellation AgreementsTIL 3.7.9, 3.9.4.7 Debt CollectionFDC; UDAP 2.2.2, 5.1.1; CLP2 Ch 11; CLP3 Ch 3; CLP4 Ch 6 Debt Collection Case PreparationFDC Ch 2 Debt Collection Procedures ActFDC 10.5 Debt Collection ScamsUDAP 5.1.11 Debt CollectorsFDC 1.3, Ch 4 Debt Collectors Common AbbreviationsFDC App M Debt Harassment, How to StopFDC 2.2.3 Debtor in Possession under Chapter 12Bankr 16.3 DeceitWarr 11.3; UDAP 9.6.3 DeceptionUDAP 4.2; FDC 5.5 Deceptive Practices StatutesSee UDAP Deceptive PricingUDAP 4.6.3 DefamationFDC 12.5; FCRA 12.3.7 Defamatory Use of MailFDC 11.1 DefaultRepo Ch 4 Default InsuranceTIL 3.7.6 Defective Automobile TitleAuto Defenses as Grounds for NonpaymentRepo 4.6 Deferred Payment PlansAUS 5.5, 16.4.4.2 Deficiency ActionsRepo Ch 12, App C.1 Deficiency JudgmentsRepo 17.3 DelayUDAP 4.9.2 Delaying Tactics, OpposingCCA Ch 6 Delinquency ChargesSee Late Charges Deliverable FuelsAUS Ch 2 Demonstrator VehiclesAuto 1.4.8, 2.1.6 Denial of Credit, NoticeFCRA 5.2 Department of Housing and Urban Development (HUD)CD 12.2.1, App D; Repo Chs 14, 15 Deposit, Consumers Right to Return When Seller Files BankruptcyBankr 17.5 Depositions in Class ActionsCCA 7.4.4, Ch 8 Depository CreditorsCOC Ch 2; FDC Ch 15 DetinueRepo Ch 5 Direct Student LoansUDAP Ch 11 Disabilities, Discrimination Based OnCD 3.5.9 Discharge in BankruptcyBankr Ch 14 Discharging Student Loan ObligationsUDAP 11.4 Disclaimers, WarrantiesWarr Ch 5 Disclosure and UDAPUDAP 4.2.14 Disclosure of Credit TermsTIL Disconnection of Utility ServiceAUS DiscoveryAuto Supp 2.7, App F Discovery, Class ActionsCCA Ch 7, App E; CLP1 DiscoverySee also Sample Interrogatories; Sample Document Requests Discovery, Motions to CompelCCA Apps F, G, H Discrimination in Collection TacticsFDC 11.7 Discrimination re CreditCD Disposition of Repo CollateralRepo Chs 9, 10 Dispute Resolution MechanismsWarr 2.8, 13.2.9 Disputing Information in Consumer ReportFCRA 7.5 Document Preparation FeesTIL 3.9.5 DOench, Duhme DoctrineCOC 10.7; Repo 12.10, 14.7.7; UDAP 6.6.7 DOJ Enforcement ActionsCD App I Door-to-Door SalesUDAP 5.8.2; Warr 16.6 Dragnet ClausesRepo 3.9 Driver Privacy Protection ActAuto 2.2.4, App A.2 Drivers Licenses and BankruptcyBankr 14.5.4, 14.5.5.1 Drunk Driving Debts in BankruptcyBankr 14.4.3.9 Dunning, How to Stop with Sample LettersFDC 2.2.3 DuressUDAP 9.5.11; AUS 7.3.2; FDC 14.3 Duty of Good Faith and Fair DealingCOC 11.7 Early Termination Penalties in Auto LeasesTIL 9.5 Earned Income Tax CreditBankr 2.5.2 Educational LoansSee Student Loans Elder Financial ExploitationCLP3 Ch 1 Elderly, Special Foreclosure ProblemsRepo 14.11 Election of Remedy StatutesRepo 11.4 Electric ServiceAUS Electric Service, RestructuringAUS Supp Employer BankruptcyBankr Supp 17.7.11 Employment AgenciesUDAP 5.13.2 Encyclopedia SalesUDAP 5.7.1 EndorsementsUDAP 4.7.7 Energy Savings ClaimsUDAP 5.6.5 Equal Credit Opportunity ActCD; AUS 5.3, 8.4; FCRA 5.4.5, 7.2.6, Ch 6 Ethnic DiscriminationCD 3.5.3 EvictionsAUS 10.5; UDAP 5.5.2.5; CLP2 1.2, 1.3, 1.4, 2.1 Evidentiary Issues in Automobile LitigationAuto 9.7 Exempt Benefits and BankruptcyBankr 10.2.2.11 Exempting Interest RatesCOC Ch 3 Exemption PlanningBankr 10.4.1 Exemptions, Benefits, Earnings, Due Process Protections FDC 9.1, Chs 15, 16 Experts, Attorney Fee Award forUDAP 8.8.7.3 Expert Witnesses, Sample QuestionsAuto Supp App G.4, J.3 Exportation of Interest RatesCOC Ch 3 Express WarrantiesWarr Ch 3 Expressio Unius Est Exclusio AlteriusCOC 9.3.1.2 Extended WarrantiesSee Service Contracts Extortionate CollectionFDC 11.5 Fair Credit and Charge Card Disclosure ActTIL 5.3 Fair Credit Billing ActTIL 5.8; FCRA 7.5.4.1.1; AUS 5.3.4.3 Fair Credit Reporting ActFCRA; FDC 11.6; CLP2 Ch 10; CLP3 Ch 5 Fair Debt Collection Practices ActFDC Chs 37, Apps A, B, H, I; CLP2 Ch 11; CLP3 Ch 3; CLP4 Ch 6 Fair Housing ActCD; AUS 8.3 Fair Housing Act RegulationsCD App D False Pretenses, Obtaining Consumer ReportsFCRA 4.6 Family Expense LawsFDC 14.4; CD 4.2.17 Farm Reorganizations, BankruptcyBankr Ch 16 Farmworker CampsUDAP 2.2.7, 5.5.3 Federal Agency Collection ActionsFDC Ch 10 Federal Civil Rights ActsCD; AUS 3.7.1 Federal Energy Regulatory Commission (FERC)AUS 14.1.4 Federal False Claims ActUDAP 9.4.13 Federal Preemption of State Usury LawsCOC Ch 3 Federal Racketeering StatuteSee RICO Federal Reserve BoardSee FRB Federal Trade CommissionSee FTC Federally Insured Student LoansUDAP Ch 11 FeesTIL 3.7; COC 7.2.1; FDC 13.7 FHA Mortgage ForeclosureCLP2 3.2

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Fiduciary DutyCOC 8.7.2, 11.8 Film Developing PackagesUDAP 5.7.8 Finance ChargeTIL Ch 3; COC 4.4 Finance Charges, HiddenCOC Ch 7; TIL 3.10 Finance CompaniesCOC Ch 2; UDAP 2.2.1, 5.1.8 FlippingCOC 6.1; UDAP 5.1.8; CLP3 Ch 2 Flood Damage to VehicleAuto 2.1.3 Food AdvertisingUDAP 5.11.2 Force-Placed Auto InsuranceUDAP 5.3.10; COC 8.3.5.4.2; TIL 3.9.4.4.2; CLP1 Ch 2; CLP5 Ch 5 ForeclosureRepo; CLP2 Ch 3 Foreclosure, ChecklistRepo 1.2 Foreclosure, Preventing Through BankruptcyBankr Ch 9, 10.4.2.6.4, 11.5, 11.6; Repo Ch 16; CLP1 Ch 8; CLP2 3.3; CLP4 Ch 14 Foreclosure, Preventing Through RefinancingCOC 6.5; Repo 15.9.1 Foreclosure, Preventing Through RescissionTIL Ch 6; Repo 14.7.3.1; CLP3 Ch 8; CLP4 Ch 14 Foreclosure, Preventing Through WorkoutsRepo Ch 15 Foreclosure, Setting AsideRepo 17.1 Foreclosure, Special Problems for ElderlyRepo 14.11 Foreclosure, Summary of State LawsRepo App F Foreclosures and UDAPUDAP 5.1.2; Repo 14.7.1.1 FormsSee Sample Forms FranchisesUDAP 2.2.9.2, 5.13.1 FraudUDAP; Warr 11.3 FRB Official Staff Commentary on Reg. BCD App C FRB Official Staff Commentary on Reg. MTIL App H.3 FRB Official Staff Commentary on Reg. ZTIL App C Free OffersUDAP 4.6.4 Freezer MeatsUDAP 5.7.2 FTC (Federal Trade Commission)UDAP FTC Act, No Private Action UnderUDAP 9.1 FTC Cooling Off Period RuleUDAP 5.8.2, App B.3 FTC Credit Practices RuleRepo 3.4.2; UDAP 5.1.3.1, App B.1; FDC 8.4.2 FTC Debt Collection LawFDC Ch 8 FTC FCRA Enforcement ActionsFCRA App F FTC FCRA Official Staff CommentaryFCRA App C FTC FDCPA Official Staff CommentaryFDC 3.2.5, App J FTC Funeral RuleUDAP 5.11.4, App B.5 FTC Holder RuleUDAP 6.6, App B.2; CLP1 Chs 3, 4, 6 FTC Mail or Telephone Order Merchandise RuleUDAP 5.8.1.1, App B.4 FTC Staff Letters on FCRAFCRA App D FTC Staff Letters on FDCPAFDC 3.2.4, App I FTC Telemarketing Sales RuleUDAP App D.2.1 FTC Telephone and Dispute Resolution RuleUDAP App D.2.2 FTC Used Car RuleUDAP 5.4.3.2, App B.6; Warr 14.5, App D FuneralsUDAP 5.11.4 Furniture SalesUDAP 5.7.3; CLP2 7.2 Future Advance ClausesRepo 3.9 Future Service ContractsUDAP 5.10 GAP InsuranceTIL 3.7.9, 3.9.4.7 GarnishmentFDC 5.5.6, Ch 9, 15.3, App K; UDAP 11.2.5; CLP2 12.3 Gas ServiceAUS Gasoline, Price GougingUDAP 5.6.6.3 Government BenefitsFCRA 2.3.5.8, 4.2.7 Government Collection PracticesFDC Ch 10; UDAP Ch 11 Guaranteed Student LoansUDAP Ch 11 GuaranteesUDAP 5.2.7.3 GuarantorsSee Cosigners Handicapped, Discrimination AgainstCD 3.5.9 Handouts for ClientSee Client Handouts Health Care BillsFDC Ch 14; Bankr 6.2.2.3.1; CLP2 Ch 15 Health Care Plans, MisrepresentationsUDAP Supp 5.11.6 Health Care Treatment, Discrimination InCD 4.3.2 Health Cures, MisrepresentationsUDAP 5.11 Health SpasUDAP 5.10.3 Hearing AidsUDAP 5.11.1 Heating FuelAUS 2.2, 2.3; UDAP 5.6.6 HELCTIL 5.18 Hidden InterestCOC Ch 7; TIL 3.10 High Pressure SalesUDAP 4.8 Hill-Burton Act ComplianceUDAP 5.11.5; CLP2 15.4 Holder in Due CourseUDAP 6.6; COC 10.6.1, 10.7.2.3 Home BuildersUDAP 5.5.4.2; CLP5 Ch 7 Home Equity Lines of CreditTIL 5.18 Home Equity LoansTIL Ch 10 Home ForeclosureSee Foreclosure Home Heating FuelAUS 2.2, 2.3; UDAP 5.6.6 Home Improvement PracticesTIL 6.8.4.2; UDAP 5.6.1; Warr 16.7, Apps H.2, J.3; CLP2 4.2, 4.3; CLP3 1.1, 1.2; CLP4 Ch 1 Home Mortgage, Rescission ofTIL Ch 6 Home Owners Insurance, Settlement re Discrimination in OfferingCD App I.2 Home Owners Warranty ProgramUDAP 5.5.4.2 Home Ownership & Equity Protection ActTIL Ch 10; COC 11.3.2; Repo 14.7.3.5, 14.11.3.2; CLP4 Ch 2 Homes and UDAPUDAP 2.2.5, 5.5.4 Homes, WarrantiesWarr 1.4.3 Homestead Exemptions, BankruptcyBankr 10.2.2.2 Horizontal PrivityWarr 6.3 Hospital BillsFDC Ch 14; CLP2 Ch 15 Household Goods, Bankruptcy ExemptionBankr 10.2.2.4, 10.4.2.4 Household Goods Security InterestRepo 3.4; UDAP 5.1.2, 5.1.3.1; TIL 4.6.7 Household Goods Security Interest, Credit Property Insurance onCOC 8.5.4.4 Houses and UDAPUDAP 2.2.5, 5.5.4 HOW ProgramUDAP 5.5.4.2.3 HUDSee Department of Housing and Urban Development Identity TheftFCRA 7.6.11; CLP3 Ch 5; CLP5 Ch 1 Illegal ConductUDAP 4.3.9, 9.5.7 Illegality as Contract DefenseUDAP 9.5.7 Immigrant Consultants, Deceptive PracticesUDAP Supp 5.12.2 Immigrant Status, Discrimination Based OnCD 3.5.3, 6.3.5 Implied WarrantiesWarr Ch 4 Incomplete Information in Consumer ReportsFCRA Ch 9 Inconvenient VenueSee Venue Indian Tribal Law, Bankruptcy ExemptionsBankr 10.2.3.1 Industrial Loan LawsCOC Ch 2 InfancySee Minority Infertility Programs, Deceptive PracticesCLP4 Ch 13 Infliction of Emotional DistressFDC 12.2 In Forma Pauperis Bankruptcy Pilot ProgramBankr 13.6.1 In Forma Pauperis Filings in BankruptcyBankr 13.6, 17.6 InjunctionsUDAP 8.6; FDC 6.11, 12.6.2, 13.6 Insecurity ClausesRepo 4.1.6 Installment Sales LawsCOC 2.3.3.3, 9.3.1.1 Insurance and UDAPUDAP 2.3.1, 5.3 Insurance Consumer ReportsFCRA 2.3.5.7, 2.6.8, 4.2.6 Insurance, CreditCOC Ch 8; TIL 3.7.8, 3.9.4; UDAP 5.3.9 Insurance DiscriminationCD 4.2.9, App I.2 Insurance, Illusory CoverageUDAP 5.3.5

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Insurance PackingCOC 8.5.4; UDAP 5.3.11 Insurance RedliningCD 4.2.9 Insurance, Refusal to Pay ClaimUDAP 5.3.3 Intentional Infliction of Emotional DistressFDC 12.2 Intentional Interference with Employment Relationships FDC 12.4 Interagency Policy Statement on Fair LendingCD 12.1.4 Interest CalculationsCOC 4.2, 4.3 Interest, HiddenCOC Ch 7; TIL 3.10 Interest Rates, Federal Preemption ofCOC Ch 3 Interference with Employment RelationshipsFDC 12.4 Internet, Fraudulent SchemesUDAP Supp 5.9 Internet, Invasion of Privacy,UDAP Supp 4.11 InterrogatoriesSee Sample Interrogatories Interstate Banking and Rate ExportationCOC 3.4.5 Intervenor FundingAUS Ch 20 Interview Checklist for Debt CollectionFDC App C Interview Form, BankruptcyBankr App H Interview Form for Clients, WarrantiesWarr App H Invasion of PrivacyFCRA Supp 1.5; FDC 12.3; FCRA 12.3.8 Investigative ReportsFCRA Ch 11 InvestmentsUDAP 2.2.9, 5.13 Involuntary Bankruptcy CasesBankr 13.8, 16.1.2 Irrelevant Information in Consumer ReportsFCRA 9.10.4.10.3 Joint Bank Accounts, SeizureFDC 15.3 Judicial Liens, Avoiding in BankruptcyBankr 10.4.2.3 Jury InstructionsSee Sample Jury Instructions Jury Trial, Class ActionCCA Ch 14 Jury Trial, Preparing FDCPA CaseFDC 2.4.7 Land Installment SalesCLP3 Ch 10; Repo 14.12 Land SalesUDAP 2.2.5, 5.5.4.4 Land TrustsTIL 2.2.1.1, 2.4.3 Landlord-TenantBankr 12.9, 17.8; UDAP 2.2.6, 5.5.2; CLP2 Ch 1 Landlords Removal of Evicted Tenants PropertyRepo 20.7.4 Landlords Requested Disconnection of Utility ServiceAUS Ch 10 Landlords Termination of Utility ServiceAUS Ch 9 Landownership, Utility Service Conditioned onAUS Ch 8 Late ChargesCOC 4.8, 7.2.4; TIL 3.9.3, 4.7.7; UDAP 5.1.3.1.7, 5.1.8.2 Late Charges, Utility BillsAUS 5.2, 5.3 Law, Unauthorized Practice ofFDC 4.2.6.6.2, 13.4; Bankr Supp 15.6 LawyerSee Attorney Layaway PlansUDAP 4.9.1; TIL 2.2.4.1 Lease-Back of HomeCOC 7.5.2.1; TIL 2.2.4.3.3, 6.2.1.5; CLP3 1.1 LeasesRepo Ch 19; TIL 2.2.4.2, Ch 9; UDAP 2.2.6, 5.4.6, 5.5.2; Warr Ch 18; Auto 3.6.2.3, 3.6.6.5, 4.2.6; Bankr 12.9; CD 4.3.3; COC 7.5.3; see also Rent to Own Lease Terms for ResidenceUDAP 5.5.2.1; CLP2 1.1 Legal Rights, Misrepresentation ofUDAP 5.2.8 Lemon Cars Being ResoldAuto 1.4.6, 2.1.5, 2.4.5.5, 6.3, App C; Warr 14.3.3; UDAP 5.4.3.7 Lemon LawsWarr 13.2, App F; CLP4 Ch 15 Lender Liability ClaimsCOC Ch 11; CLP1 Liability of Agents, Principals, OwnersUDAP Ch 6; FDC 2.7 Licenses to Drive and BankruptcyBankr 14.5.5.1 LiensRepo Ch 20 Life Care HomesUDAP 5.11.3 Life Insurance, Excessive Premiums forUDAP 5.3.8 Lifeline Assistance ProgramsAUS 19.3 LIHEAPAUS Chs 15, 16, App C, Supp App G Limitation of Remedies ClausesWarr Ch 9 Living TrustsUDAP 5.12.3 Loan BrokersUDAP 2.2.1, 5.1.10; COC 7.3.2; CLP1 Ch 7 Loan FlippingSee Flipping Lost Credit Card Reporting ServicesUDAP 5.1.18 Low BallingUDAP 4.6.5 Low Income Home Energy Assistance ProgramAUS Chs 15, 16 Magazine SalesUDAP 5.7.1 Magnuson-Moss Warranty ActWarr Ch 2, Apps A, B; Auto 8.2.5; CLP4 Ch 15 Mail FraudUDAP 9.2.4.2; FDC 11.1 Mail Order SalesUDAP 5.8.1 Malicious ProsecutionFDC 12.6 Managed Care, MisrepresentationsUDAP Supp 5.11.6 Manufacturer RebatesUDAP 4.6.3 Marital Status DiscriminationCD 3.5.6 Master MeteringAUS 13.2 Math, CreditCOC Ch 4 McCarran-Ferguson ActTIL 2.4.9 Mechanical Breakdown InsuranceSee Service Contracts MedicalSee Health Care Medicare, Medicaid Applications Not Processed by Hospital CLP2 15.6 Mental Anguish DamagesFDC 2.4, 6.3, 12.2 Mental IncompetenceUDAP 9.5.6.3 Meter TamperingAUS Chs 6, 13 Migrant Farmworker CampsUDAP 2.2.7, 5.5.3 Mileage DisclosureAuto 3.6.6 Military Personnel and Credit ProtectionFDC 11.9; FCRA 7.2.7.5; Repo 6.3.5.1 Mini-FTC LawsSee UDAP MinorityUDAP 9.5.6 MisrepresentationUDAP 4.2; Warr 11.3; Auto 8.3 Mistaken Undercharges, Utility BillsAUS 6.3, 14.2 Mobile Home ForeclosureRepo 14.13 Mobile Home Park ConversionsCLP2 2.2 Mobile Home ParksUDAP 2.2.6, 5.5.1; CLP2 Ch 2 Mobile Homes and Interstate Rate DeregulationCOC Ch 3 Mobile Homes and RepossessionRepo 2.3.2, 3.5, 4.8.3, 5.4.3, 6.3.3, 7.1 Mobile Homes and UDAPUDAP 2.2.5, 5.4.9 Mobile Homes, Federal StatutesWarr App C Mobile Homes, Sale by ConsumerRepo 9.6.3 Mobile Homes, Utility ServiceAUS Supp Ch 11 Mobile Homes, WarrantiesWarr Ch 15, Supp App J.4; CLP2 4.1; CLP5 Ch 4 Model PleadingsSee Sample Complaints, Sample Interrogatories, etc. Mortgage Assistance ScamsUDAP 5.1.12; Repo 14.7.6, 15.10 Mortgage Assistance, State ProgramsRepo 15.9.3 Mortgage DiscriminationCD Mortgage FeesTIL 3.9.5; COC Ch 7 Mortgage LoansUDAP 5.1.9 Mortgage Servicers, DisclosuresRepo 15.2.4.2; CLP3 7.1 Most Favored LenderCOC 3.4.3 Motor Vehicle Information and Cost Savings ActAuto Chs 3, 4, App A.1 Motor Vehicle Installment Sales ActCOC 2.3.3.4; Repo 2.2 Multiple DamagesUDAP 8.4.2; Auto 4.7.1 Municipal Utilities (MUNIs)AUS NACA Class Actions Guidelines for SettlementCCA App B; CLP4 12.2 Name on Credit Accounts, DiscriminationCD 5.7

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
National Origin DiscriminationCD 3.5.3 Native Americans and RepossessionRepo 6.3.5.2 Necessities LawsFDC 14.4; CD 4.2.17 Negative Option PlansUDAP 5.8.5 NegligenceWarr Ch 12; FCRA 12.3.9; FDC 12.2, 12.7.1.1 Negotiations, Class ActionsCCA Ch 11 New Car Lemon LawsWarr 13.2, App F; CLP2 Ch 5 New Cars, SalesWarr Ch 13; UDAP 5.4.4; CLP2 Ch 5 New Cars, Undisclosed Damage toAuto 1.4.5, 6.2.2 900 NumbersUDAP 5.9.3, 6.9, Apps D, E Nonattorney Legal Service Providers, Deceptive Practices UDAP Supp 5.12.2 Nondisclosure and UDAPUDAP 4.2.14 Non-English SpeakingUDAP 5.2.1 Nonfiling InsuranceCOC 8.5.4.5 Nonpayment of Loans, When ExcusedRepo 4.6 Notario FraudUDAP Supp 5.12.2 Notice to ClassCCA Ch 10 Notice to Quit, DeceptiveUDAP 5.5.2.4 Nursing Homes, Deceptive PracticesUDAP 5.11.3; CLP4 Ch 3 Obsolete Information in Consumer ReportsFCRA Ch 10 Odometer TamperingAuto 3.3, 3.4; CLP5 Ch 3 OdometersAuto; Warr 14.3.2; UDAP 5.4.3.5 Official Bankruptcy FormsBankr App D Oil, Home HeatingAUS 2.3; UDAP 5.6.6 Open-End CreditTIL Ch 5; COC 2.3.2.2 Open-End Credit, SpuriousTIL 5.2.1.5 Outdated Information in Consumer ReportsFCRA Ch 10 Overcharges by Creditor in BankruptcyBankr Supp 13.4.3.3; CLP3 Ch 7 Pain and Suffering DamagesFDC 2.4; UDAP 8.3.3.9 Paralegals, Attorney Fees forUDAP 8.6.11.6, 8.8.7.2 Parol EvidenceWarr 3.7 Partial PrepaymentCOC 8.2 PawnbrokersCOC 2.3.3.8, 7.5.2.3; UDAP 5.1.13 Pawn TransactionsTIL 2.2.4.3.2 Payday LoansCOC Supp 7.5.5, Supp App F; TIL 2.2.4.3.5; CLP3 4.1 Payment Plans, Utility BillsAUS Chs 5, 16 Pell GrantsUDAP 11.1.2.4 Pensions in BankruptcyBankr 2.5.1, 10.2.2.11 Percentage of Income Payment PlansAUS Supp App B Personal Injury SuitsUDAP 2.2.11 Personal Property Seized with RepoRepo Ch 7 Pest Control ServicesUDAP 5.6.3 Petroleum Products, Price GougingUDAP 5.6.6.3 Photoprocessing PackagesUDAP 5.7.8 Plain EnglishUDAP 5.2.2 PleadingsSee Sample Complaints, Sample Answer, etc. PointsCOC 4.7, 6.4.1.3, 7.2.1, 8.3.2; TIL 3.7.4 Precomputed InterestCOC 4.5 Precut HousingUDAP 5.5.4.3 Preemption of State Usury LawsCOC Ch 3 Preexisting Debt ClausesRepo 3.9 PrepaymentTIL 4.7.6; COC Ch 5 Prepayment PenaltiesCOC 5.6 Prescreening ListsFCRA 4.3.7.4 Preservation of Documents, Class ActionsCCA 5.2 Price Gouging in an EmergencyUDAP 4.3.11 PricingUDAP 4.6 Privacy, Invasion ofFCRA 12.3.8, Supp 12.3.8; FDC 12.3 Privacy, Restrictions on Use of Consumer ReportsFCRA Ch 4, Supp 1.5 Private Mortgage Insurance (PMI)Repo 14.7.8.6 Private Sale of CollateralRepo 10.5.7 PrivityWarr Ch 6; UDAP 4.2.15; FDC 12.7.1.1 PrizesUDAP 5.13.4 Procedural UnconscionabilityWarr 11.2; COC 11.6 ProceedsRepo 3.3.2 Progress PaymentsCOC 4.9 PropaneAUS 2.3.1; UDAP 5.6.6 Proprietary SchoolsUDAP Ch 11 Protective OrdersCCA 5.2, App H Public Assistance Status, Discrimination Based onCD 3.5.10, 6.3.3 Public Housing, UDAP CoverageUDAP 2.3.3.3, 2.3.6 Public Housing, Utility ServiceAUS Ch 18 Public RecordsFCRA 9.2.3 Public Sale of CollateralRepo 10.7 Public UtilitiesAUS Public Utility CreditTIL 2.4.6 Punitive DamagesAuto 7.9.2; CD 11.4; FCRA 13.4; FDC 2.5, Ch 12; UDAP 8.4.3; CLP1 Ch 5 Pyramid SalesUDAP 5.13.3 Pyramiding Late ChargesCOC 7.2.4.3; AUS 5.3 Race Discrimination re Car SalesCLP3 9.2 Race Discrimination re CreditCD 3.5.1 Racketeering StatuteSee RICO Reachback PeriodsBankr Supp 6.5.2.4 Reaffirmations and BankruptcyBankr 14.5.2; CLP5 Ch 2 Real EstateUDAP 2.2.5, 5.5.4 Real Estate BrokersUDAP 5.5.4.1; CLP2 4.4 Real Estate Settlement Procedures ActCOC Supp 11.3.1 Real Estate Tax Abatement LawsRepo App G Reassembled Cars from PartsAuto 1.4.3, 2.1.4; UDAP 5.4.3.6 Rebates from ManufacturerUDAP 4.6.3.2; TIL 3.7.4.2 Rebates of InterestCOC Ch 5, 6.3, 6.4; TIL 2.6, 3.7.2.2 Recoupment ClaimsTIL 6.6.3.3, 7.2.4; Bankr Supp 13.3.2.4; CLP3 Ch 8 Redemption and RepoRepo 9.3 Redemption, ForeclosuresRepo 14.2.5, 17.2 RedliningCD 4.2.9, 4.2.10, 9.5.5.1 Referral SalesUDAP 5.8.3 RefinancingsCOC Ch 6; Repo 3.8; TIL 4.9; UDAP 5.1.8; CLP3 Ch 2 Refund Anticipation LoansCOC 7.5.4; TIL 2.2.4.3.6 RefundsUDAP 5.2.6 Regulation B, TextCD App B Regulation M, TextTIL App H.2 Regulation Z, TextTIL App B RejectionWarr Ch 8 Religious Discrimination re CreditCD 3.5.2 Rent and BankruptcyBankr 12.9, 14.5.5.3, 17.8 Rent to OwnUDAP 5.7.4; TIL 2.2.4.3.4; Bankr 11.8; COC 7.5.3; Repo 19.3; CLP2 Ch 8; CLP4 Ch 11 Rent, Utility ServiceAUS Chs 9, 18 Rental CarsUDAP 5.4.7; Auto 2.4.5.6 Rental Housing, SubstandardUDAP 5.5.2.2 RepairsUDAP 4.9.7 Repairs, AutomobileWarr 16.8; UDAP 5.4.1 ReplevinRepo Ch 5 Reporting AgenciesFCRA RepossessionsRepo; UDAP 5.1.2; FDC 4.1.4; CLP2 Ch 12; CLP3 9.3; CLP4 Ch 4; CLP5 Ch 3 Repossessions, StoppingBankr Ch 9 Requests for AdmissionsCCA 7.5; Repo App D.5; CLP15 Resale of Utility ServiceAUS 13.2 RescissionTIL Ch 6; Auto 7.10; Repo 14.7.3.1; UDAP 8.7, 9.5.2; CLP5 Ch 10 Rescission by RecoupmentTIL 6.6.3.3

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Resisting Repossession, Liability forRepo 6.2.3.3 RESPACOC Supp 11.3.1; Repo 14.7.8.7, 15.2.4.2, 15.2.7.5; TIL 4.1.1, 4.3.3; CLP3 Ch 6 Retail Installment Sales Acts (RISA)COC 2.3.3.4; Repo 2.4 Retail SellersCOC 2.3.1.2.2, 9.2.3.2 Retaliation for Exercise of TIL, CCPA RightsCD 3.5.11 Retroactive StatutesUDAP 7.4; COC 9.3.2 Reverse MeteringAUS 14.1, 14.2 Reverse RedliningCD 4.2.10 Revocation of AcceptanceWarr Ch 8 Revolving RepossessionsRepo 10.9.3 RICOUDAP 9.2, 9.3 App C.1; COC 10.8.3.2; FDC 11.5; Auto 8.4; CLP3 9.3 Right to Cure DefaultRepo 4.8, App B; Bankr 11.6.2 Right to See Consumer ReportsFCRA 3.3 Right to Utility ServiceAUS Ch 4 RISACOC 2.3.3.4; Repo 2.4 RTO ContractsSee Rent to Own Rule of 78COC 5.6.3.3; TIL 3.7.2.2.3; Repo 11.5.2.2.2 Rural Electric Cooperatives (RECs)AUS RustproofingUDAP 5.4.4.6.2 SafetyUDAP 4.7.4 Sale and Lease-BackCOC 7.5.2.1; TIL 2.2.4.3.3, 6.2.1.5; CLP3 1.3 Sale of CollateralRepo Ch 10 Salvage AuctionsAuto 2.6.4.2 Salvage Vehicles, Sale ofAuto 1.4.3, 2.1.4, 2.4.5.4, 6.2.1; Warr 14.3.4; CLP5 Ch 6 Salvaged PartsUDAP 5.4.3.6 Sample Answer and CounterclaimsRepo App C.1; COC App E; CLP2 Sample Appellate BriefsFDC Supp App N Sample Briefs, Class ActionCCA Apps L, M; CLP15 Sample Client Retainer FormsCLP4 Ch 8 Sample Closing ArgumentsAuto App G.3; FCRA App I.2 Sample ComplaintsAuto App E; CD App G; CCA App D; COC App E, Supp App F; FCRA App H; FDC App D; Repo App C.2; Warr App J; TIL Apps D, F; CLP15 Sample Consumer Reporting Agency User Agreement FCRA App J Sample Deposition QuestionsFCRA App H.3; CLP1; CLP3 Sample DiscoverySee Sample Interrogatories; Sample Document Requests Sample Document RequestsAuto App F; CCA App E; FDC App E.2; Repo App D.2; TIL App G.2; Warr App K.3; CLP15 Sample Forms, BankruptcyBankr Apps. D, E, F, G Sample Forms, Credit ReportingFCRA App G Sample InterrogatoriesAuto App F; CCA App E; CD App H; COC App E; FCRA App H.2; FDC App E.1; Repo App D; Warr App K; TIL App G.1; CLP15 Sample Interview FormsWarr App H Sample Jury InstructionsCCA Ch 14; Auto Supp App G.6; FDC App F.2; FCRA App I.3; UDAP App G.2 Sample Letter to Debt CollectorFDC 2.2 Sample Motions for Class CertificationCCA App K; CLP15 Sample Motion in LimineAuto Supp App G.5; FDC Supp App F.5 Sample Notice for RescissionTIL App E; CLP1 Ch 8 Sample Notice of DepositionCLP2 8.3, 15.3.1; CLP3 5.1.2 Sample Notice of RevocationWarr App I.1 Sample Notice That Consumer Is Deducting Damages From the Outstanding BalanceWarr App I.2 Sample Objection to Document RequestsCCA App J Sample Opening and Closing StatementAuto App G Sample PleadingsSee Sample Answer; Sample Complaint Sample Requests for AdmissionsCOC App E; FDC App E.3; Auto App F.1.4; CLP15 Sample Summary Judgment BriefsFDC App F.1; CLP15 Sample Trial BriefFDC Supp App F.4 Sample Trial DocumentsAuto App G; FDC Supp App F; Warr Supp App L Scholarship Finders, ScamsUDAP Supp 11.10 Schools, VocationalUDAP Ch 11 Scrip Settlements, Class ActionsCCA 11.6; CLP4 Ch 12 Second Mortgage, Rescission ofTIL Ch 6 Secret WarrantiesUDAP 5.4.4.10.2; Warr 13.5.3.2 Securities LawUDAP 9.4.10 Security Deposits, Consumers Rights to Reform Where Seller in BankruptcyBankr 17.8.4 Security Deposits, TenantsUDAP 5.5.2.1; AUS 4.5 Security Interest ChargesTIL 3.9 Security InterestsRepo Ch 3; TIL 4.6.7 Security Interests, Avoiding in BankruptcyBankr 10.4.2.4, Ch 11 Security SystemsUDAP 5.6.2 Seizure of CollateralRepo Self-Help RepossessionRepo Ch 6 Service ContractsWarr Ch 17, App G; UDAP 5.2.7.2, 5.4.5 Service Contracts, When Hidden InterestCOC 7.2.3, 7.3.1; TIL 3.6.5 Services and WarrantiesWarr Ch 16 Set-OffsTIL 5.14, 8.4; FDC 15.2 Settlement, Class ActionsCCA Chs 11, 12, Apps O, P; CLP3 3.5, 7.2.7; CLP4 Ch 12 Settlement, Class Actions, ObjectionsCCA 12.8, App Q; CLP4 Ch 12 Settlement, Individual Prior to Class ActionCCA 1.2 Settlement, Lemon Law CaseCLP4 Ch 15 Settlements and Consumer ReportsFCRA 7.5 Sewer ServiceAUS 4.2.1.2, 6.3.3.3 Sex Discrimination re CreditCD 3.5.7, 6.2 Sexual Orientation, Discrimination Based OnCD 3.5.7 Shell HomesUDAP 5.5.4.3 Slamming, Telephone ServiceAUS 19.4; UDAP 5.6.7.3 Small Loan LawsCOC 2.3.3.1 Soldiers and Sailors Civil Relief ActFDC 11.9; FCRA 7.2.7.5; Repo 6.3.5.1 Spendthrift Trusts in BankruptcyBankr 2.5.1 Spot Delivery of AutomobilesUDAP Supp 5.4.4.9a; Repo 4.5; TIL 4.4.1 Spouses and Credit DiscriminationCD Spouses, Consumer Reports onFCRA 7.2.6, 7.3.6.2 Spreader ClausesTIL 4.6.7.6 Spurious Open-End CreditTIL 5.2.1.5 Standard Form Contracts, UnfairUDAP 5.2.3 State Bonding LawsAuto App C State Cosigner StatutesRepo 12.9.5.2 State Credit Discrimination LawsCD 1.6, App E State Credit Repair LawsFCRA App B State Credit Reporting LawsFCRA 12.4.1, App B State Debt Collection StatutesFDC 13.2, App L State Foreclosure LawsRepo App F State Leasing Disclosure StatutesTIL 9.5.2.3 State Lemon Buyback Disclosure LawsAuto App C State Lemon LawsWarr 13.2, App F State Lending StatutesCOC Supp App A State 900 Number LawsUDAP App E State Odometer StatutesAuto App C State Real Estate Tax Abatement LawsRepo App G State RICO StatutesUDAP 9.3, App C.2 State Right to Cure, Reinstate and Redeem StatutesRepo App B

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
State Salvage LawsAuto App C State Service Contract LawsWarr App G State Telemarketing LawsUDAP App E State TIL LawsTIL 2.5 State Title Transfer LawsAuto 6.5, App C State UDAP StatutesUDAP App A State Usury StatutesCOC Supp App A Statute of Limitations as Consumer Defense to Collection ActionRepo 12.6.2 Statutory DamagesTIL 8.6; FDC 6.4, 13.2; Repo 13.2; UDAP 8.4.1 Statutory LiensRepo Ch 20 Statutory Liens, Avoiding in BankruptcyBankr 10.4.2.6.2 Staying ForeclosureBankr Ch 9 Stolen VehiclesAuto 1.4.10, 2.1.7 Storage of Consumer BelongingsCLP2 7.1 Storage of Evicted Tenants PropertyRepo 20.7.4; UDAP 5.5.2.5 Straight BankruptcyBankr Ch 3 Strict Liability in TortWarr Ch 12 Student Loan Collection AbuseUDAP 11.2.1; CLP2 Ch 14 Student Loan Payments, CancellingUDAP 11.4 Student Loan Payments, ReschedulingUDAP 11.3 Student Loan RegulationsUDAP App F Student LoansUDAP Ch 11; Bankr 14.4.3.8; FCRA 7.5.4.4, 7.6.10, 7.7.9, 10.6.9; TIL 2.4.5; CLP2 Chs 13, 14; CLP5 Ch 9 Student Loans, Reinstating EligibilityUDAP 11.5 Subdivided Land SalesUDAP 5.5.4.4 Surety for Consumer DebtorRepo 12.9 Surety Liability for Sellers ActionsAuto 9.12.3 Surveys, Use in LitigationCCA 7.6 Target Marketing ListsFCRA 2.3.3, 4.2.9.1, 4.3.7.4.1 Tax Abatement Laws, State Property, SummariesRepo App G Tax Consequences, Bankruptcy DischargeBankr Supp 14.6 Tax InterceptBankr Supp 9.4.3 Tax LiensRepo Ch 18 Tax Refund InterceptsFDC 10.2.8; UDAP 11.2.4 Tax RefundsCOC 7.5.4; TIL 2.2.4.3.6 Tax Refunds in BankruptcyBankr 2.5.2 Tax SalesRepo Ch 18 Taxis, Undisclosed Sale ofAuto 2.4.5.6 TelechecksUDAP 5.1.14 Telecommunications Act of 1996AUS Ch 19 Telemarketing FraudUDAP 5.9; FCRA 8.4 Telemarketing Fraud, Federal StatutesUDAP App D Telephone Companies as Credit Reporting AgenciesFCRA 2.6.9 Telephone HarassmentFDC 11.3 Telephone Inside Wiring Maintenance AgreementsUDAP 5.2.7.2, 5.6.7.2 Telephone ServiceAUS Ch 19 Telephone Service ContractsUDAP 5.2.7.2, 5.6.7.2 Telephone SlammingAUS 19.4; UDAP 5.6.7.3 Tenant Approval CompaniesFCRA 2.3.5.4, 2.6.1, 5.4.2.2.3, 7.3.2, 7.7.3 Tenant Ownership in Chapter 7 LiquidationBankr Supp 17.8.2 Tenants Property Removed with EvictionRepo 20.7.4 Tenants Rights When Landlord Files BankruptcyBankr 17.8; AUS 12.3 Termination of Utility ServiceAUS Termite Control ServicesUDAP 5.6.3 Theft of IdentityFCRA 7.6.11; CLP3 Ch 5 Third Party Liability IssuesAUS Ch 7 Threats of Criminal ProsecutionFDC 13.8 Tie-In Sale Between Mobile Home and Park SpaceCLP2 2.2; UDAP 5.5.1.2 TILSee Truth in Lending Time SharesUDAP 5.5.4.5 Tire IdentificationAuto 2.2.3 Title, AutomobileAuto 2.3, 2.4, App D; Warr 14.3.5 Tort Remedies, Unlawful DisconnectionsAUS 6.6 Tort Liability, StrictWarr Ch 12 Tort Remedies, Wrongful RepossessionsRepo 13.6 TowingUDAP 5.4.1.5; Repo Ch 20 Trade SchoolsUDAP Ch 11 Trade-in CarsUDAP 5.4.4.4 Trading PostsUDAP 5.1.13 Transcripts and BankruptcyBankr 14.5.5.2 Travel FraudUDAP 5.4.10; CLP4 Ch 5 Travelers ChecksUDAP 2.2.1.3 Treble DamagesUDAP 8.4.2 Trustees in BankruptcyBankr 2.6, 2.7, 16.4.2, 17.7 Truth in LendingTIL; COC 2.3.4, 4.4.1; FDC 11.4; Repo 2.9 Truth in Mileage ActAuto Chs 3, 4 Typing ServicesBankr 15.6 UCC Article 2Warr UCC Article 2 and Comments ReprintedWarr App E UCC Article 2ARepo 2.3.4, 19.1.3.1; Warr Ch 18, App E.4; UDAP 5.4.6.5 UCC Article 9Repo UCC Article 9, RevisedRepo 2.3.3, App A UCC Article 9 and Comments ReprintedRepo App A UDAPUDAP; AUS 3.8.3, 7.5.1; Auto 8.3; COC 8.5.2.5.2, 11.5; FDC 13.3; FCRA 12.4.2; Repo 2.6, 13.4.3; Warr 11.1 Unauthorized Card UseTIL 5.15 Unauthorized Practice of LawFDC 4.2.6.6, 5.6.2, 13.4; Bankr 15.6; UDAP Supp 5.12.2 Unauthorized Use of Utility ServiceAUS Ch 14 Unavailability of Advertised ItemsUDAP 4.6.2 UnconscionabilityWarr 11.2, 18.4; COC 8.7.5, 11.6; UDAP 4.4, 5.4.6.5; Auto 8.6 Unearned InterestCOC Ch 5 Unemployment InsuranceCOC 8.3.4 Unfair Insurance Practices StatutesUDAP 5.3; COC 8.4.1.4 Unfair Practices StatutesSee UDAP UnfairnessUDAP 4.3 Uniform Commercial CodeSee UCC United States TrusteeBankr 2.7, 17.7.2 Universal Telephone ServiceAUS Ch 19 Unlicensed ActivitiesUDAP 4.9.8; COC 9.2.4.4 Unsolicited Credit CardsTIL 5.12 Unsolicited GoodsUDAP 5.8.4; FDC 11.2 Unsubstantiated ClaimsUDAP 4.5 Used as NewUDAP 4.9.4 Used Car Lemon LawsWarr 14.6 Used Car RuleWarr 14.5, App D; UDAP 5.4.3.2, App B.6 Used CarsAuto; Warr Ch 14, App J.2, Supp App K.5; UDAP 5.4.3; CLP2 Ch 6 Used Cars, Assembled from Salvaged PartsAuto 1.4.3, 2.1.4; CLP2 6.2 Used Cars, FinancingCOC Supp 11.2.2 Used Cars, Undisclosed Sale of Wrecked CarsAuto 1.4.4, 2.1.4 Users of Consumer and Credit ReportsFCRA Ch 4 Usury, Trying a CaseCOC Ch 10 UtilitiesAUS; CD 4.3.1; TIL 2.4.6; UDAP 2.3.2, 5.6.7 Utilities and BankruptcyAUS Ch 12; Bankr 9.8

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Quick Reference to the Consumer Credit and Sales Legal Practice Series References are to sections in all manuals in NCLCs Consumer Credit and Sales Legal Practice Series
Utilities as Credit Reporting AgenciesFCRA 2.6.9 Utility Commission RegulationsAUS Supp App E Utility Commissions, State ListAUS Supp App H Utility Service Terminated by a LandlordAUS Ch 10 Utility Subsidies in Subsidized HousingAUS Ch 18 Utility Termination, RemediesAUS; UDAP 5.6.7.1; CLP2 1.3 Utility Terminations, StoppingAUS; Bankr Ch 9 VA Mortgage Foreclosures and WorkoutsRepo 14.6.2, 15.5.2; CLP2 3.1 Variable Rate DisclosuresTIL 4.8 Variable Rates, CalculationCOC 4.3.6 Vehicle History Report (VHR)Auto 2.3.2 Vehicle Identification NumberAuto 2.2.4 Venue, InconvenientFDC 6.11.2, 8.3.6, 12.6.2, 13.6; UDAP 5.1.4 Vertical PrivityWarr 6.2 Vocational SchoolsUDAP Ch 11 Wage Earner PlansBankr Ch 4 Wage GarnishmentFDC Ch 9, App K Waiver of DefaultRepo 4.3 Warehousemans LienRepo 20.7.4; CLP2 7.1 WarrantiesWarr; Auto 8.2; UDAP 5.2.7 Warranties, SecretWarr 13.5.3.2; UDAP 5.4.4.10.2 Warranty DisclaimersWarr Ch 5 Warranty of Habitability, Utility ServiceAUS 9.3 Water Quality Improvement SystemsUDAP 5.6.4 Water ServiceAUS; UDAP 5.6.7.3 Weatherization AssistanceAUS Ch 17 Web Sites, Consumer AdvocacyUDAP Supp 1.3 Welfare Benefits, BankruptcyBankr 10.2.2.11, 14.5.5 Welfare Benefits, Credit DiscriminationCD 3.5.10, 6.3.3 Welfare Benefits, Credit ReportingFCRA 2.3.5.8, 4.2.2, 7.3.4 Welfare Benefits, ExemptionsFDC 9.1, Ch 15 Wire FraudUDAP 9.2.4.3 Withholding Credit PaymentsRepo 4.6.3; Warr 8.5 Womens Business Ownership Act of 1988CD 2.2.6 Workers Compensation and BankruptcyBankr 10.2.2.1 Workout AgreementsTIL 4.9.6 Workout Agreements, ForeclosuresRepo Ch 15 Wraparound MortgagesCOC 7.4.3 Writ of ReplevinRepo Ch 5 Yield Spread PremiumsCD 4.2.10.4, 12.1.4; COC 4.7.2, 7.3.2, 11.2.1.4.3; TIL 3.6.3.2; CLP3 Ch 6

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About the Companion Disk

What Is on the Disk

The companion disk to this volume is a CD-Rom containing virtually all the pleadings found in the appendices. It does not include certain introductory material in the appendices, but does contain a Contents for the appendices, the index to Consumer Class Actions, and the Quick Reference to NCLCs Consumer Credit and Sales Legal Practice Series. The disk consists of a series of documents that can be opened in Word or WordPerfect-based wordprocessors. Because the documents are formatted in WordPerfect 5.1, they can also be opened in most other PC-based wordprocessors. The documents can then be read, copied, retrieved, edited, and printed like any other document. Documents refer to either an appendix or part of an appendix in the book and are named in the directory accordingly. See the READ.ME file for how to go quickly from an appendix found in the book to the corresponding document on the disk. Also read the READ.ME file for tips on how to rapidly find documents and other information on the disk. The captions are not ready to print as a final document. Practitioners will want to adapt the captions to the style used for their particular court. As with the book itself, signature blocks, certificates of service, and related information has not been included to save space and because attorneys will need to revise these to conform to local practice.

National Consumer Law Center. Nor may you otherwise transfer the disk or this agreement to any other party unless that party agrees to accept the terms and conditions of this agreement. You may use the disk on only one computer at a time by one user. The National Consumer Law Center warrants the disk to be free of defects in materials and faulty workmanship under normal use for a period of ninety days after purchase. If a defect is discovered in the disk during this warranty period, a replacement disk can be obtained at no charge by sending the defective disk, postage prepaid, with information identifying the purchaser, to National Consumer Law Center, Publications Department, 18 Tremont Street, Suite 400, Boston, MA 02108. After the ninetyday period, a replacement will be available on the same terms, but also requiring prepayment of $10. The National Consumer Law Center makes no other warranty or representation, either express or implied, with respect to this disk, its quality, performance, merchantability, or fitness for a particular purpose. In no event will the National Consumer Law Center be liable for direct, indirect, special, incidental, or consequential damages arising out of the use or inability to use the disk. The exclusion of implied warranties is not effective in some states, and thus this exclusion may not apply to you.

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Use of this CD-Rom requires a DOS or Windowsbased PC with a CD-Rom drive. (Contact NCLCs Publications Department at (617) 523-8089 about obtaining 3.59 floppy disks if you do not have a CD-Rom drive; there will be a handling and shipping charge.) The disk contains approximately 2 Mb of material that can remain on the CD-Rom or can be copied onto a hard drive. The documents on the disk can be opened in Word, WordPerfect, and any other wordprocessor that is compatible with WordPerfect 5.1. To use, open the files in your wordprocessor. For example, if you are Windows-based and your CD-Rom drive is the D drive, go to the open file function on your wordprocessor and click on the D directory, and then open the appropriate document within that directory.

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Before opening the disk package, please read this information. Opening the package constitutes acceptance of the following described terms. In addition, the book is not returnable once the seal to the disk has been broken. This product is copyrighted and all rights are reserved by the National Consumer Law Center, Inc. No copyright is claimed to the text of statutes, regulations, excerpts from court opinions, or any part of an original work prepared by a United States Government employee. You may not commercially distribute the disk or otherwise reproduce, publish, distribute, or use the disk in any manner that may infringe on any copyright or other proprietary right of the

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