Cook County Record

Wednesday, February 19, 2020

Judge nixes $17.5M deal in collection calls class action vs Ocwen, says attorney fees too high


By Jonathan Bilyk | Oct 2, 2018


Saying lawyers for the plaintiffs need to “drastically” reduce their $5.8 million fee request to make it "conceivable" to win his approval, a federal judge has rejected a $17.5 million settlement intended to end a class action lawsuit against debt collector Ocwen Loan Servicing over claims the company violated federal law when it called millions of debtors.

On Sept. 28, U.S. District Judge Matthew F. Kennelly declined to grant final approval to the deal, upending the settlement that would have brought the litigation to a close after four years in the courts.

The judge said he believed the total settlement amount fell short of what the plaintiffs’ lawyers could have obtained for their clients and more than 200,000 potential claimants.

Kennelly noted under the settlement, claimants could receive as little as $39 each – even less than an average payout estimate of $60 per claim.

At the same time, attorneys had requested one-third of the total settlement amount, or more than $5.7 million.

Plaintiffs are represented in the case by attorneys with the firms of Terrell Marshall Law Group LLC, of Seattle; Ankcorn Law Firm PLLC, of Chicago; The Cabrera Firm, of San Diego; Burke Law Offices LLC, of Chicago; and Heaney Law Firm LLC, of Minnetonka, Minn.

“It is conceivable that the Court could be persuaded to approve a settlement at the current overall dollar amount if the amounts for attorney's fees were reduced drastically, to take account of counsel's relative lack of success reflected from obtaining a settlement with a relatively low value given the size of the class and the number of calls made,” Kennelly wrote in his Sept. 28 order.  “But no such proposal is on the table.”

The case had landed in Chicago federal court in 2014, when named plaintiffs Keith Snyder, Susan Mansanarez and Tracee A. Beecroft had filed suit against Ocwen, accusing the company of placing collecting calls to more than 1.7 million cellphone numbers, allegedly in violation of the federal Telephone Consumer Protection Act.

They alleged unwanted calls were made to loan clients and others who were not Ocwen customers, and said the company ignored verbal requests to stop the calls because they allegedly lacked sufficient systems to track who should and should not be called.

However, according to Kennelly’s Sept. 28 order, Ocwen informed the plaintiffs its insurer had denied it coverage, and the company lacked the ability to pay anywhere near the billions of dollars it could be on the hook to pay under the TCPA law, should the case go to trial.

Kennelly rejected an attempt to then add several banks, for which Ocwen had placed collection calls, to the litigation as defendants. The plaintiffs then filed a separate legal action those banks.

In the meantime, Ocwen and the plaintiffs then entered settlement talks, and reached a settlement following mediation, Kennelly noted.

They then submitted the settlement proposal to Judge Kennelly in September 2017, and the plaintiffs agreed to drop their legal action against the banks.

In his order, Kennelly acknowledged the settlement appeared to meet most of the criteria needed to win approval.

But he said several elements of the settlement “gives the Court concern,” including the relative small size of the settlement compared to the much larger amount the plaintiffs had appeared to have desired from the case, and the plaintiffs quick willingness to dismiss the lawsuit against the banks.

“…Ocwen's inability to pay a billion-dollar adverse judgment does not explain the particular settlement figure the parties arrived at—$17.5 million, which is far less than a billion-dollar jury award,” Kennelly wrote.

Concerning the dropped lawsuit against the banks, he later added: “…The absence of an explanation for why the banks are being let off scot-free is, at best, disconcerting.”

And, the judge noted, while the plaintiffs’ attorneys asserted the settlement “represents a reasonable resolution of the claims,” he placed only limited weight on their arguments.

“… Their opinion is worthy of consideration,” Kennelly said. “But the Court cannot simply defer to them, particularly when they stand to gain millions of dollars from the proposed settlement.”

The judge said further court proceedings would be scheduled later in October in the case.

Ocwen has been represented by attorneys with the firms of Locke Lord LLP, of Chicago; and Hunton & Williams LLP, of New York.

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Hunton & Williams LLPLocke Lord LLPU.S. District Court for the Northern District of IllinoisTerrell Marshall Law Group PLLCOcwen Loan Servicing LLCBurke Law Offices, LLC

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