Earlier, I posted a note indicating that Chase had settled the class action against it arising out of its check loan scheme. On July 23, 2012, counsel for the plaintiffs filed a motion for preliminary approval, which disclosed that the settlement was for $100 million.
As you know, the class action sought recovery from Chase based on Chase’s alleged breach of the implied covenant of good faith and fair dealing which applies to every contract. On behalf of the class, plaintiffs sought as damages from Chase a dollar amount which would reasonably approximate the value of the loans as promised (with the 2% minimum monthly payments), which class members lost at the time Chase unilaterally changed the loans’ terms. Plaintiffs hired two experts to support these damages. Chase opposed this theory and, as of the time of this tentative settlement, the Court had not yet ruled on whether plaintiffs would be able to present their proposed damages model and calculations at trial
On May 22, plaintiff’s counsel disclosed that they had engaged in a series of mediations in order to negotiate a possible resolution of the class claims. After five of these all-day mediations over more than two years in front of two mediators, including one held May 11, 2012 at JAMS by the Honorable Edward A. Infante (Ret.), the parties reached a tentative agreement of the broad terms for a possible settlement.
At the time of the settlement, Chase had moved to decertify the class and for summary judgment on April 13, 2012. The hearing on these motions was set for May 25, 2012. Thus, at the time the parties’ reached the tentative settlement, the Court had not yet ruled on Chase’s motions.
The key terms of the tentative settlement include the following:
(a) Chase will pay $100 million into a settlement “fund”;
(b) The fund will be used to pay class members on a pro rata basis according to a payment schedule. The pro rata allocation has yet to be worked out. Although there may be a broad range of recovery among class members, we anticipate that class members could receive payments as high as a couple hundred dollars depending on the nature of their individual loans;
(c) The fund will also reimburse the attorneys for their expenses and pay their fees. The amount of attorneys’ fees and costs has not yet been determined, but will likely be between 25% and 30% of the settlement fund;
(d) Lastly, plaintiffs will apply to the Court for an “incentive award” of $7,500 to each class representative.