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Truth in Lending: 1.5.3.4.6 Rulemaking for mortgage loans under the Dodd-Frank Act

In January and February 2013, the CFPB issued a number of major rules, regarding ability to repay, mortgage servicing, HOEPA, appraisal requirements for higher-priced mortgage loans, mortgage loan originator compensation, arbitration, credit insurance, and escrow requirements. The Dodd-Frank requirements for periodic statements, payoff statements, and adjustable rate reset notices were also implemented.

Consumer Class Actions: 17.4.6.3 Determination of Standard for Reprocessing

A second method of determining damages owed to each individual class member is particularly appropriate in class cases involving insurance, pension, or governmental benefits in which the class challenges the standard that the defendant applies in determining claims. This second approach to individual damages seeks to have the trier of fact determine in the trial on the classwide issues what standard will be applied to individual claims. The defendant is then required to reprocess the claims under that standard; the court retains jurisdiction to decide any disputes.

Consumer Class Actions: 17.5.1 Overview

Special interrogatories and special verdicts to the jury particularly are useful when a class action involves claims arising under the laws of different states.57 Naturally, proposed jury instructions must be tailored to the special interrogatories and verdicts that will be given to the jury. Some examples from consumer cases are set forth in the following subsections.

Consumer Class Actions: 17.5.2 Jury Instructions

Jury instructions suitable for use in consumer class actions often must be prepared on an ad hoc basis; stock instructions frequently do not cover the essential points. For example, the jury should be “pre-instructed” on the nature of a class action. One suggested instruction is:

Consumer Class Actions: 17.5.3 Use of Special Interrogatories and Special Verdicts to the Jury

It is rarely advisable to use a general verdict in class action litigation. Rather, the jury should be required to answer special interrogatories and to complete special verdicts. Federal Rule of Civil Procedure 49(a) provides that a “court may require a jury to return only a special verdict in the form of a special written finding upon each issue of fact.” The interrogatories give the jury a series of questions to answer. If the questions are answered in a certain way, a special verdict is in effect rendered, and the plaintiff prevails.

Consumer Class Actions: 19.1.1 Overview

Class counsel ordinarily may seek an award of attorney fees when authorized by attorney fee-shifting statutes or when their work on behalf of a consumer class succeeds in creating a common fund or conferring upon the class a common benefit. In rare instances, fees may also be awarded pursuant to a contractual fee-shifting provision.1 Courts disagree on whether or not the presence of a fee-shifting statute precludes recovery of attorney fees pursuant to the common fund approach.2

Consumer Class Actions: 19.1.2 Common Fund and Common Benefit Doctrines

Under the “common fund” doctrine, a lawyer who recovers a common fund for the benefit of a class is generally entitled to a reasonable attorney fee from the fund itself.7 The court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the fees and costs proportionately among the members of the class.8 When the litigation results in a common fund, no separate statutory basis is necessary for recovery of attorney fees.

Consumer Class Actions: 19.2.2.1 The Buckhannon Decision

In Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources,55 the Supreme Court rejected decades of federal decisions that had awarded fees to plaintiffs as the prevailing party under the “catalyst” rule.

Consumer Class Actions: 19.3.1 General Considerations

After winning a class case or settling it on a favorable basis, the plaintiff’s attorney is entitled to fees, subject to the court’s determination that the fees are reasonable. The attorney fee award is the compensation for the effort expended to benefit the class. Counsel will not undertake actions of this nature unless they can receive adequate compensation for (1) their time, (2) the risk of not prevailing, (3) the delay in receipt of fees, and (4) the investment (money as well as time) that must be made in a case.

Consumer Class Actions: 19.3.5 Many State Courts Prefer the Percentage-of-Fund Approach, Often with a Cross-Check

The percentage-of-recovery approach is employed or authorized by a number of state courts,117 with some of these courts preferring to use a lodestar “cross-check” in order to ensure a reasonable result.118 Similarly, in states where both methods are authorized, but the court chooses to employ the lodestar method in a given case, the court may use the percentage-of-recovery methodology as a cross-check against its lodestar calculation.119 Othe

Consumer Class Actions: 19.3.6.1 Establishing the Percentage

The usual percentage that courts approve is between 20% and 30% of the recovery.125 Between 40% and 50% is generally viewed as an upper limit.126 In a 2009 to 2013 study, the average in consumer cases was 26% nationwide.127 In the Eleventh Circuit, “[w]here the requested fee exceeds 25%, the court is instructed to apply the twelve Johnson factors.”128 The Ninth Circuit has also identi

Consumer Class Actions: 19.3.6.2.4 Cancellation of debt as part of the settlement

If the settlement consists of the write-off of class members’ debt that was unlikely to have been fully collected in any event, the value of the settlement cannot be assumed to be the amount of such debt. In such a case, some assessment of the likelihood that the money would have been collected is necessary to determine the actual benefit conferred on the class.159 Testimony of economists or statisticians may be necessary in order to estimate the value of the settlement to class members.

Consumer Class Actions: 19.3.6.2.6 Effect of amounts not paid to class members

In determining the value of the settlement to the class, existing law holds that it is not necessary to deduct amounts that are available for distribution to class members but are not claimed, even if the unclaimed amounts might revert to the defendant.174 Some courts, however, make such deductions in calculating attorney fees when funds are not first available to class members (e.g., the settlement provides for a definite amount to go directly to a cy pres recipient), while others do not.

Consumer Class Actions: 19.3.6.2.7 In computing the fund’s value, should costs first be deducted?

An issue in calculating the value of the fund for purposes of a percentage-of-the-recovery-fee award is whether costs of litigation and costs of administration should be deducted from the gross amount of the settlement or judgment before multiplying it by the selected percentage. One argument against such a deduction for litigation expenses is that it is contrary to the best interests of the class for class counsel to have an incentive against incurring whatever costs are reasonably necessary to litigate the case vigorously.

Consumer Class Actions: 19.3.6.2.8 Interest on the fund

In computing the attorney fees awarded on the basis of a percentage of a common fund, courts generally include in the fund interest that has been earned on the settlement fund.186 In the context of securities class actions, the Private Securities Litigation Reform Act (PSLRA) specifically requires that the interest calculation be based on the amount the class members actually received.187 However, it has been a long time since any court has considered this issue in the context of consumer cl

Consumer Class Actions: 19.3.7.1 Continued Importance of Lodestar Calculations for Common Fund Cases

Even though many courts no longer use the lodestar approach for computing common fund attorney fees, attorneys must still understand how to compute fees pursuant to this approach for a variety of reasons.188 As noted above, some courts continue to use the lodestar analysis to determine common fund fees, while others compute an approximate lodestar award as an independent check on the reasonableness of the percentage-of-the-recovery award.189

Consumer Class Actions: 19.3.7.3 Compensable Time

As noted, the lodestar is based in part on time reasonably expended to advance the litigation. The extent of a plaintiff’s success is a crucial factor in determining the reasonableness of the time spent.215 However, “the question is not whether . . . in hindsight the time expenditure was strictly necessary to obtain the relief achieved.

Consumer Class Actions: 19.3.7.4 Time Records

As the lodestar computation is based on hours expended, the most basic task in connection with the recovery of attorney fees is to keep detailed contemporaneous time records. Without such records, reconstruction of the time spent is extremely difficult. In addition, courts look with disfavor upon reconstructed time records.