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Consumer Class Actions: 19.2.1 Overview

Many statutory claims in consumer class actions provide for an award of “reasonable” statutory attorney fees to the consumer in a “successful action,” often referred to as the prevailing party.21 This is a second, independent basis for the award of attorney fees in a class action, distinct from an award based on a common fund theory.22 Even when claims are initiated pursuant to a statute with a fee-shifting provision, “where a class action results in a common-fund settlement for the benefit

Consumer Class Actions: 19.3.3 The Two Competing Common Fund Methods: Percentage of Fund Versus Lodestar

Over time, the courts have shifted their views on the correct approach to computing attorney fees under a common fund theory—use of a lodestar or use of a percentage of the common fund. Prior to the 1970s, the federal courts awarded fees in common fund cases based on a percentage of the benefit conferred.84 From 1973 to around 1985, the lodestar method, often with a multiplier, was temporarily in vogue in the federal courts.85

Consumer Class Actions: 19.3.7.2 The Hourly Rate

Under the lodestar method, the court first multiplies the attorney’s reasonable hourly rate by the number of hours reasonably expended to arrive at a lodestar. In common fund cases, when this lodestar is used to cross-check the reasonableness of a fee computed as a percentage of the recovery, it is often multiplied by a specific number (called a multiplier) to take into consideration the contingent nature of the case, the degree of success, and other factors.191

Consumer Class Actions: 14.10.1 Court Options When All or Part of a Recovery Cannot Be Paid Directly to Class Members

Cy pres or fluid recovery259 are procedural devices in class actions that, with court approval, distribute money damages indirectly for the benefit of the class of persons on whose behalf the litigation was brought rather than directly to class members.260 Cy pres awards ideally should be used to provide indirect benefit to absent members of the plaintiff class or to further the rights that formed the basis for the underlying litigation, which itself is an indirect benefit

Consumer Class Actions: 19.4.1 Overview

There are three possible ways to resolve a class case successfully and to receive attorney fees. The first is to win the case after trial or summary judgment and later petition the court for fees. The second is to negotiate a settlement of the class claims, have the court approve the settlement, and later negotiate or petition for fees.267 The third is to negotiate a settlement that covers both the recovery for the class and an award of fees.

Consumer Class Actions: 5.9 Reviewing the Complaint with the Client

Conduct a thorough review of the underlying facts with the potential class representative before the complaint is filed. Make sure that the class representative understands the factual allegations that form the basis of the defendant’s wrongful conduct. To the extent possible, educate the class representative on the basic legal theories under which the case will be prosecuted.

Consumer Credit Regulation: 3.2.4.1 Introduction

This section examines the application of preemption principles and the OCC rule to specific non-mortgage lending practices and loan features. It first examines the ten topics on which the OCC regulation, if it is valid, preempts state law limitations. It then analyzes the savings clause and several types of state laws that are generally carved out from preemption.

Consumer Credit Regulation: 3.2.4.2 Licensing, Registration, or Reports

The OCC regulation preempts state law limitations regarding “licensing, registration (except for purposes of service of process), filings, or reports by creditors.”183 Many state credit laws require lenders to be licensed and require them to file annual reports with a state regulator.184 Most of those laws are drafted to apply only to non-bank lenders, but to the extent they do not exclude national banks and federal savings associations they are probably preempted.

Consumer Credit Regulation: 3.2.4.3 Insurance and Other Credit Enhancements or Risk Mitigants; Debt Cancellation Contracts

The OCC regulation preempts state law limitations concerning “[t]he ability of a creditor to require or obtain insurance for collateral or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices.”187 Significantly, the language of the rule refers only to the ability to require or obtain insurance, not to any other aspect of insurance.

Consumer Credit Regulation: 3.2.4.5 Credit Terms

The OCC regulation provides that state law limitations concerning

the terms of credit, including the schedule for repayment of principal and interest, amortization of loans, balance, payments due, minimum payments, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan

Consumer Credit Regulation: 3.2.4.6 Escrow Accounts

The OCC regulation preempts state law limitations regarding “escrow accounts, impound accounts, and similar accounts.”213 Escrow account issues are unlikely to arise in the typical non-mortgage consumer loan, and no cases have been found that apply or illuminate this provision outside the mortgage context.

Consumer Credit Regulation: 3.2.4.7 Security Interests

The regulation preempts state law limitations regarding “security property, including leaseholds.”214 No cases have been found that apply or illuminate this provision to preempt state law, but it probably means that states cannot limit the types of collateral a national bank or federal savings association can take as security for a loan. Courts have held that state repossession protections and procedures are not preempted.215

Consumer Credit Regulation: 3.2.4.9 Disclosure and Advertising

The OCC regulation preempts state law limitations concerning “disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents.”218

Consumer Credit Regulation: 3.2.4.11 Rates of Interest on Loans; Non-Interest Fees and Charges

The final topic on which the OCC regulation preempts state law limitations is rates of interest.237 But, as acknowledged by a footnote in the OCC’s regulation, national banks are, in fact, required to obey state law regarding interest rates—their home state’s law, which they can export—unless they choose to follow the alternative federal ceiling.238 States other than the bank’s home state cannot, however, impose caps on the interest rates that a national bank can charge.