http://newsandinsight.thomsonreuters.com/Legal/News/2012/08
I’ve written a lot this year about a worrisome trend for class action lawyers: state attorneys general swooping into well-developed cases and settling them out from under the class lawyers who sank vast amounts of time and money into the litigation. We saw it in the muni bond derivatives litigation, we’re seeing it in the e-books antitrust case, and I’d wager that the Libor subpoenas sent to banks by the New York and Connecticut AGs are a prelude to claims that could bump up against the ongoing Libor antitrust class action.
But here’s a twist on the paradigm: On Tuesday, U.S. District Judge Virginia Covington of Tampa, Florida, ruled that Capital One’s $250 million nationwide class action settlement does not bar subsequent parents patriae suits against the credit card company by state AGs – even though the class settlement specifically includes releases of those claims. And to add to the frustration for Capital One and its lawyers at Morrison & Foerster, one of the private firms representing the AGs also represented plaintiffs in the class action.
According to Covington’s nine-page decision, Capital One cardholders first sued over the company’s “payment protection” fees in 2007 and reached a nationwide class action settlement in 2010. The settlement agreement specifically released all “claims on [cardholders’] behalf (including the government in its capacity in parens patriae).” Yet in April and June of 2012, the AGs of Hawaii and Mississippi filed state-court parens patriae suits against Capital One, citing the same payment protection fees at issue in the class action.
Capital One asked Covington to enjoin the AGs’ suits, arguing that their claims had already been litigated and resolved in the case she oversaw. The credit card company’s brief also asked the Florida judge to sanction the firm Golomb & Honik, which had been counsel to plaintiffs in the class action and subsequently signed on as counsel to the Hawaii and Mississippi AGs. “Golomb’s conduct in asserting against Capital One claims released herein violates Golomb’s obligations under the settlement agreement approved by this court,” asserted Capital One’s MoFo lawyers, requesting an order that the plaintiffs’ firm pay Capital One’s legal fees.
Golomb & Honik replied that the class action settlement didn’t release the AGs’ claims because class members don’t’ have authority to do so. Individual cardholders, the firm argued in a 24-page brief, can’t sign away the state’s rights, and Capital One knows it. Otherwise, according to the brief, the credit card company would not have agreed to a $13.5 million settlement with the West Virginia AG in January 2012 to resolve the same payment protection fee claims that were raised in the class action. “Why would Capital One agree to pay West Virginia and its citizens directly to settle claims regarding payment protection for an overlapping period of time and yet argue to Your Honor that all claims that an AG could bring have been released?” the Golomb brief said. (The firm also asserted that it had done nothing to warrant sanctions, since it had not acted in any way to undermine the class settlement.)
In her ruling Tuesday, Covington sided with Golomb and the Mississippi AG, who also filed a brief in opposition to Capital One. “The court’s order approving the settlement and closing this case did not bind the States of Mississippi and Hawaii,” she wrote. “The (AGs) of Mississippi and Hawaii were not defined as class members and did not have an opportunity to participate in the litigation or opt out of the class. It would be a violation of the Due Process clause to now enjoin such Attorney General via the requested injunction.” And if Capital One wants to argue that the AGs’ claims are already resolved, she said, it should make that argument before the Hawaii and Mississippi judges hearing the AG cases, not to her. (She also denied sanctions, without explanation.)
Richard Golomb told me Covington got the analysis exactly right. He said there have been several other instances in which AGs have filed suits following class action settlements. “Banks tried this same maneuver and failed each time,” he said. I asked why the class settlement included language on the release of parens patriae claims if, in his view, that language is meaningless. “I didn’t draft the release,” he said.
I left a message for Capital One counsel James McCabe of MoFo but didn’t immediately hear back.
(Reporting by Alison Frankel)
