155 F. Supp. 3d 297
W.D.N.Y.2016Background
- This case was referred to Magistrate Judge McCarthy under 28 U.S.C. § 636(b)(1)(B).
- Judge McCarthy filed a Report and Recommendation recommending denial of plaintiffs uncontested Motion for Settlement (Dkt. No. 92).
- The Court allowed objections until December 10, 2015; none were filed.
- The Court adopted the Report and Recommendation and denied the settlement, referring the case back to Magistrate Judge McCarthy for further proceedings.
- The motion sought conditional certification of a settlement class and preliminary approval of a class action settlement under Rule 23; the class is defined as mortgagors with New York real property who paid off mortgages after July 19, 2007, but whose certificates of discharge were not timely recorded.
- Class size is identified as 5010 potential members with varying delays in discharge certificates; up to $2.2 million was proposed for settlement, fees, and costs, with possible incentive for the named plaintiff and counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there subject matter jurisdiction under 28 U.S.C. § 1332(d)? | Zink asserts minimal diversity and >$5M controversy. | First Niagara argues lack of jurisdiction due to insufficient amount in controversy. | Court assumes jurisdiction issue pending, but requires proof of minimal diversity and amount in controversy; jurisdiction not conclusively established at this stage. |
| Can the settlement class be conditionally certified under Rule 23? | Class meets numerosity, commonality, typicality, and adequacy; data supports class size. | Potential deficiencies in adequacy and manageability; jurisdictional defense undermines claims. | Court questions adequacy and the overall reasonableness of certification; conditional certification denied without prejudice. |
| Is the proposed settlement fair, adequate, and reasonable? | Settlement provides meaningful relief and avoids complex litigation. | Lack of transparency, potential collusion, and disproportionate benefits to class representatives raise concerns. | Court finds concerns about fairness, potential collusion, notice deficiencies, and fee structure; recommends denial of preliminary approval. |
| Is the proposed notice to class members sufficient? | Notice can identify class members via NTC data and direct mailing. | Incomplete identification and potential address issues hinder notice adequacy. | Notice plan deemed insufficient; publication/identification methods uncertain and neutrally presented notice lacking. |
| Are the fee/incentive provisions and unclaimed funds provisions appropriate? | Fees and incentive payment are reasonable given discovery and claims process. | Proposed fee and incentive risk disproportionate to class recovery; unclaimed funds revert to Defendant. | Court doubts alignment of counsel incentives with class interests; questioned proportionality of fees and distribution. |
Key Cases Cited
- Scherer v. Equitable Life Assurance Society of the United States, 347 F.3d 394 (2d Cir.2003) (amount in controversy not reduced by merits defenses; jurisdiction focus)
- Traffic Executive Association-Eastern Railroads, 627 F.2d 631 (2d Cir.1980) (nine-factor framework for assessing settlement fairness)
- Brown v. Kelly, 609 F.3d 467 (2d Cir.2010) (preliminary approval scrutiny and factors for class settlements)
- In re Global Crossing Securities and ERISA Litigation, 225 F.R.D. 436 (S.D.N.Y.2004) (nine-factor approach to evaluating settlement terms and fairness)
- Pineros Y Campesinos Unidos del Noroeste v. Goldschmidt, 790 F.Supp.216 (D.Or.1990) (jurisdictional and procedural considerations in class actions)