Wilken v. Wachovia Bank of Delaware, N.A.

2014 Ohio 2840
Ohio Court of Appeals·Decided June 27, 2014·No. H-13-020·Published

Opinion

IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT

HURON COUNTY

John Wilken and Andrea Wilken, Court of Appeals No. H-13-020 as class representatives Trial Court No. CVE-2002-4321 Appellees

v. Wachovia Bank of Delaware, N.A. DECISION AND JUDGMENT Appellant Decided: June 27, 2014

*****

John T. Murray, Leslie O. Murray, Michael J. Stewart, James J.

Martin and Robert W. Gentzel, for appellees.

James S. Wertheim, Kimberly Y. Smith Rivera and Russell J.

Pope, for appellant.

*****

YARBROUGH, P.J.

I. Introduction

{¶ 1} Defendant-appellant, Wachovia Bank of Delaware, N.A. (“Wachovia”), appeals the judgment of the Huron County Court of Common Pleas, which followed our affirmance of the trial court’s judgments approving a class action settlement and awarding attorney fees. We reverse.

A. Facts and Procedural Background

{¶ 2} This is the third appeal in this class action litigation. In the first appeal, we affirmed the trial court’s certification of the class. Wachovia Natl. Bank of Delaware, NA v. Ball, 6th Dist. Huron No. H-08-022, 2010-Ohio-1479. In the second appeal, we affirmed the trial court’s judgments that approved the class action settlement agreement and awarded attorney fees. Wilken v. Wachovia Bank of Delaware, N.A., 6th Dist. Huron No. H-12-006, 2013-Ohio-2132. In the present appeal, Wachovia challenges the trial court’s “Post-Affirmance Opinion and Order,” which ordered Wachovia to pay an additional approximately $1.2 million, and which determined that postjudgment statutory interest began to accrue on January 31, 2012, when the trial court entered its judgment approving the class action settlement.

{¶ 3} The relevant facts predate our decision in the second appeal.1 After extensive litigation and negotiations, the parties in this class action lawsuit reached a settlement agreement. As part of the agreement, Wachovia agreed to pay class members a defined amount if they filed a qualifying claim. The specific terms of the settlement agreement are not relevant to the present appeal, except as they pertain to the payment of attorney fees. Under the agreement, class counsel was to request attorney fees totaling

1 A more complete recitation of facts can be found in our decision in Wilken v. Wachovia Bank of Delaware, N.A., 6th Dist. Huron No. H-12-006, 2013-Ohio-2132.

one-third of the value of the settlement, which the parties estimated to be $5.6 million. Notice was sent to the class members that they would not be required to pay the attorney fee directly, but rather the resulting $1.85 million attorney fee would be deducted proportionately from the net disbursement each class member received.

{¶ 4} As discussions regarding the acceptability of the settlement agreement continued in the trial court, it became clear that the response rate was not as high as desired, and that an amount significantly less than $5.6 million would be disbursed to class members. Nevertheless, on October 6, 2011, the parties jointly moved for approval of the settlement agreement. In addition, on that date, class counsel and Wachovia jointly submitted a letter in an effort to resolve a perceived ambiguity in the settlement agreement as to how the attorney fee would be deducted from the disbursements to class members. Because the response was lower than expected, class counsel and Wachovia assured the court that no more than one-third of each disbursement would be deducted to pay the requested $1.85 million attorney fee. Rather, Wachovia agreed to supplement the fee award such that it would pay to class counsel directly any difference between the $1.85 million requested fee and the amount deducted from the class members’ disbursements.

{¶ 5} The settlement hearing continued on January 5, 2012, after another round of notices to class members directed at increasing the participation rate. Notably, this round of notices did not contain any clarification regarding attorney fees or Wachovia’s agreement to supplement the fee award. At the end of the January 5, 2012 hearing, the trial court expressed its concerns with the settlement agreement, particularly the attorney fees. The court was satisfied with class counsel receiving one-third of the disbursed awards, which at that time were estimated to be only $3 million. Where the court had trouble, though, was the supplemental payment from Wachovia. The court wondered, if Wachovia was willing to pay that additional amount, why should it not pay the money to the class members.

{¶ 6} Following a short recess, the court proposed a compromise:

[The court would be] willing to approve the settlement as described, with the provision for the supplementation of payment to plaintiff’s counsel that has been agreed upon in [the October 6, 2011] letter, provided that claimants’ counsel will issue a supplemental payment to the [sub-]class A and B claimants of two-thirds of the supplement that they receive. They could retain one-third of the underlying amounts in that fashion.

The parties were granted time to examine the proposal, and the settlement hearing was continued until January 31, 2012. On January 23, 2012, class counsel and Wachovia jointly submitted a letter that rejected the trial court’s suggested compromise. In the letter, class counsel and Wachovia reasoned that the compromise deviated from the terms in the notice sent to class members, and would raise due process concerns with regard to the sufficiency of the notice. In addition, class counsel and Wachovia argued that setting the amount of attorney fees based on the actual disbursement to the class members failed to account for the total benefit conferred on the class. Further, they stated that it is more common for attorney fees to be determined based on the total amount of the fund.

{¶ 7} On January 31, 2012, the settlement hearing continued. At that time, the response period for class members had officially concluded, and the amount due to be disbursed totaled only $1.8 million. Following the hearing, the trial court entered its final judgment on January 31, 2012, approving the settlement agreement. Contemporaneously, the trial court entered a second judgment, which incorporated and amended the first, and which determined attorney fees and expenses. In that second judgment, the court rejected the special arrangement between class counsel and Wachovia because (a) the Settlement Agreement did not report or approve it; (b) the court approved Notice of Pending Class Action Settlement did not report it;

(c) the court has no reason to believe that the Class Members have been made aware of it; (d) that relatively large payment by the adverse party may affect or have the appearance of affecting Class Counsel’s independent judgment on behalf of the Class Members; (e) the Class Members have not approved that payment; and (f) the total fees would then exceed 60% of the total funds paid for this settlement.

The trial court then awarded fees of one-third of each payment for any class member’s claim as fair and reasonable compensation. The court reasoned that the resulting payment exceeds the time charges that class counsel reasonably expended on behalf of the class members, and is consistent with the written contingent fee arrangement to accept one-third of all funds received as full payment for their services.

{¶ 8} The class members, on behalf of class counsel, appealed the trial court’s judgments, arguing that the court erred when it awarded only one-third of the actual disbursements as attorney fees. At the outset, Wachovia moved to dismiss the appeal as it pertained to the trial court’s first judgment—which approved the terms of the settlement agreement—so that it could distribute the funds to the class members. However, we denied Wachovia’s motion, because the trial court’s second judgment amended and incorporated the first judgment, and thus the two were inseparable. Thereafter, we affirmed the trial court’s judgments in Wilken v. Wachovia Bank of Delaware, N.A., 6th Dist. Huron No. H-12-006, 2013-Ohio-2132.

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