Settlement Gives Law Firm $3.1 Million, Consumer 38 Cents
Law firm wins millions for itself and small amounts for its class action "clients," then sues columnist who dares to criticizes its conduct.
by Jerome F. Winzig
The 38-cent "lawsuit settlement credit" on this month's First USA credit card statement was puzzling. In recent years we've received many notices about class action lawsuits filed on our alleged behalf. In one settlement several years ago, we received six months of free technical support from Packard Bell because it allegedly deceived us about the width of its monitors. Our monitor worked fine but the 800 number was almost always busy. So I decided to research the true beneficiaries of this 38-cent settlement.
The First USA lawsuit was filed on behalf of someone identified as Richard Mangone ("and all others similarly situated") by the law firm of Carr, Korein, Tillery, Kunin, Montroy, Cates, Katz & Glass of St. Louis, Mo. The law firm will receive an award "not to exceed $3,000,000 in attorneys' fees and $100,000 in actual expenses, but the benefits to individual First USA cardholders are not quite as obvious.
The settlement applies to First USA cardholders who sent payments to two processing centers between January 1, 1998 and August 31, 1999. $6.7 million is set aside to provide a 38-cent credit for each cardholder who was assessed a finance charge; no reason is given for the 38-cent refund. (Former cardholders who somehow learn of this settlement may "submit a Proof of Claim to receive a Finance Charge Credit" to receive a check for 75 cents -- 38 cents plus postage!) $700,000 is set aside for potential credits to customers who sent in more than one check in a payment cycle, if they can show First USA delayed processing one of their checks. Another $28.7 million has been set aside for $29 refunds for customers who can show they were incorrectly assessed a late charge during that time period. Lastly, $3.8 million is reserved for a "reprice credit" averaging $58 for customers who can show their interest rates went up because their payments were incorrectly posted late.
According to the settlement, First USA denies all liability but settled for $40 million to avoid "the expense and uncertainty of protracted litigation." (Since my retirement account owns stock in First USA's parent company, I suppose I should be thankful for the avoided expense.)
Carr, Korein, et al. has taken on other cases where the benefits to the customer are questionable. Earlier this year it reached a settlement with NationsBank (now merged with Bank of America) regarding how overdraft fees were affected by the order in which the bank processed checks. The settlement provided customers with $5 million in small credits and gave the law firm $2 million.
Last year, Carr, Korein, et al. reached a settlement with Ameritech Mobile Communications regarding how partial minutes should be billed in a long distance phone call. The settlement provided the law firm with $6.75 million -- "only" 16 percent of the total settlement. Carr, Korein, et al. was also one of several law firms that won 29 percent of an $88 million settlement against MCI for allegedly charging customers non-subscriber rates from February 5, 1996 to October 15, 2000.
The aftermath of another case -- where Carr, Korein, et al. participated in a lawsuit against Publishers Clearinghouse -- is especially interesting. When Bill McClellan, a columnist for the St. Louis Post-Dispatch, criticized the settlement, Carr, Korein, et al. sued him. While writing about yet another lawsuit in his April 4, 2001 column, McClellan described to the earlier case: "I did some math and saw that if I filled out some long and complicated form, I'd get a little less than the cost of a stamp, and since I'd have to buy a stamp to claim my winnings, it didn't seem like a good deal. So I did a reckless thing. I went public with my math. I wrote about the lawsuit. The class-action lawyers sued me. They asked for $3 million. Their lawsuit against me cited the fact that I had compared them to bank robbers."
With the help of the newspaper's lawyers, the case was eventually dismissed. But the moral of the story is clear; be careful about publicly criticizing class action lawyers for filling their pockets by suing everyone on our behalf.