Opposition Brief — Kamilewicz v. Bank of Boston Corp.

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No. 96-1184 oe o-.

MAR 27 907

In THE

Supreme Court of the United leetateg ="

OcTOBER TERM, 1996

DEXTER J. KAMILEWICZ, GRETCHEN L. KAMILEWICZ,

and MARTHA E. PRESTON, on behalf

of themselves and all others similarly situated,

Petitioners,

Vv.

BANK OF BOSTON CORPORATION, BANCBOSTON

MORTGAGE CORPORATION, BURR & FORMAN,

T. THOMAS COTTINGHAM, EZELL & SHARBROUGH,

MARK EZELL, JOHN W. SHARBROUGH III, EDELMAN

& COMBS, DANIEL A. EDELMAN, LAWRENCE

WALNER & ASSOCIATES, LAWRENCE WALNER, and

John or Jane Does 1 through 50,

Respondents.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

JAMES T. FERRINI

Counsel of Record

MICHAEL R. GRIMM

MELISSA A. MURPHY-PETROS

CLAUSEN MILLER P.C.

10 South LaSalle Street

Chicago, Illinois 60603

Of Counsel: (312) 855-1010

RONALD E. STACKLER Attorneys for Respondents

STACKLER & STACKLER EDELMAN & COMBS

200 West Ohio Street and DANIEL A. EDELMAN

Chicago, Illinois 60610

(312) 337-6663

Midwest Law Printing Co., Chicago 60610, (312) 321-0220

QUESTION PRESENTED FOR REVIEW

May petitioners, who are former members of the plain-

tiff class in an earlier state action and who purport to

represent substantially the same class membership in

the instant case, evade the Rooker-Feldman jurisdiction-

al doctrine and collaterally attack the state court’s fact-

intensive determination of fair fees for class counsel by

asserting that notice of the fairness hearing upon a pro-

posed class settlement and class counsel’s fee petition

violated due process, notwithstanding:

— that the state court adjudicated the question of its

jurisdiction, finding that the notice complied with

due process and that the court had jurisdiction

over class members;

and

— that the allegedly deficient notice was, in fact, suf-

ficient to prompt members of petitioners’ class to

prevail upon the Florida Attorney General to in-

tervene on their behalf in the state proceedings

and actively litigate the issue of reasonable fees:

and

— that those intervening class members successfully

prevailed upon the state court to award lower fees

than those sought by counsel;

and

— that those intervening class members then elected

not to appeal that state court ruling.

‘i

PARTIES TO THE PROCEEDINGS

Petitioners (plaintiffs below): Dexter J. Kamilewicz,

Gretchen L. Kamilewicz, and Martha E. Preston, on be-

half of themselves and all others similarly situated.

Respondents (defendants below): Bank of Boston

Corporation and BancBoston Mortgage Corporation were

named defendants in the earlier state class action which

is the subject of this litigation. Bank of Boston Cor-

poration has no parent company and has the following

non-wholly owned subsidiaries: Boston Equiserve, Thor

Credit Corporation, and HomeSide, Inc. The parent com-

pany of BancBoston Mortgage Company is HomeSide,

Inc. BancBoston Mortgage Company is now known as

HomeSide Lending, Inc., and it has no non-wholly owned

subsidiaries.

Burr & Forman and specifically T. Thomas Cotting-

ham, represented the banks in the state action.

Ezell & Sharbrough, Mark Ezell, and John W. Shar-

brough, III were the principal attorneys for the plaintiff

class in the state action. They are not, however, before

this Court as petitioners did not effect service of process

upon them.

Edelman & Combs; Daniel A. Edelman; Lawrence

Walner & Associates; Lawrence Walner were additional

counsel for the plaintiff class.

iii

TABLE OF CONTENTS

QUESTION PRESENTED FOR REVIEW ....

PARTIES TO THE PROCEEDINGS ........

TABUR OF CONTEND 0s cccc ccc cescscces

TABLE OF AUTHORITIES ................

GP APTITIEE SUEEAEAT bcc pew hes Seed e dn secees®

STATEMENT OF JURISDICTION ..........

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED ..................

COUNTER-STATEMENT OF THE CASE ....

PRELIMINARY—THE CASE PETITIONERS

a ga IS NOT THE CASE BEFORE THIS

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THE ROOKER-FELDMAN DOCTRINE HAS

WITHSTOOD THE TEST OF TIME ........

Il.

PETITIONERS’ ASSERTIONS OF A DUE

PROCESS VIOLATION ARE CONCLUSIVELY

PRECLUDED BY THE HOFFMAN COURT'S

— OF ITS OWN JURISDIC-

Pe PO ee eeT ETO CT PT eee eee TE Eee

III.

PETITIONERS’ CHARACTERIZATION OF

THEIR CLAIM AS ONE FOR “MALPRAC-

TICE” CANNOT CAMOUFLAGE THE FACT

THAT THIS CASE IS EFFECTIVELY AN

APPEAL FROM THE ADJUDICATIONS OF

THE HOFFMAN COURT ...............4..

CEE <b tea yb be sevevcevebebeduwssars

PAGE

8 8

TABLE OF AUTHORITIES

Cases PAGE

Adams v. Robertson, No. 95-1873, 1997 WL 85127

COB, Bie Wee Oy ANU 60 sc ckccedcaenions 20

Appleton Electric Co. v. Advance-United Express-

ways, 494 F.2d 126 (7th Cir. 1974)......... 18

ASARCO, Inc. v. Kadish, 490 U.S. 605 (1989) ... 18

Baldwin v. Iowa State Traveling Men’s Ass’n, 283

Ps CE TU ois us Si uw vie cheese ee 16

Browning v. Navarro, 826 F.2d 335 (5th Cir.

TOT) 5 cuts se nseden cakes was 17

District of Columbia Court of Appeals v. Feldman,

es. CE 5s saiknks sun bauieaees 6

Durfee v. Duke, 375 U.S. 106 (1963) .......... 19

Durkin v. Shea & Gould, 92 F.3d 1510 (9th Cir.

Es shsasou sak intestine 20, 21

Grunin v. International House of Pancakes, 513

F.2d 114 (8th Cir.), cert. denied, 423 U.S. 864

CEPTEE t45 sca ce ecu Diukdaeeae vases 14

Handschu v. Special Services Div., 787 F.2d 828

Ge A. SUD bcc k sine asiccs ochxeeekeecens 14, 19

Harris Trust & Savings Bank v. Ellis, 810 F.2d

oo et ee er ere eae pie iee 17

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322

Sis Eo race Fa awed 6 eee eee eee 17

Homola v. McNamara, 59 F.3d 647 (7th Cir.

ROS 6 O54 ere FW WAGE aah wes eh as 21

Howlett by Howlett v. Rose, 496 U.S. 356 (1990) . 18

In re General Tire and Rubber Co. Securities

, 726 F.2d 1075 (6th Cir.), cert. denied,

469 U.S. ’ 858 | RRS RR ae ar eS

Johnson v. DeGrandy, 512 U.S. 997, 114 S. Ct.

NT SE ds ices bok a bbs Cade nee nbeudan

Kenner v. Commissioner,387 F.2d 689 (7th Cir.),

cert. denied, 393 U.S. 841 (1968) ...........

Marshall v. Holiday Magic, Inc., 550 F.2d 1173

CG Ga SEE cok oc haa aN sks bic dee kes Veen

Miller v. Republic Nat. Life Ins. Co., 559 F.2d 426

GN RA SUED va ch cdun teen dpunseebetecnees

Parsons Steel, Inc. v. First Alabama Bank, 474

Se, ee xy 0k 4 os ee hee ae ees

Peters v. Delaware River Port Authority, 16 F.3d

1346 (8rd Cir.), cert. denied, 115 S. Ct. 62

ERE Sak neve s Knees bbubaa ke carselnaeesens

ROUNN es eek anaes a es Lee

ee sae eas

Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) .

Taft v. Donellan Jerome, Inc., 407 F.2d 807 (7th

Ce ues sok As Neha beh ccouue aaa ne bene

Underwriters Nat’l Assur. Co. v. N. Carolina Life

& Acc. & Health Ins. Guaranty Ass’n, 455 U.S.

EE ec kk ca nies Va eke Rhee enedaes

United States v. Wilson, 631 F.2d 118 (9th Cir.

SSIES RARE m ger ona alt RERUN AL a a Saw ape AEE

Walsh v. Great Atlantic & Pacific Tea Co., 726

fe 8 | Bk A PR eee

17-18

14, 18

Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982),

cert. denied, 464 U.S. 818 (1983) ........... 14

Wilson v. Schwarz, 99 F.3d 1141 (6th Cir. 1996) . 7

Constitutional Provisions

eu CHS GR. Bia oe ca wecadcekseckesgonsss 2

oes SU. CINE, TRE a can ck dgaeseweavns 1

Statutes And Other Authority

OE Fah See < vee neveceaccacscwsurenbueus 1

DP Te RU Wine bis 508d SON cde 2,19

Ge Bee Ms ee RED koivncthabecaunceeasires 6

WO: Wis Rs Oe os bec veh anedkeuseevaceus es 4

pO Be eee Serres y 4

Wright, Miller & Kane, Federal Practice and Pro-

cedure: Civil 2d § 2870 (1995) .............. 17

OPINIONS BELOW

The District Court’s opinion is not published. It is

instead available from online services at Kamilewicz v.

Bank of Boston Corp., No. 95 C 6341, 1995 U.S. Dist.

LEXIS 18973 (N.D. Ill. Dec. 15, 1995), or Kamilewicz v.

Bank of Boston Corp., No. 95 C 6341, 1995 WL 758422

(N.D. Ill. Dec. 15, 1995). The Court of Appeals’ opinion is

reported at Kamilewicz v. Bank of Boston Corp., 92 F.3d

506 (7th Cir. 1996). The dissent from the Court of

Appeals’ denial of rehearing and suggestion for rehearing

en banc is reported at Kamilewicz v. Bank of Boston

Corp., 100 F.3d 1348 (7th Cir. 1996).

STATEMENT OF JURISDICTION

The District Court’s judgment was entered on Decem-

ber 15, 1995. The Court of Appeals’ judgment was en-

tered on August 8, 1996. Plaintiffs’ petition for rehearing

was denied on November 22, 1996. This Court has jur-

isdiction pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fourteenth Amendment, Section 1, of the United

States Constitution provides:

All persons born or naturalized in the United

States, and subject to the jurisdiction thereof, are

citizens of the United States and of the State where-

in they reside. No State shall make or enforce any

law which shall abridge the privileges or immunities

of citizens of the United States; nor shall any State

deprive any person of life, liberty, or property, with-

out due process of law; nor deny to any person within

its jurisdiction the equal protection of the laws.

Article IV, Section 1, of the United States Constitution

provides:

Full Faith and Credit shall be given in each State

to the public Acts, Records, and judicial Proceedings

of every other State. And the Congress may by gen-

eral Laws prescribe the Manner in which such Acts,

Records and Proceedings shall be proved, and the

Effect thereof.

The Full Faith and Credit Act, 28 U.S.C. § 1738, pro-

vides:

The Acts of the legislature of any State, Territory,

or Possession of the United States, or copies thereof,

shall be authenticated by affixing the seal of such

State, Territory or Possession thereto.

The records and judicial proceedings of any court

of any such State, Territory or Possession, or copies

thereof, shall be proved or admitted in other courts

within the United States and its Territories and Pos-

sessions by the attestation of the clerk and seal of

the court annexed, if a seal exists, together with a

certificate of a judge of the court that the said attes-

tation is in proper form.

Such Acts, records and judicial proceedings or

copies thereof, so authenticated, shall have the same

full faith and credit in every court within the United

States and its Territories and Possessions as they

have by law or usage in the courts of such State,

Territory or Possession from which they are taken.

1 A Nia hee: SON NED help i BEM (A A tah Be

sila eet a brie ile ater in Lee

COUNTER-STATEMENT OF THE CASE

An Embarrassment Petitioners

Would Wish Away

Petitioners’ statement of the case is inaccurate and

incomplete in several material respects. Most notably,

petitioners have not disclosed the critical role played by

the Florida Attorney General. The Florida Attorney Gen-

eral has proven to be such an embarrassment to petition-

ers that they have apparently taken the drastic step of

terminating his role as their amicus.’ Petitioners claim

to be representatives of the former members of the

plaintiff class in an earlier state class action’ (herein-

after Hoffman). (Pet. App. 59, 65) In fact, a significant

contingent of petitioners’ putative class (the Florida

members of the plaintiff class), acting through the

Florida Attorney General, had intervened in Hoffman

and actively litigated the very questions (the value of the

settlement and a fair fee award for class counsel) peti-

tioners now seek to have the federal court review in

violation of the Rooker-Feldman jurisdictional doctrine.

1 The Florida Attorney General served as amicus curiae sup-

porting petitioners before the Seventh Circuit.

2 The class action was filed in Alabama where the named

plaintiffs and a large percentage of the plaintiff class resided.

BancBoston Mortgage Company was located in Northern

Florida and was primarily a regional servicer. The case was

filed in Mobile County under the style and caption of Hoffman,

et al. v. BancBoston Mortgage Corp., No. CV-91-1880.

A Claim Inextricably Intertwined

With Earlier State Proceedings

Petitioners vaguely assert that respondents somehow

perpetrated a fraud upon the Hoffman court and that, as

a consequence, that court’s award of fees to class counsel

unfairly exceeded one-third of the economic benefit of the

class settlement. (Pet. App. 52-53)

The Hoffman court, which had earlier certified the

class pursuant to Alabama Civil Procedure Rule 23(b)(2)°

and granted the plaintiff class partial summary judg-

ment, conducted a fairness hearing on January 10 and

11, 1994, and by order entered January 24, 1994,4 ap-

proved the proposed settlement of the class action, re-

jected class counsel’s request in their fee petition for a

fee equivalent to one-third of the economic benefit of the

settlement and awarded fees, which it specifically deter-

mined to be less than one-third of that benefit.

The Value Of The Class Settlement

The class settlement required the defendant,

BancBoston, to stop overcharging its mortgagors the

amounts required to be paid into and retained in their

escrow accounts, refund the excess already in those

accounts (19% of the amount held in escrow) and pay the

mortgagors interest on the sums which had been wrong-

fully held. (Resp. App. 10-11) The court considered tes-

* Alabama Rule 23 is identical to Federal Rule 23.

* Petitioners did not provide this Court with the Hoffman

decision of 1/24/94, which decided the very question now resur-

rected by this lawsuit. That order is set forth in Respondents’

Appendix 4-18.

timony, including that of experts, and documentary

evidence adduced upon the two-day fairness hearing and

entered its order of January 24, 1994, identifying severe!

categories of economic and non-economic benefit, bo...

present and future. The court determined that that bene-

fit included the time value of the money which, but for

the settlement, would not have been refunded until the

mortgages ended and the money which, again, but for

the settlement, would have been paid into escrow in

futuro.

The court further decided that the fee determination

should be based upon that economic benefit:

In this case, because of the broad responsibilities and

risks assumed by class counsel, and the unprece-

dented results achieved by Class counsel, Class coun-

sel’s efforts merit a fee based upon a percentage of

the economic benefit conferred by this settlement.

The total fee recovery as set out below is found to be

reasonable in light of the fact that the future benefit

conferred upon the Class by this Consent Decree is

substantial and is at least as valuable to the Class as

the immediate refund to the Class of the settlement

proceeds from the common fund. This Court makes

this determination after taking into . . . account the

objections of the Florida Attorney General. (Resp.

App.16-17)

The Court further determined the minimum value of

the economic benefit and that the fees should be 28% of

that sum—and not the one-third sought by class counsel.

The fees thus calculated and awarded approximated $8.5

million (not $14 million as asserted by petitioners) and

that included both fees to be allocated among all of the

several class counsel and costs.

Petitioners’ Federal Claim:

A Denial Of the Time Value Of Money

Petitioners’ challenge to the fairness of the fees is

based on their denial of the time value of money, assert-

ing that the only benefit to members of the plaintiff class

was the interest which the defendant in Hoffman was

required to pay to class members. (Pet. App. 52 and 53)

The district court below, Judge Plunkett presiding, iden-

tified the gist of petitioners’ claim as one inextricably in-

tertwined with the very question decided by the Hoffman

court:

The plaintiffs here allege that the true economic

benefit to the plaintiff class in the Hoffman litigation

was only the interest payment. . . . (Pet. App. 21, 31)

The district court dismissed this action, pursuant to

Fed. R. Civ. P 12(b)(1) for lack of subject matter jurisdic-

tion under the Rooker-Feldman doctrine,’ stating:

[Tlhe plaintiffs are asking us to undo what the

Alabama court did, and that constitutes a [sic] im-

permissible collateral attack upon the state court

judgment . . . we would have to re-open, in effect, the

Alabama court’s decision regarding the economic

benefit to the class and the reasonableness of the

award of attorneys’ fees. (Pet. App. 31)

° Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of

Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983).

2 gigunsu ted eae aaa arama

Petitioners’ Belated Attack Upon

The Jurisdiction Of The Hoffman Court

The focus of petitioners’ argument before this Court—

their challenge to the Hoffman court’s jurisdiction over

the members of the plaintiff class—is an afterthought

not pled in their complaint. (Pet. App. 49-105) Petition-

ers first raised the assertion in response to and in an

effort to evade respondents’ Rooker-Feldman defense.

Nevertheless, petitioners have repeatedly insisted that

they do not “seek to overturn the Alabama judgment.”

(Pet. Opening Brf. before 7th Cir. at 4) Thus, the Court

of Appeals described petitioners’ contradictory attack

upon jurisdiction as “shifting sand.” (Pet. App. 6)

Also, notice® to class members, effected both by first

class mail and publication, advised them in neutral

terms of the nature of the lawsuit; the proceedings to

date; the general terms of the proposed settlement; that

only “some” class members would receive a payment of

interest or a cash refund; that others would receive a

credit; that fees, if awarded, would “be paid out of each

6 Although petitioners attack the notice, they did not place it

in the record. That notice is a matter of record in the Hoffman

case. Also, it was published in USA Today on December 13

and 20, 1993. A federal court may take judicial notice of the

records of an inferior court in other cases. United States v.

Wilson, 631 F.2d 118, 119 (9th Cir. 1980). Also, since items

published in newspapers are “capable of accurate and ready

determination” such items may be the subject of judicial

notice. Peters v. Delaware River Port Authority, 16 F.3d 1346,

1356 (3rd Cir.) cert. denied, 115 S.Ct. 62 (1994); Ritter v.

Hughes Aircraft Co., 58 F.3d 454, 458-59 (9th Cir. 1995);

Wilson v. Schwarz, 99 F.3d 1141(6th Cir. 1996). Pertinent por-

tions of the notice are set forth in respondents’ appendix

(Resp. App 1-3).

Mis Gai, +

escrow account”; the availability upon request of more

detailed information; the hearing date; the subject

(“whether” the proposed settlement is “fair, reasonable

and adequate” and whether class counsel should be

awarded fees and if so, the amount thereof) and the right

of class members to appear and object or opt out. The

notice, the content of which was prescribed by the

Hoffman court (Pet. App. 70), described class counsel’s

fee petition as follows:

Class Counsel will request the Court to award them

a reasonable attorney fee to be paid out of each

escrow account based upon the benefit conferred on

the class . . . Class Counsel has indicated that they

will request a percentage not to exceed one-third of

the economic benefit conferred on the class as a

result of this settlement. The Court will decide

whether or not to award attorneys’ fees to class

counsel at the fairness hearing scheduled for Janu-

ary 10, 1994. (Resp. App. 2-3)

Petitioner, Martha Preston, admitted that she per-

sonally received the notice. (Doc.37, Aff. of Martha E.

Preston)’

The Hoffman Court’s Adjudication

Of Its Jurisdiction

The Hoffman court initially approved the class notice

on December 6, 1993 (Doc.22, Exh. A, p.3), thereafter

heard evidence on the reasonableness of notice and, by

order of January 24, 1994, specifically held that both the

personal notice and notice by publication complied with

7 All citations to a “Doc.” number are citations to the Record

on Appeal before the Seventh Circuit.

Lee

due process requirements, giving the members of the

plaintiff class ample opportunity to object to both the

proposed settlement and fees. (Resp. App. 15-16) The

Court’s order states:

The notice given to members of the Class by pub-

lication and by mail . . . complied with all require-

ments of due process, all requirements of Rule 23 of

the Alabama Rules of Civil Procedure, and const-

tuted the best notice practicable under the circum-

stances. (Resp. App. 15)

The Sufficiency Of The Notice

In their argument before the Court of Appeals, peti-

tioners asserted that the notice approved and effected in

Hoffman gave them “no opportunity to raise their claims

in the state action.” (Pet. Opening Brf. before 7th Cir. at

24) In fact, the Florida Attorney General intervened in

Hoffman at the behest of and on behalf of Florida mem-

bers of the class who had received that notice. (Doc. 39,

Exhs. A & B)

Petitioners’ Representation That

Their Arguments Challenging Fairness

Were Not Made In Hoffman

In support of their accusation of fraud, petitioners

made the following representation to the Court of Ap-

peals:

[Alt no time during the fairness hearing was... the

fact that most, if not all, of the Hoffman class mem-

bers would suffer a net out-of-pocket loss even men-

tioned. . . much less raised, argued, briefed or de-

cided. (Pet. Reply Brief before 7th Cir. at 10)

kisses. o0

In fact, the Florida Attorney General made that very

argument in Hoffman. In a brief which he filed in

Hoffman, “in opposition to approval of . . . class counsel’s

fee request,” the Florida Attorney General argued that

“the benefit to class members has been overstated” (Doc.

39, Exh. B at 8) because payment should be determined

by the interest which was to be paid by BancBoston and

not upon consideration of the future value of money.

Also, in his cross-examination of a witness, the Florida

Attorney General specifically asked about the possibility

“that somebody could end up with less money after this

settlement in their escrow account than they did be-

fore[.]” (Doc. 39, Exh. A at 77)

The Florida Attorney General’s

Admission: The Benefit To The

Class Was At Least $32 Million

In Hoffman, the Florida Attorney General argued that

the court should reject the evidence adduced upon the

two day fairness hearing that the economic benefit to the

class members exceeded $42 million. The Florida Attor-

ney General argued that the economic benefit instead

approximated $32 million. (Doc. 39, Exh. B at 2, 3, 13,

14, 18)

The Hoffman Court’s Decision Upon

The Supplemental Proceedings: No Fraud

At the time their motion to dismiss this action was

pending below, those respondents who were counsel for

the plaintiff class in Hoffman filed a motion before the

Hoffman court asking that court to direct petitioners to

eer one eS ee

Raa iit shai ixeniied rena sart?

show cause why tiney should not be bound by that court’s

adjudication of January 24, 1994. The court treated

plaintiffs’ complaint in the instant case as an Alabama

Rule 60(b) motion for supplemental relief and scheduled

a hearing for December 18, 1995. The Hoffman court

had, by its order of January 24, 1994, retained jurisdic-

tion, “for the purpose of adducing evidence regarding the

fairness, reasonableness and adequacy of the Decree, for

the purpose of hearing any objections to the Decree or

any provision thereof, and for the purpose of determining

the fairness, reasonableness and adequacy of the Decree

_...” (Resp. App. 22) Also, the court directed counsel to

have summons served upon petitioners and directed peti-

tioners to substantiate their accusations. (Doc. 39, Exh.

C at 2)

Referencing the scheduled hearing of December 18,

1995 the Hoffman court stated:

The respondents allege that a fraud was perpetrated

upon this Court and further that information which

was material to these deliberations was withheld by

class counsel. Furthermore, Mr. Kamilewicz has con-

tacted this Court regarding this matter.

* * *

[Alt that time they will be given an opportunity to

present evidence and testimony in support of their

allegation challenging this Court's final order in this

matter. (Doc. 39, Exh.C at 1, 2)

In the order belew granting respondents’ motion to

dismiss, the district court made the following comment

relative to that scheduled hearing:

If the defendants did perpetrate a fraud upon the

Alabama court, as the plaintiffs have alleged, then

the state court was an innocent victim of it; that is

Ssh RELEASE

a far cry from being prejudiced against the plaintiffs

... Moreover, if the plaintiffs address their concerns

to the Alabama court now and can substantiate their

claims, that court is likely to be outraged by the

defendants’ conduct. (Pet. App. 32)

Petitioners, who had received the summons and notice

of the December 18 hearing, sent a representative to the

Hoffman court, stating their refusal to participate. (Pet.

App. 111)

The Hoffman court nevertheless proceeded to conduct

the scheduled hearing and by order entered January 30,

1996 made the following findings:

— that the court has personal jurisdiction over plain-

tiffs;

— the due process requirements have been satisfied

and plaintiffs’ claim that the court lacks jurisdic-

tion is meritless;

— thatthe substance of plaintiffs’ arguments concern-

| ing the alleged excessiveness of fees was raised,

| argued and briefed by the Florida Attorney Gen-

| eral and was fully adjudicated and decided by the

Court;

— that defendants did not perpetrate a fraud upon

the court;

— that plaintiffs’ allegations of misrepresentation and

fraud upon the court are “baseless.” (Pet. App. 106-

118)

ARGUMENT

PRELIMINARY

THE CASE PETITIONERS DESCRIBE

IS NOT THE CASE BEFORE THIS COURT

A Spurious Claim Of Fraud

Petitioners’ claim of fraud is hyperbole or, as the dis-

trict court below described it, mere “dress[ing]”. The

transcript of the Hoffman court’s fairness hearing and

the Florida Attorney General’s brief, both of which are in

the record, demonstrate on their face that the Florida

Attorney General aggressively participated in the pro-

ceedings, that no evidence was withheld and that his

participation was unfettered.

Petitioners’ federal lawsuit, stripped of this hyperbole,

simply asserts that the Hoffman court erred in its deter-

mination of “what” is the value of the benefits conferred

by class counsel. In its opinion below, the district court

summarized the point:

Even though their request for relief is dressed up

as damages under RICO, section 1983, or for attor-

ney malpractice, the plaintiffs are asking us to undo

what the Alabama court did, and that constitutes a

[sic] impermissible collateral attack upon the state

court judgment. (Pet. App. 31)

Additionally, members of petitioners’ class who inter-

vened in Hoffman via the Florida Attorney General par-

ticipated in litigating the issue of fees. Those litigants

had every right to challenge the Hoffman court’s fairness

determination by appealing. Instead, petitioners have

opted to repeat those very arguments before the federal

court asserting that the only economic benefit resultant

from the settlement was the defendant bank’s payment

of interest to the mortgagors.

There is only one significant difference between the

arguments presented below and those advanced in Hoff-

man. In Hoffman, the Florida Attorney General admitted

that the future value of money constituted a substantial

economic benefit and, further, that the economic benefit

approximated $32 million. (Doc. 39, Exh. A, Exh. B at

8-13)

That admission, on its face, makes plain that the fees

awarded did not exceed one-third of the economic benefit.

A Contrived Due Process Claim

Petitioners’ assertion that they were denied due proc-

ess is unfounded. The notice of class action and proposed

settlement (Resp. App. 1-3) assiduously adhered to the

requirements of due process as established by case law.®

The notice is neutral as to the merits of the assertions of

the parties, identifies class counsel’s request for fees,

states that the fees will be paid out of the escrow

accounts, that some class members will not receive an

immediate money pay out, and that the amount of fees,

if any, is a subject of the scheduled fairness hearing.

® See e.g.: Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-

12 (1985); Grunin v. International House of Pancakes, 513 F.2d

114, 122 (8th Cir.), cert. denied, 423 U.S. 864 (1975); Wein-

berger v. Kendrick, 698 F.2d 61, 70 (2d Cir. 1982), cert. denied,

464 U.S. 818 (1983); Marshall v. Holiday Magic, Inc., 550 F.2d

1173, 1177 (9th Cir. 1977); Handschu v. Special Services Div.,

787 F.2d 828, 832-33 (2d Cir. 1986); Miller v. Republic Nat.

Life Ins. Co., 559 F.2d 426, 429 (5th Cir. 1977); In re General

Tire and Rubber Co. Securities Litigation, 726 F.2d 1075, 1086

(6th Cir.), cert. denied, 469 U.S. 858 (1984).

;

AD Re re Nat asa” CAN ated ae wy

Petitioners’ Mischaracterization

Of The Court of Appeals’ Decision

Petitioners’ assertion that the Court of Appeals held

that Rooker-Feldman deprives a federal court of jurisdic-

tion “even if” the state court did not have jurisdiction

(Pet. at 13) is ludicrous. It is axiomatic that a judgment

is not entitled to full faith and credit if the court render-

ing the judgment did not have jurisdiction. The Court of

Appeals simply and correctly held that the jurisdictional

question was resolved by the Hoffman court’s determina-

tion that there was a substantial benefit to the class and

that the class notice passed constitutional muster.

Petitioners also wrongly assert that the Court of

Appeals held that Rooker-Feldman broadly precludes

actions for legal malpractice. (Pet. at 26) The Court of

Appeals’ decision is narrow and limited to the facts of

this unique case. Rooker-Feldman precludes this action,

which petitioners loosely—and indeed inaccurately—

describe as one for malpractice, only because that claim

is inextricably intertwined with the state court’s determi-

nation that the fees awarded are fair and substantially

less than one-third of the economic benefit of the class

settlement. Under Rooker-Feldman that ruling conclu-

sively establishes that there was no “malpractice” here.

No Precedential Value

Respondents respectfully submit that petitioners’ mis-

characterizations are designed to mask the fact that this

case involves unique circumstances which militate

against its value as precedent. The Hoffman court pro-

vided a safeguard for absent class members by appoint-

ing a Special Master to effectively act as their guardian

ad litem and the court specifically referenced and con-

sidered that Master’s special report in its decision of

January 24, 1994. Additionally, this case cannot provide

precedent for any class action where, in contrast to the

instant case, the class members did not participate in

litigating the very issue they now challenge by “appeal”

to the Federal District Court.

THE ROOKER-FELDMAN DOCTRINE HAS WITHSTOOD

THE TEST OF TIME.

Public policy dictates that there be an end of litiga-

tion; that those who have contested an issue shall be

bound by the result of the contest, and that matters

once tried shall be considered forever settled as be-

tween the parties. Baldwin v. Iowa State Traveling

Men’s Association, 283 U.S. 522, 525 (1931)

The issue of fairness was, contrary to Judge Easter-

brook’s dissent, specifically litigated in Hoffman and that

issue, “once tried”, should be forever settled. In the order

of January 30, 1996, the Hoffman court stated:

[T]he substance of Respondents [sic] arguments con-

cerning “economic benefit” and the possible “net loss”

to some class members was raised, argued and

briefed by the Florida Attorney General’s office.

Therefore, these arguments have already been fully

adjudicated and decided by this Court. (Pet. App.

114)

Petitioners cannot evade this reality upon their vague

and undefined allegations of fraud. “Fraud upon the

court,” justifying an attack on a judgment, is a limited

kind of fraud. It is fraud that “defiles the court itself or

is a fraud perpetrated by officers of the court so that the

judicial machinery cannot perform in the usuai manner

caininasvowal

Bie a ph are

uh et th RS Aire ih, ca TS Ng ch ‘ess

Be eS ew ERR F eT aaa : house ca P Siete his seit

MPR ecitd = aio i awh nln Sch leat REE RR EAT Mi EL RE eat RULES iret BCE

its impartial task of adjudging cases that are presented

for adjudication.” Kenner v. Commissioner, 387 F.2d 689,

691 (7th Cir.); cert. denied, 393 U.S. 841 (1968). There

must be “the most egregious conduct involving a corrup-

tion of the judicial process itself,” such as bribery of a

judge or similar improper influence on the court. Wright,

Miller & Kane, Federal Practice and Procedure: Civil 2d

§ 2870, pp.418-19 (1995). See also Browning v. Navarro,

826 F.2d 335, 344-45 n.12 (5th Cir. 1987). Petitioners

have specifically acknowledged that the Hoffman court

was not a party to and did not participate in any alleged

wrongdoing. (Doc.36 at 5 n.5, 13 n.8; Doc.37 at 4)

Additionally, the proper forum in which to assert that

a party has perpetrated a “fraud upon the court” is the

court which allegedly was the victim of that fraud—the

claim cannot be made in another court. Hazel-Atlas

Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 249-50

(1944); Harris Trust & Savings Bank v. Ellis, 810 F.2d

700, 706 (7th Cir. 1987); Taft v. Donellan Jerome, Inc.,

407 F.2d 807, 808-09 (7th Cir. 1969); Wright, Miller &

Kane supra, at 411. The Hoffman court specifically

found, in its order of January 30, 1996, that no evidence

had been withheld and that the allegations of fraud are

“baseless.” (Pet. App. 117)

Petitioners’ federal lawsuit, no matter how “dressed

up” with allegations of RICO violations, fraud or mal-

practice, essentially asserts nothing more than that the

Hoffman court erroneously awarded too large a fee. That,

under Rooker-Feldman, may not be re-litigated. The

Rooker-Feldman doctrine is a sound and established

principle and there is no reasonable alternative to the

conclusion that the facts before this Court require its

application. Johnson v. DeGrandy, 512 U.S. 997,__, 114

EEE a eee RE Se vo aE ne

S. Ct. 2647, 2653-54 (1994); Howlett by Howlett v. Rose,

496 U.S. 356, 369, 370 n.16, 372-73 (1990); ASARCO,

Inc. v. Kadish, 490 U.S. 605, 622-23 (1989).

The class petitioners seek to represent is the plaintiff

class in Hoffman and, as such, all members of that class

who did not opt out are bound by the adjudications of the

Hoffman court—particularly since the Florida contingent

of petitioners’ class intervened in Hoffman via the

Florida Attorney General and actively litigated the issue

of reasonable fees, preseu.ting the very arguments they

now bring to the federal court.

Il.

PETITIONERS’ ASSERTIONS OF A DUE PROCESS

VIOLATION ARE CONCLUSIVELY PRECLUDED BY

THE HOFFMAN COURT’S DETERMINATION OF ITS

OWN JURISDICTION.

Petitioners’ attack upon the jurisdiction’ of the Hoff-

man court is an unsupported conclusory afterthought,

contrived in a desperate effort to evade Rooker-Feldman.

The sufficiency of the notice, the pertinent content of

® Among petitioners’ mischaracterizations is their inapt

attempt to analogize themselves to a defendant class for the

purpose of by-passing this Court’s holding in Phillips Petro-

leum Co. v. Shutts, 472 U.S. 797 (1985), in favor of the Inter-

national Shoe minimum contacts test. Aside from the fact that

several courts have found that minimum contacts are not

needed between a defendant class and the forum state (see,

e.g., Appleton Electric Co. v. Advance-United Expressways, 494

F.2d 126, 139-40 (7th Cir. 1974), the fact remains that peti-

tioners are not a defendant class. That fact, along with the

fact that the Hoffman court determined its jurisdiction over

petitioners, demonstrates clearly that this is not an appropri-

ate case for this Court to decide the issue of whether Shutts

applies to defendant classes.

which appears in Respondents’ Appendix, pages 1-3, is

evident on its face. Further, its sufficiency is confirmed

by the fact that that notice prompted the intervention of

the Florida Attorney General at the behest of and on

behalf of the Florida members of the plaintiff class. The

fact that that notice prompted a vigorous objection from

a significant contingent of the class members establishes

that that notice has necessarily served its due process

objectives. Handschu v. Special Services Div., 787 F.2d

828, 833 (2nd Cir. 1986); Walsh v. Great Atlantic &

Pacific Tea Co., 726 F.2d 956, 963-64 (3rd Cir. 1983).

Moreover, the sufficiency of the notice was adjudicated,

not once but three times by the Hoffman court. The court

approved the notice on December 6, 1993; determined by

order of January 24, 1994 that the notice was the “best

notice practicable” and that it complied with due process;

and again on January 30, 1996 that there was no vio-

lation of due process. (Resp. App. 15; Pet. App. 112-113)

The Hoffman court’s decision is conclusive under the Full

Faith and Credit Act, 28 U.S.C. § 1738, which directs

federal courts to defer to state judgments. Parsons Steel,

Inc. v. First Alabama Bank, 474 U.S. 518, 523 (1986). A

state court is fully competent to decide constitutional

issues, including those that go to its jurisdiction and

where, as here, that issue has not been challenged by

appeal, it is conclusive—“erroneous or not.” Underwriters

Nat'l Assur. Co. v. N. Carolina Life & Acc. & Health Ins.

Guaranty Ass’n, 455 U.S. 691, 714 (1982); Durfee v.

Duke, 375 U.S. 106, 111 (1963).

As the Court of Appeals noted, there are “significant

differences between default judgments and the judgment

under attack here.” (Pet. App. 10) Petitioners, who pur-

port to represent the plaintiff class, received notice of

both the Hoffman fairness and supplementary proceed-

ings. Also, those members of the plaintiff class who re-

sponded to that notice by enlisting representation by the

Florida Attorney General, participated in the Hoffman

proceedings but elected to forego appeal of that court’s

determination of jurisdiction. The plaintiff class members

thus wrongly denied the Alabama Supreme Court the op-

portunity to determine whether its rules governing class

action notice provisions satisfy due process and whether

to exercise its power to amend those rules to avoid poten-

tial constitutional challenges. See, e.g.: Adams v. Robert-

son, No. 95-1873, 1997 WL 85127, at *1 (U.S. Ala. Mar.

3, 1997).

III.

PETITIONERS’ CHARACTERIZATION OF THEIR

CLAIM AS ONE FOR “MALPRACTICE” CANNOT CAM-

OUFLAGE THE FACT THAT THIS CASE IS EFFEC-

TIVELY AN APPEAL FROM THE ADJUDICATIONS OF

THE HOFFMAN COURT.

The Seventh Circuit’s decision does not stand for the

proposition that class counsel may not be sued for legal

malpractice. Judge Easterbrook’s concern, expressed in

his dissent that the panel’s decision may stand as prece-

dent barring all malpractice actions, is unsupported by

the cases cited by Judge Easterbrook and indeed is im-

provident. Petitioners’ characterization of their claim as

one for malpractice cannot obviate the essence of their

claim, which is essentially that the Hoffman court er-

roneously decided the amount of fees to be awarded class

counsel.

This is a far different question from the one considered

in Durkin v. Shea & Gould, 92 F.3d 1510 (9th Cir. 1996),

the principal case relied upon by Judge Easterbrook. The

Durkin court held that class counsel could be sued in

malpractice only because that claim did not require the

second court to re-litigate any question determined in the

earlier class action litigation. The subsequent malprac-

tice action was appropriate because, as the court specifi-

cally held, the earlier settlement had decided a question

substantially different from that presented by the mal-

practice action: the determination that payment was

reasonable for Rule 23.1 settlement purposes was not the

same as the question whether competent counsel could

have effected more favorable terms. 92 F.3d at 1516.

The instant case presents a marked contrast. There is

no claim that the class should have obtained more bene-

fits. The only question is the fact intensive question of

“what” is the economic value of those benefits. Peti-

tioners’ claim, albeit “dressed up” as one sounding in

malpractice, would necessarily reopen the question

already directly decided by the Hoffman court: the

amount of fees which are reasonable and fair in light of

the work performed and the economic benefit secured.

Petitioners’ assertion is that the fees were simply too

high and that assertion is one which, under Rooker-Feld-

man, could properly have been pursued only by appellate

review. Significantly, Judge Easterbrook made that very

point in Homola v. McNamara, 59 F.3d 647, 650 (7th

Cir. 1995). The court there ruled that the plaintiff, who

had lost an earlier state court civil rights action, effec-

tively sought nothing less from the federal court than

collateral review of that state court judgment and such

a plaintiff must be sent “where he belongs—the original

courts.”

Petitioners eschewed that remedy—on several occa-

sions. Their members who intervened via the Florida

Attorney General declined to appeal. Also, petitioners

refused to participate in the supplementary proceedings

conducted by the Hoffman court—notwithstanding their

admission that that court was not a party to the alleged

fraud. Instead, petitioners and their erstwhile amicus

would have the federal court sit as a reviewing court and

engage in the very same fact-intensive inquiry as had

been conducted by the Hoffman court and thus provide

petitioners with a “fresh bite at the apple.” Petitioners

simply cannot migrate to another tribunal in search of a

decision they like better.

CONCLUSION

For the reasons above stated and upon the authorities

cited, respondents respectfully pray that this Court deny

the petition for issuance of a writ of certiorari.

Respectfully submitted,

JAMES T. FERRINI

Counsel of Record

MICHAEL R. GRIMM

MELISSA A. MURPHY-PETROS

CLAUSEN MILLER P.C.

10 South LaSalle Street

Chicago, Illinois 60603

Of Counsel: (312) 855-1010

RONALD E. STACKLER Attorneys for

STACKLER & STACKLER EDELMAN & CoMBS

200 West Ohio Street and DANIEL A. EDELMAN

Chicago, Illinois 60610

(312) 337-6663

TABLE OF CONTENTS

TO APPENDIX

Portions of Published Notice of Hearing on Pro-

posed Settlement of Class Action, published in

USA Today, December 13 & 20, 1998....... App. 1

Order of Settlement Approval and Final Judg-

ment in Hoffman v. BancBoston Mortgage Cor-

poration, dated January 24, 1994........... App. 4

Consent Decree in Hoffman v. BancBoston Mort-

gage Corporation, dated January 24, 1994 .. App. 19

App. 1

APPENDIX

PUBLISHED NOTICE OF HEARING ON

PROPOSED SETTLEMENT OF CLASS ACTION

* * *

Notice is hereby given that a hearing will be held in the

Circuit Court of Mobile County, Alabama at the County

Courthouse in Mobile, Alabama at 8:00 (a.m.) on the

10th day of January, 1994, to determine whether Judge

Kittrell should approve and confirm a proposed Consent

Decree settling all aspects, both monetary and equitable,

of the above-styled lawsuit as fair, reasonable and ade-

quate. This notice is not an expression by the Court as

to the merits of any claim or defense asserted by the

parties. Copies of the proposed Consent Decree, a more

complete notice of the Settlement terms and your rights

as a class member, as well as the prior proceedings in

this case, are available for your review and inspection in

the Clerk’s Office at the County Courthouse in Mobile,

Alabama during regular business hours. THIS NOTICE

DOES NOT AFFECT YOUR OBLIGATION TO MAKE

TIMELY PAYMENTS IN ACCORDANCE WITH THE

TERMS OF YOUR MORTGAGE.

* * *

SUMMARY OF TERMS OF

PROPOSED CONSENT DECREE

Beginning on the effective date of the Consent Decree,

BancBoston will change to the aggregate method of

analysis in the calculation and accumulation of escrow

deposits. Previously, BancBoston has used the “Individ-

ual Item” accrual method. This change in method may

result in some of the class members receiving either a

App. 2

cash refund or a credit in their escrow accounts. Other

class members will receive a reduction in the amount by

which their escrow accounts are “short” of the necessary

funds to be maintained in the escrow accounts. The pro-

cedures for implementing this change in methods, as

well as the procedures for making the refunds or credits

to the escrow accounts, are set forth in detail on pages

2-4 of the more descriptive written notice which each

class member who reads this published notice is encour-

aged to request from Class Counsel.

In addition to the possibility of receiving either a cash

refund or credit to their escrow account, some class

members will also receive an interest payment from

BancBoston. With the exception of class members whose

loans were originated after September 1, 1990, all class

members who currently have mortgages being serviced

by BancBoston will receive a one-time payment of in-

terest calculated according to a formula set forth in the

detailed notice which can be obtained from Class Coun-

sel. All class members who had mortgages serviced by

BancBoston since May 28, 1981 but who no longer had

those mortgages serviced by BancBoston as of November

9, 1993 will also receive a one-time interest payment,

but only if those former mortgagors file a form entitled

“Intention to Participate in Monetary Distribution”,

which form can also be obtained from Class Counsel.

Class Counsel will request the Court to award them a

reasonable attorney’s fee to be paid out of each escrow

account based on the benefit conferred on the class after

BancBoston has performed certain analysis of the escrow

accounts. Class Counsel has indicated that they will re-

quest a percentage not to exceed one-third of the eco-

nomic benefit conferred on the class as a result of this

App. 3

settlement. The Court will decide whether or not to

award attorneys’ fees to class counsel at the fairness

hearing scheduled for January 10, 1994. This award of

fees will include compensation for plaintiffs’ counsel’s

monitoring of BancBoston’s future compliance with the

terms and provisions of the Consent Decree.

* *

App. 4

{vated January 24, 1994]

IN THE CIRCUIT COURT

OF MOBILE COUNTY, ALABAMA

CARL F. HOFFMAN, and

DEBORAH L. HOFFMAN,

)

Plaintiffs, ) No. CV-91-1880

Vv. )

) (Hon.

BANCBOSTON MORTGAGE _) Braxton L. Kittrell, Jr.)

CORPORATION, and BANK _)

OF BOSTON CORPORATION, )

)

Defendants. )

ORDER OF SETTLEMENT APPROVAL

AND FINAL JUDGMENT

THIS MATTER COMES BEFORE the Court for a

fairness hearing conducted on January 10 and 11, 1994

to determine final approval of the settlement reached

between BancBoston Mortgage Corporation and Bank of

Boston Corporation (hereinafter collectively referred to

as “BancBoston”) and the class represented by Carl F.

Hoffman and Deborah L. Hoffman (the “Class”). Having

considered the entire record in these proceedings, the

report of the Special Master, the oral presentations of

counsel and the objector, and the briefs, testimony and

evidence presented, and being fully advised of the prem-

ises, the Court has entered the Consent Decree and here-

by makes the following additional findings of fact and

conclusions of law:

App. 5

I. Events leading up to the Fairness Hearing.

The plaintiffs commenced this action on May 28, 1991,

alleging that BancBoston required its mortgagors to pay

an amount into escrow accounts for realty taxes, insur-

ance, and other assessments which was in excess of the

amount permitted by the mortgage contracts serviced or

subserviced by BancBoston. The Plaintiffs alleged that

BancBoston’s practices with respect to the calculation

and accumulation of escrow payments were a breach of

the mortgage contracts and were unlawful. The Plain-

tiffs’ complaint, and the subsequent amendments there-

to, also contained allegations of other claims such as

breach of duty, fraud, and violations of various state and

federal laws.

BancBoston denied that its actions with respect to the

escrowed mortgage loans that it services or subservices

were unlawful or violated the mortgage contracts or any

laws. BancBoston argued that the individual mortgage

contracts, HUD, and RESPA regulations allowed. [sic]

BancBosuon to use the methodology it employed.

BancBoston filed motions to dismiss on numerous

grounds, which were denied.

On July 2, 1992, this Court granted the Plaintiffs’

Motion for Class Certification and determined that the

lawsuit should proceed as a class-action with Carl F.

Hoffman and Deborah L. Hoffman as the representatives

of the class.

On October 12, 1993, the Court granted a partial sum-

mary judgment in favor of the Plaintiffs and all class

members on the breach of contract claim, declaring that

the escrow account deposit requirements imposed by

App. 6

BancBoston exceeded those allowed under the mortgage

contracts.

Prior to entering into the proposed settlement agree-

ment, the parties engaged in substantial motion practice

and discovery, primarily in the nature of document

review. After much arm’s length and good-faith bargain-

ing, the parties signed a global settlement on November

9, 1993 (the “Settlement Agreement”). The parties sub-

mitted the Settlement Agreement as a Consent Decree

to this Court along with a motion for preliminary ap-

proval of the Consent Decree, a proposed order condition-

ally approving the Consent Decree, proposed forms of

notice to be mailed to the Class and published in USA

Today, the form giving notice to appear and object, the

form for requesting exclusion, and the form for signifying

an intention to participate in monetary distribution for

sub-class two members.

On December 6, 1993, this Court entered an order

granting the motion for preliminary approval of the

Consent Decree, and BancBoston began mailing the ap-

proved notice to all current and past mortgage holders as

provided in the Consent Decree.

II. The Notice of Hearing on Proposed Settlement

of Class Action.

On December 6, 1993, BancBoston began mailing by

first-class mail approximately 315,000 notice packets

to every current mortgage holder and approximately

100,000 notice packets to the last known address of past

mortgage holders who had an account with BancBoston

within the last year. The notice packet sent to all class

members included the court-approved Notice of Hearing

App. 7

on Proposed Settlement of Class Action, a Notice to Ap-

pear and Object form, and a Request for Exclusion form.

In addition, the notice packet to the past mortgagors

contained the Intention to Participate in Monetary Dis-

tribution form.

In addition to the mailed notice packets, notice was

published nationwide in the December 13 and 20, 1993

editions of USA Today. Class counsel set up message

center telephone lines providing a layman’s explanation

of the terms of the settlement. Class counsel also fielded

thousands of telephone calls and replied to hundreds of

letters from the Class requesting additional information.

Ill. Requests for Exclusion, Objections to the Pro-

posed Settlement, and Intentions to Partici-

pate in the Monetary Distribution.

Prior to the January 3, 1994 cutoff date established by

the Court for the filing of Requests for Exclusion, ap-

proximately fifteen hundred such requests were filed

with the Court.’ Class counsel attempted in good faith to

contact several of these people to determine the nature

of the Request for Exclusion. Most of the persons con-

tacted who requested exclusion did not wish to partici-

pate in any type of class action litigation or did not feel

that BancBoston had handled their Individual account

improperly.

" Class counsel have represented to the Court that a complete

list of those who have chosen to exclude themselves from the

Consent Decree will be forthcoming as soon as all the forms

are processed and compared among the parties.

App. 8

In addition, approximately two hundred class members

sent the Notice of Intent to Appear and Object by the

deadline for filing such matters. Class counsel have in

good faith attempted to contact each of the persons ob-

jecting to the class action, and found that all of the per-

sons objecting to the settlement, except four, sent that

form in only by mistake due to the similarity of that

form and the Intention to Participate form. Of the re-

maining persons objecting, one complained that notice

should also be sent prior to the settlement, one felt that

people who have held their mortgages longer should get

more interest, and the Florida Attorney General objected

for reasons discussed more thoroughly below.

As of January 6, 1993, approximately 15,000 claim

forms signifying the Intention to Participate in Monetary

Distribution had been received by all the parties and the

Circuit Clerk’s office.

IV. The Fairness Hearing.

A. Substantive issues regarding the Proposed

Settlement Agreement.

On January 10, 1994, this Court conducted a fairness

hearing to determine whether final approval of the Con-

sent Decree should be granted. At the fairness hearing,

Class counsel presented evidence regarding the reason-

ableness of the Consent Decree. In addition, Class coun-

sel reiterated the protracted and highly contested liti-

gation manifested by this case, highlighting the exten-

sive negotiations for settlement.

The only significant objector, the Florida Attorney Gen-

eral [sic] had two arguments addressing the substantive

App. 9

merits of the Consent Decree. First, he argued about the

preaccrual dates on the individual escrow accounts. The

Florida Attorney General further argued that any un-

claimed funds and interest payments for Florida resi-

dents should be paid to the office of the Florida Attorney

General and should not revert to BancBoston. With

respect to the argument concerning the preaccrual dates,

this Court finds that the provisions concerning pre-

accrual in the Consent Decree are the same as those

offered by the Florida Attorney General in his earlier

proposed settlement with BancBoston. The Court further

finds that the preaccrual provisions in the Consent

Decree are consistent with and not materially different

from those found in similar settlements such as the Fleet

Mortgage and GMACM cases.

With respect to the second argument raised by the

Florida Attorney General (unclaimed funds and interest

payments), the Court finds that such a request would

confer no additional benefit on the Class and is inconsis-

tent with the treatment of unclaimed funds and interest

payments in substantially similar escrow account class

actions. The Florida Attorney General also failed to pre-

sent statutory or other legal grounds to justify his re-

quest that the Florida residents’ unclaimed funds and

interest payments should revert to the office of the

Florida Attorney General.

The principal benefit of the settlement is that

BancBoston Mortgage Corporation shall hereafter use a

formula to compute escrow account deposit requirements

which plaintiffs contend more closely follows the provi-

sions of each mortgage note. This will result in lower

escrow account requirements for most mortgagors. The

new formula or methodology to be adopted as a conse-

App. 10

quence of this settlement is commonly referred to as

“cash basis” or “aggregate override” analysis.

In addition to the change in the method by which

BancBoston calculates the escrow deposits, the Consent

Decree provides that BancBoston will promptly refund or

credit to the mortgagor’s accounts any cushion or surplus

that results from the initial change in the accounting

method. This will create a common fund of settlement

proceeds.

BancBoston will also pay interest to each of the sub-

class one members (current mortgage holders) and to

those subclass two class members (past mortgage hold-

ers) who timely filed an Intention to Participate in

Monetary Distribution form as provided in Paragraph

eight (8) of the Consent Decree. The interest paid to each

subclass one member is $8.76, and $1.78 will be paid to

each subclass two member. The interest increases the

common fund of settlement proceeds.

Class counsel presented evidence regarding the eco-

nomic benefit conferred on the Class as a result of the

creation of the common fund. Class counsel submitted

the affidavit of Dr. Albert Madansky and presented Mr.

Walter McKean, C.P.A., to testify. Mr. McKean testified

that the economic benefit to the Class could be calcu-

lated using a statistical sample of BancBoston’s mort-

gage holders. Class counsel provided the affidavit of Mr.

Michael Koster, Senior Vice President of BancBoston re-

garding the sampling techniques, and Mr. McKean tes-

tified that the sampling was valid.

Mr. McKean further testified that based on the sample,

the average mortgage holder had 20 years left on his or

her mortgage. The average interest rate on such a mort-

een ee eT

App. 11

gage was 8.6 percent. Thus, Mr. McKean testified, if the

average mortgage holder were to receive a $100.00 re-

fund and apply it to his or her mortgage, he or she could

reduce his or her principal $545.00 by the time his or

her mortgage was paid off.

This Court finds that based on the testimony, the

economic benefit to the Class is defined as the following:

(a) any cash refund to the class members as a result

of the change in methodology;

(b) any credit or decrease reflected on a class mem-

ber’s escrow account in an overage, shortage or

combination overage and shortage situation’;

account.

While the foregoing constitutes clearly calculable eco-

nomic benefits, this Court finds that the Class has

accumulated other less easily quantifiable economic and

noneconomic benefits such as:

(a) BancBoston shall hereafter be required to utilize a

new escrow account analysis methodology when

determining mortgage escrow account deposit re-

quirements that will result in each class member’s

escrow account balance being reduced, in accord-

ance with the most recent analysis completed by

BancBoston, by an average of 19.0%.

(b) BancBoston, after performing its annual escrow

account analysis, will immediately refund or credit

the mortgagor’s accounts in an amount equal to

any escrow overages found in the escrow account.

* The terms “overage” and “shortage” as used in this Order

mean the same as used heretofore in BancBoston’s annual

escrow account statements sent to the individual mortgagor.

App. 12

reduction in the lien on the mortgagor’s property

because funds held in escrow accounts stand as

security for the underlying debt.

(d) The class members have the option of receiving a

refund immediately which creates much additional

value in the face of increasing taxes (and the con-

sequent increase in required escrow).

(e) Class counsel and their expert, Dr. Albert Madan-

sky, will monitor BancBoston’s compliance with the

Consent Decree for the next three years.

Under the terms of the Consent Decree, the Class

continues to reap the monetary benefits of the new

methodology as long as his or her mortgage remains

with BancBoston. It is this Court’s opinion that this

prospective relief is the most that could be maximized

from this case even if the case had progressed to a very

favorable jury verdict.

B. Attorneys’ Fees.

At the fairness hearing, Class counsel submitted evi-

dence regarding the amount of attorneys’ fees this Court

should award. Class counsel presented the affidavits of

William J. Baxley, Edward L. Hardin, and George L.

Beck. The Court heard testimony from J. Doyle Fuller

and Richard T. Bounds who both stated thai a fee equal

to one-third of the settlement proceeds was reasonable

and fair under Alabama law. Mr. Fuller has been in-

volved in over 40 class actions in Alabama and further

testified that the results achieved in this case would jus-

tify a fee of forty percent (40%) of the settlement pro-

ceeds. Mr. Bounds testified that he had reviewed the ex-

arent. Saree

a a eee

Piro

App.-13

tensive pleadings and documents produced in this case,

and further testified that in his experience, fees up to

40% and not less than one-third of the recovery were

reasonable.

Class counsel submitted the affidavit of Mr. Michael

Koster, Senior Vice-President of BancBoston who tes-

tified that under the last analysis performed by

BancBoston, the difference in the escrow account portfo

lio between the new and old methodology was 19%. Class

counsel proposed that attorneys’ fees be awarded as one-

third of 19% of the balance reflected in the escrow ac-

counts at the time that the annual escrow analysis is

calculated.

The Florida Attorney General objected to the attorney’s

fee request, and essentially raised the following argu-

ments in opposition to Class counsel’s request for attor-

neys’ fees:

(a) If any attorney's fees are due to Class counsel,

BancBoston should be the party which directly

pays the fees and they should not be awarded out

of the benefit conferred on the Class as a result of

the Consent Decree;

(b) If any fees are awarded, they should come sole-

ly from the interest payments to be made by

BancBoston and not from the individual mort-

gagor’s escrow account; and

ent attorneys’ fee formula than the one proposed

here by Class counsel.

With respect to the Florida Attorney General’s ar-

guments, the Florida Attorney General has failed to

produce any statutory or legal authority that directs

BancBoston to pay attorneys’ fees. Class counsel, John

App. 14

W. Sharbrough, testified that the Alabama Rules of

Professional Conduct prevent such negotiation for fees

from opposing parties when to do so would interfere with

the lawyer’s independence or the attorney-client relation-

ship. Mr. Sharbrough further testified that in his opinion

negotiations with the defendant would have interfered

with his best judgment and compromised his indepen-

dence. As a practical matter, any concession to pay fees

by BancBoston would have diminished the class relief.

With respect to the Attorney General’s third argument,

Mr. Sharbrough testified that the Fleet and GMYUACM

cases did not involve the change in accounting methodol-

ogy to cash basis. In addition, the Court notes that this

is the only escrow csse of those proffered as evidence

which proceeded as far as a partial summary judgment

on the breach of contract issue.

Mr. Sharbrough testified that there are only three

members in his firm, including himself. He further tes-

tified that the firm had turned away work because of the

demands of this case, and that the firm’s associate has

devoted nearly all her time to this case. Class counsel

will continue to have demands placed on them by the

future monitoring and auditing for three years hence.

The Court has weighed the foregoing objections of the

Florida Attorney General in making its determination of

attorneys’ fees as outlined below. However, it is this

Court’s opinion that the award of fees to class counsel in

cases such as this one is a matter best left to the sound

discretion of the Court.

It is this Court’s further opinion that the attorneys

representing the Class enjoy an excellent reputation, and

have considerable expertise in consumer fraud class

App. 15

action cases and cases involving excessive escrow deposit

j requirements in particular. They have prosecuted this

case without any compensation whatsoever and have re-

presented the Class on a contingency fee basis.

Based on the foregoing and having considered the

entire record in these proceedings, the report of the

Special Master, the oral presentations of counsel and the

objectors, and the briefs, testimony, and evidence pre-

sented, it is the ORDER, JUDGMENT, and DECREE of

this Court that:

A. The notice given to members of the Class by pub-

lication and by mail, as aforesaid, complied with all re-

quirements of due process, all requirements of Rule 23

of the Alabama Rules of Civil Procedure, and constituted

the best notice practicable under the circumstances. The

i former Fifth Circuit Court of Appeals has made it clear

that Rule 23(e) mandates individual notice only to those

potential class members who can reasonably be ascer-

4 tained. In re Beef Industry Antitrust Litigations, 60'7 F.2d

i 167, 178-179 (5th Cir. 1979), cert. denied, 452 U.S. 905

(1981).° Thus, any additional expense in locating and

notifying any class members who may not have received

individual notice would be outweighed by the tremen-

dous expense of doing so, and which expense would ma-

terially reduce the fund available for all class members.

| B. The number of those members who wish to exclude

themselves from the Consent Decree is less than the

tS IN cde ate Rea ll RT hae ts Lal SI ab Sei tn

* The Alabama Supreme Court has held that federal auth-

orities, while not binding, are persuasive when interpreting

the Alabama class action rule. First Baptist Church v. Citro-

‘3 nelle-Mobile Gathering, Inc., 409 So. 2d 727 (Ala. 1981).

App. 16

number that would permit any party to withdraw from

the settlement.

C. Due and adequate notice of the proceedings has

been given to members of the Class, and a full opportu-

nity has been offered to members of the Class to object

to the Consent Decree and to participate in the hearing

thereon. Thus, the Court finds that the Consent Decree

is fair, reasonable and in the best interests of the Class

as compared to the uncertainties of litigation of the

claims involved, the significant cost, time and effort such

litigation would entail on behaif of all parties regardless

of the outcome, and the considerable burden that contin-

ued litigation would impose upon the Court and upon the

relationship that exists between the plaintiffs, the class

members, and defendants. The Court makes this deter-

mination based upon oral presentations by counsel, ex-

pert testimony, and the other evidence before this Court,

and after duly considering and weighing the objections

presented at the Fairness Hearing.

D. The usual and customary contingency fee in this

locality is no less than thirty-three and one-third percent

(334%), and such fees frequently are between forty

(40%) and fifty (560%) percent. In this case, because of

the broad responsibilities and risks assumed by class

counsel, and the unprecedented results achieved by Class

counsel, Class counsel’s efforts merit a fee based on a

percentage of the economic benefit conferred by this set-

tlement. The total fee recovery as set out below is found

to be reasonable in light of the fact that the future

benefit conferred upon the Class by this Consent Decree

is substantial and is at least as valuable to the Class as

the immediate refund to the Class of the settlement pro-

ceeds from the common fund. This Court makes this

lew eati ed tet ee Bol .

App. 17

determination after taking into the account the objec-

tions of the Florida Attorney General.

E. [n place of the second sentence of Paragraph 9 of

the Consent Decree and in accordance with the remain-

ing provisions of the Consent Decree, the Court directs

that BancBoston shall credit each Class members’ ac-

count with the interest as provided in Paragraph eight

(8) of the Consent Decree by April 1, 1994. At the

beginning of each month, for accounts scheduled to be

analyzed that month, BancBoston will deduct attorneys’

fees from each escrow account in the amount of 28 per-

cent multiplied by 19% multiplied by the escrow balance

at that time. BancBoston will then perform the analysis

using the new accounting methodology. BancBoston shall

pay said fee to Ezell & Sharbrongh, and shall provide

Class counsel with documentation reflecting the calcula-

tions of said amounts. Ezell & Sharbrough shall appor-

tion the fees between Class counsel in accordance with

their prior agreement.

F. All of the claims deemed released by the named

plaintiffs and Class members, in accordance with the

provisions of Paragraphs 16 and 17 of the Consent De-

cree, shall be known as the Released Claims. Under this

Order and the terms of the Consent Decree, the named

plaintiffs and class members who have not requested ex-

clusion from the Class are hereby severally and perma-

nently barred and enjoined from asserting any of the

Released Claims in any court or forum whatsoever.

G. BancBoston shall not change its customary and

ordinary business practices with respect to any escrow

account in any manner that will diminish or circumvent

App. 18

any of the provisions of this Order or the Consent

Decree.

H. The Parties are ordered to implement the Consent

Decree and Consent Decree. [sic]

I. The Clerk of this Court is directed to furnish to

BancBoston all of the Intention to Participate in Mone-

tary Distribution forms it receives.

J. The fees and expenses of the Special Master are to

be paid by class counsel. Otherwise, each party is to bear

its own costs.

It is further hereby ORDERED, ADJUDGED and

DECREED by this Court that the Consent Decree should

be and is hereby ENTERED and APPROVED, and this

Order is hereby entered as a final judgment pursuant to

Rule 54, Ala. R. Civ. P.

GIVEN UNDER MY HAND THIS 24th DAY OF

JANUARY, 1994.

CIRCUIT COURT JUDGE

App. 19

[Dated January 24, 1994]

IN THE CIRCUIT COURT

OF MOBILE COUNTY, ALABAMA

CARL F. HOFFMAN and

DEBORAH L. HOFFMAN,

on behalf of themselves and

all others similarly situated,

)

Plaintiffs, )

vs. ) CIVIL ACTION NO.

)

BANCBOSTON MORTGAGE CV-91-1880

CORPORATION and BANK

OF BOSTON CORPORATION,

Defendants.

CONSENT DECREE

WHEREAS, the plaintiffs, Carl F. Hoffman and

Deborah L. Hoffman, on behalf of themselves and all

others similarly situated, filed their complaint in this

action against the defendants, BancBoston Mortgage

Corporation and Bank of Boston Corporation (collectively

“BancBoston” or “defendants”), on May 28, 1991; and

WHEREAS, BancBoston is a servicer of mortgage loans

secured by one to four-family dwellings which mortgages

or other security instruments (“mortgage” or “mort-

gages”) provide for escrow payments of realty taxes and

insurance (“residential real estate mortgage loans”); and

WHEREAS, plaintiffs alleged in their complaint, as

amended, that BancBoston has required its mortgagors

to deposit into their mortgage escrow accounts, from

which realty taxes and insurance premiums are paid, an

App. 20

amount in excess of the sums provided for in the stan-

dard-form mortgage contracts and that BancBoston’s cal-

culation and accumulation of escrow deposits is illegal;

and

WHEREAS, BancBoston has denied the material alle-

gations of the complaint, as amended, and continues to

deny liability in any amount; and

WHEREAS, counsel for BancBoston has provided

certain information and made certain representations

to counsel for plaintiffs and the class regarding

BancBoston’s escrow practices and the methodology used

by BancBoston in calculating and accumulating escrow

deposits; and

WHEREAS, counsel for plaintiffs and the class has

investigated the facts and the applicable law; and

WHEREAS, the plaintiffs and defendants have had the

opportunity to evaluate their respective positions on the

merits; and

WHEREAS, the issues before the Court are extremely

complex and, if fully litigated, will likely result in pro-

tracted litigation, appeals and continued uncertainty as

to outcome; and

WHEREAS, counsel for the plaintiffs and the class is

qualified to evaluate the fairness, reasonableness and

adequacy of this settlement on behalf of the plaintiffs

and the class members; and

WHEREAS, the parties to this action desire to avoid

the additional cost, time, effort and uncertainties which

would result from the continuance of this litigation, re-

gardless of the outcome, and desire to enter into the

settlement embodied in this Consent Decree; and

App. 21

WHEREAS, the parties agreed on all of the terms of

this settlement through extensive arms-length negotia-

tions between counsel for the plaintiffs and counsel for

the defendants; and

WHEREAS, the attorneys for the parties reached

agreement on the terms of relief to be afforded the plain-

tiffs and the plaintiff class prior to the discussion of the

fees and expenses to be paid to the plaintiffs for their

attorney’s services in this action; and

WHEREAS, this settlement provides substantial bene-

fits to the class, resolves substantial issues without pro-

longed litigation and provides certain current and former

mortgagors of BancBoston Mortgage Corporation with a

benefit significant in the aggregate; and

WHEREAS, settlement of this action at this stage will

relieve the significant burden that otherwise will be im-

posed upon the Court and the parties; and

WHEREAS, the parties believe that this settlement is

fair, reasonable and adequate and that the best interests

of all concerned lie in this Consent Decree, with the

attendant benefits to the plaintiffs and the class mem-

bers, without the burden and uncertainties created by

pending litigation; and

WHEREAS, BancBoston denies any wrongdoing and

any liability whatsoever, BancBoston has concluded that

it is in its best interest to settle the litigation on the

terms set forth in this Decree in order to avoid further

expense, inconvenience and interference with ongoing

business operations; and

WHEREAS, the Court tentatively approved this Con-

sent Decree on , 1993, based upon the

App. 22

Court’s initial determination that the settlement reached

by the parties is fair, reasonable and adequate, and

thereafter, the Court gave notice of the proposed Decree

to the class members, notifying them of the terms of the

Decree and of their opportunity to file and express objec-

tions to the Decree or any provision thereof and notifying

them of each class member’s respective rights and obli-

gations with respect to the Decree, such notices being in

compliance with Rule 23 of the Alabama Rules of Civil

Procedure and due process; and

WHEREAS, the Court held a hearing on January 10,

1994 for the purpose of adducing evidence regarding the

fairness, reasonableness and adequacy of the Decree, for

the purpose of hearing any objections to the Decree or

any provision thereof, and for the purpose of determining

the fairness, reasonableness and adequacy of the Decree;

and

WHEREAS, the Court, after considering the evidence

adduced at the fairness hearing, has approved the De-

cree as fair, reasonable and adequate as to all affected

parties and persons.

NOW, THEREFORE, the Court being fully advised in

the premises, it is hereby ORDERED, ADJUDGED and

DECREED as follows:

1. The Court has jurisdiction over the subject matter

of this action and the parties to this action.

2. This Decree is, and shall be, applicable to and con-

clusive and binding upon all parties to this action, in-

cluding the named plaintiffs, members of the plaintiff

class (named or unnamed), and defendants and their

successors and assigns.

App. 23

3. The Court confirms that the class consists of all

persons (and in the case of deceased or disabled persons,

their estates, personal representatives, beneficiaries or

conservators) whose loan was secured by a residential

real estate mortgage and for whom BancBoston or its

predecessors acted as servicer at any time from May 18,

1981 to the present. The Court finds that the prerequi-

sites of Rule 23(a) of the Alabama Rules of Civil Proce-

dure are satisfied and, in addition, that the provisions of

Rule 23(bX2) and Rule 23(b\3) are applicable.

4. Beginning within ninety (90) days after the effec-

tive date of this Consent Decree (or, at the sole dis-

cretion of BancBoston, sooner than the effective date),

BancBoston shall adopt and institute the following

changes with respect to the calculation and accumulation

of escrow deposits for all residential real estate mortgage

loans serviced or subserviced by BancBoston now or in

the future. These changes are cumulative, and each may

result in a change in the amount of funds required in an

escrow account:

a) BancBoston shall estimate future escrow dis-

bursements based upon current data and reports and

other information which provide reasonable estimates of

future escrow disbursements. BancBoston may use the

prior year’s escrow payments as a base for estimating

future escrow disbursements.

b) BancBoston shall use the aggregate method of

analysis in the calculation and accumulation of escrow

deposits and may maintain a maximum of a two-month

reserve in any given escrow account, except as otherwise

provided in paragraph 4(d) of this Decree. At its custom-

ary annual analysis of each current and future mort-

App. 24

gagor’s escrow account (or more frequently if BancBoston

so elects), BancBoston shall prepare a running trial bal-

ance projection setting forth expected mortgage payment

receipts, projected escrow disbursements, and expected

escrow balances for the analysis period beginning with

the date any change made in the amount of the mort-

gagor’s payment as a result of the annual analysis

becomes effective (“trial balance”). (By way of example,

for an annual analysis performed in September, 1993,

with an effective payment change date of November 1,

1993, BancBoston will prepare a trial balance from No-

vember 1, 1993 to October 31, 1994. BancBoston shall

calculate the trial balance based on BancBoston’s rea-

sonable estimate of the amounts of the items to be dis-

bursed from the escrow account during the analysis

period).

In preparing the trial balance, BancBoston shall as-

sume the disbursement of an escrow item, in any given

month, will post-date BancBoston’s receipt of the mort-

gagor’s mortgage payment for that month, except that

BancBoston shall be entitled to assume the disbursement

of an escrow item whose projected disbursement date is

from the first through the fifteenth day of the month,

will predate BancBoston’s receipt of the mortgagor’s

mortgage payment for the month of disbursement. To the

extent BancBoston cannot project an expected disburse-

ment date within a given month, BancBoston shall as-

sume the receipt of the mortgagor’s mortgage payment

will predate disbursement of the related escrow item.

c) To the extent the expected lowest balance in

the escrow account exceeds one-sixth (1/6) of the anti-

cipated total amount of the escrow items that are due

during the analysis period (“1/6 low point”), then

App. 25

BancBoston shall: (1) automatically prorate the deter-

mined surplus and reduce the mortgagor’s payments

(except in those states that do not permit applying the

surplus in this manner); or (2) upon request, refund the

surplus to the mortgagor; or (3) upon request, apply the

surplus to principal; or (4) upon request, apply the

surplus to the next payment(s), provided that the

mortgage is not in default, otherwise delinquent, or the

resulting escrow on deposit is not less than the escrow

needed for future escrow disbursements. Notwithstand-

ing the foregoing, BancBoston may collect and hold an

amount exceeding the 1/6 low point set forth above if the

mortgagor so requests.

cd) BancBoston shall use the aggregate method of

analysis and reasonable estimates of future disburse-

ments (subject to the terms of paragraph 4(a)) in the

calculation and accumulation of escrow deposits and

shall maintain (i) no reserve in the escrow account with

respect to FNMA/FHLMC mortgages that contain lan-

guage substantially the same as the language contained

in the documents attached to this Decree and that were

entered into prior to September 1, 1990, and (ii) one

month’s reserve in the escrow account with respect to (a)

VA mortgages and (b) FHA mortgages that contain lan-

guage substantially the same as the language contained

in the documents attached to this decree as Appendix B

and that were entered into prior to September 1, 1990.

The aggregate projected escrow account balance for these

mortgages shall be anticipated to fall to zero or one-

twelfth (1/12), as the case may be, at least once during

the twelve (12) month period following the effective pay-

ment change date. BancBoston shall treat surpluses in

accordance with the provisions of paragraph 4(c)1)-(4) of

App. 26

this Decree and shall treat shortages in accordance with

the provisions of paragraph 4(f) of this Decree. Notwith-

standing the foregoing, BancBoston may collect and hold

an amount exceeding the zero low point set forth above

if the mortgagor so requests.

e) Subject to applicable law, (1) the selection of

the appropriate analysis date and effective payment

change date shall be at BancBoston’s discretion; and (2)

BancBoston is permitted to perform its escrow analysis

pursuant to the above provisions more frequently than

once a year, and may, at its discretion, change the date

of any given mortgagor’s escrow analysis. In addition,

the parties and the Court recognize that in applying the

above provisions, BancBoston is performing a projection

of future events. As such, assuming BancBoston has

acted in good faith, BancBoston shall have no liability if

the actual billing amounts, disbursement dates, or other

projection items differ from those assumed at the time of

analysis, or if errors are made in good faith and the

escrow accounts affected by such errors are corrected

after discovery. By way of example, but not limitation,

BancBoston shall be entitled to utilize prior year dis-

bursement dates in setting expected disbursement dates

for the upcoming year.

f) BancBoston shall collect escrow shortages (de-

fined as the deficiency in funds determined to exist

during the escrow analysis performed in conjunction with

the methods described in section 4(b)) by spreading the

shortage over: (1) not less than six (6) months; or (2) the

number of months until the next escrow analysis, at

BancBoston’s sole option. Notwithstanding the foregoing,

BancBoston may collect escrow advances (“negative

escrow balances”) by sending written notice of the de-

App. 27

ficiency to the mortgagor and requesting one or more

payments to cure that deficiency to begin not less than

thirty (30) days after the date of the notice.

g) Ifa mortgagor provides evidence of payment of

realty taxes and insurance for any given period (other

than by BancBoston from escrow funds), BancBoston

shall promptly refund any realty tax or insurance de-

posits accumulated for that period, provided that the

mortgage is not in default, otherwise delinquent, or the

resulting escrow on deposit is not less than the escrow

needed for future escrow disbursements.

h) BancBoston, the plaintiffs and all class mem-

bers agree that the contracts, promissory notes, mort-

gages, deeds of trust, security instruments, and any and

all other documents, understandings or agreements con-

stituting, establishing or evidencing the contractual rela-

tionship between the plaintiffs and class members and

BancBoston, or between the plaintiffs and class members

and the entities for which BancBoston services, serviced,

subservices or subserviced class members’ loans (“the

mortgage contracts”) are hereby modified to allow

BancBoston to service or subservice the loans of all

plaintiffs and class members in accordance with the

terms of this Decree.

5. Counsel for plaintiffs and the class has the right to

monitor BancBoston’s compliance with this Consent De-

cree for a period of three years following the effective

date of the Decree. BancBoston agrees to cooperate with

counsel for plaintiffs and the class and provide 300

sample loans selected at random for each of the next

three years in order for counsel for the plaintiffs to

ensure BancBoston’s compliance with this Consent De-

App. 28

cree. The random sample shall include loans for which

there are multiple or different due dates for tax and in-

surance payments during the year.

6. Inthe event BancBoston believes that it is required

to change its escrow practices in the future to comply

with or conform to applicable statutes, regulations, case

law, or standard-form mortgage contracts, which govern

the mortgage contract signed by the borrower with

respect to the methodology and formula by which escrow

deposits are calculated and accumulated, BancBoston

shall give thirty (30) days advance notice of such pro-

posed change or modification to counsel for the plaintiffs

and the class. The notice shall identify the proposed

change or modification, explain why BancBoston believes

that the proposed change or modification is required and

state how BancBoston intends to implement the pro-

posed change or modification. If BancBoston and counsel

for plaintiffs and the class cannot agree that the change

or modification is either required or not required, counsel

for plaintiffs and the class shall have an additional

thirty (30) days within which to file a written objection

with the Court and to seek a hearing before the Court to

determine whether the change or modification is re-

quired. If counsel for the plaintiffs and the class does not

file a written objection within the time period stated

above, BancBoston may implement the change or modi-

fication.

7. BancBoston shall pay Two Thousand Five Hundred

Dollars ($2,500.00) to each of the two class representa-

tives, Carl F. Hoffman and Deborah L. Hoffman, for

their services as named plaintiffs and class representa-

tives.

App. 29

8. In addition to the amounts to be paid to eligible

class members under paragraphs 4(c) and (d) of this

Decree, BancBoston shall make a single payment to each

eligible class member in complete satisfaction of all

claims that were raised or could have been raised in this

action, as well as any and all other claims for damages,

prejudgment interest, postjudgment interest or any other

monetary or injunctive relief not otherwise provided for

herein of any nature whatsoever which have been or

could have been alleged in the complaint for the period

May 28, 1981 to the effective date of this Decree (“the

monetary distribution” or “the monetary fund”). Loans

originated subsequent to September 1, 1990 are excluded

from the single payment.

BancBoston shall distribute, as described above, the

monetary fund to eligible class members within the

class. The Court conditionally approved and does hereby

finally approve two monetary subclasses which are more

particularly described as follows:

A. Subclass Number One (consisting of active loans)

is composed of all persons whose residential real

estate mortgage loans BancBoston or its predeces-

sors serviced or subserviced and for which escrow

accounts were maintained for at least six (6)

months, and is still servicing or subservicing as of

November 9, 1993. With respect to this Subclass,

BancBoston shall make a one-time payment to the

Subclass members in an amount equal to fifty per-

cent (50%) multiplied by seven point five (7.5)

multiplied by (four (4) percent minus the interest

rate paid on escrow, if any), multiplied by the aver-

age escrow surplus, which has been determined to

be $58.41. The average escrow surplus was deter-

App. 30

mined by using a statistically reliable sample of

loans with escrow accounts which BancBoston ser-

viced during the years 1989, 1990 or 1991. Each

loan in the sample was serviced by BancBoston for

the entire calendar year for which the loan was

selected and the escrow account was analyzed dur-

ing such year. The sample of loans is statistically

valid and the loans were selected randomly such

that the sample is representative of the loans ser-

viced by BancBoston during 1989, 1990 and 1991.

Bar.cBoston then reviewed the escrow accounts of

the random sample loans to identify each account

which contained an escrow surplus and the amount

of such escrow surplus. For purposes of this review,

escrow surplus means the amount by which the

lowest balance the escrow account reached during

the year reviewed exceeded two months’ escrow col-

lection. This was determined by adding that year’s

normal escrow disbursements and dividing by

twelve (12), then multiplying by two (2). The aver-

age surplus was then determined by adding the

escrow surplus, if any, for each loan in the sample

and then dividing that total by the number of loans

in the sample.

Class members who are more than thirty (30)

days past due in their mortgage payments will not

receive a payment under the settlement. Banc

Boston shall pay the above-determined amounts to

the eligible class members by making an electronic

deposit to each subclass member’s escrow account

within ninety (90) days after this Decree has been

finally approved by a court order which is final,

unappealable and otherwise unreviewable.

App. 31

B. Subclass Number Two (comprised of former mort-

gagors) is composed of all persons whose residen-

tial real estate mortgage loans BancBoston or its

predecessors serviced or subserviced for a mini-

mum of six (6) months anytime after May 28, 1981

for which escrow accounts were maintained and

that have been paid off, transferred, waived, or

otherwise removed from BancBoston’s books and

records as of November 9, 1993, but not including

those persons whose mortgages were foreclosed or,

for whatever reason, whose mortgages were in de-

fault at the time the mortgage was transferred,

waived, or otherwise removed from BancBoston’s

books and records.

With respect to this Subclass, BancBoston shall

make a one-time payment in an amount equal to

2.5 multiplied by 4% multiplied by 50% multiplied

by the average escrow surplus to each Subclass

member who timely files the requisite “INTEN-

TION TO PARTICIPATE IN MONETARY DISTRI-

BUTION.” For purposes of Subclass Number Two,

BancBoston has determined the average escrow

surplus to be $35.63 by using a statistically reli-

able sample of loans with escrow accounts which

BancBoston serviced during the years 1989, 1990

or 1991. Each loan in the sample was serviced by

BancBoston for the entire year for which the loan

was selected and the escrow account was analyzed

during such year. The sample of loans is statisti-

cally valid and the loans were selected on a ran-

dom basis such that the sample is representative

of the loans serviced by BancBoston during 1989,

1990, and 1991.

App. 32

BancBoston then reviewed the escrow accounts of

the sample loans to identify each account which

contained an escrow surplus and the amount of

such escrow surplus. For purposes of this review,

escrow surplus means the amount by which the

lowest balance in the escrow account during the

year exceeded two (2) months’ escrow collection.

This was determined by adding that year’s normal

escrow disbursements and dividing by twelve (12)

then multiplying by two (2). Loans where interest

on escrow was paid during the year reviewed were

counted as having no surplus. The average surplus

was then determined by adding the escrow surplus,

if any, for each loan in the sample and then divid-

ing that total by the number of loans in the sam-

ple. BancBoston shall begin distributing these pay-

ments by mailing a check to the last known ad-

dress of the claimant within ninety (90) days after

this Decree has been finally approved by a court

order which is final, unappealable and otherwise

unreviewable.

9. Counsel for plaintiffs and the class have requested

the Court to award them a reasonable attorney's fee to

be paid out of each escrow account based on the benefit

conferred on the class after BancBoston has performed

the analysis set forth in paragraphs 4(b), (c) and (d) of

this Decree. The Court hereby awards counsel for plain-

tiffs and the class an attorney’s fee to be paid out of each

escrow account based on the benefit conferred on the

class after BancBoston has performed the analysis set

forth in paragraphs 4(b), (c) and (d) of this Decree in an

amount equal to__% of the economic benefit conferred

on the class. In addition, BancBoston will pay plaintiffs

App. 33

[sic] expert, Dr. Madansky, a maximum of $20,000 to

cover the costs of monitoring compliance with this set-

tlement. The Court finds that the amount awarded by

the Court, together with the amount to be paid to Dr.

Madansky, shall constitute a complete satisfaction of all

claims against BancBoston for attorneys’ fees for services

rendered to the plaintiffs or the class in connection with

any and all aspects of this litigation, and a complete

satisfaction of any and all claims against BancBoston for

reimbursement of any expenses incurred in connection

with this litigation for any purpose whatsoever, includ-

ing, but not limited to, out-of-pocket expenses, copying

charges, witness fees, deposition costs, expert witness

fees, paralegal expenses, and the like. This award of fees

includes compensation for plaintiffs’ counsel monitoring

Banc Boston’s compliance with the Consent Decree as set

forth in paragraph 5 of this Decree. BancBoston shall

distribute the above fees, costs and expenses to counsel

for plaintiffs and the class on a monthly basis after the

analysis set forth in paragraphs 4(b), (c) and (d) has

been performed.

10. BancBoston shall begin distributing the monetary

fund described in paragraph eight above not more than

ninety (90) days after this Decree has been finally ap-

proved by a court order which is final, unappealable, and

otherwise unreviewable. In the event the Decree, or any

order related thereto, is appealed, and an appellate court

affirms the entry of the Consent Decree, such that the

Consent Decree and each provision thereof is final, unap-

pealable, otherwise unreviewable and binding, Banc

Boston shall begin distributing the monetary fund within

ninety (90) days after such affirmation.

App. 34

11. BancBoston shall provide to counsel for plaintiffs

a count of class members who have cashed distribution

checks within 90 days of the effective date of the Con-

sent Decree. BancBoston shall supplement the count

within 180 days of the effective date of the Decree.

12. BancBoston’s address shall serve as the return

address on all envelopes used to mail checks to plaintiffs

and class members. BancBoston shall maintain exclusive

control over distribution checks which have been re-

turned. If BancBoston is unable to deliver a distribution

check or if a class member does not cash his or her dis-

tribution check within six (6) months of the date of the

check, BancBoston shall have no obligation to honor such

a check or to issue a new check, and said funds shall

revert to and remain the property of BancBoston.

13. In the event any portion of the monetary fund

cannot be paid to any specified eligible class member

because that class member is deceased, that class mem-

ber’s share shall be distributed to the deceased class

member’s estate, personal representative, or heirs at law,

as determined by the Court, in a manner which is equi-

table and consistent with the laws of the State of the

deceased class member’s residence upon due proof by any

person claiming entitlement to the deceased class mem-

ber’s share. Any competing claims to a deceased class

member’s share of the monetary distribution in this case

shall be determined by the Court subsequent to the

entry of this Consent Decree in an appropriate proceed-

ing upon due notice and opportunity to be heard by the

competing claimants.

14. In addition to the monetary relief aspects of this

case as explained and defined in paragraphs 4, 7, 8 and

App. 35

9 above, the parties have agreed and this Decree embod-

ies, in paragraph 4, many aspects of relief to operate

prospectively which are for the benefit of the class mem-

bers and future mortgagors. Such affirmative and pro-

spective relief is in lieu of and in consideration for any

further claim to monetary or equitable relief and is con-

sidered an essential component of this Decree. The sub-

stantial prospective relief contained in this Decree is

more fully set forth in paragraph 4 hereinabove and will

operate prospectively upon the effective date of this

Consent Decree.

15. Defendants’ obligations under this Decree are lim-

ited solely to the undertakings set forth in this Decree.

16. This Decree is final and binding upon the plaintiffs,

all individual class members, except those who “opted

out” or excluded themselves from the settlement class

pursuant to Rule 23(c)(2) of the Alabama Rules of Civil

Procedure, and BancBoston and their successors and

assigns. The negotiation, execution and entry of this

Decree, and the undertakings made by BancBoston, are

in full and final settlement and compromise of all rights,

duties and obligations of all parties, including the named

plaintiffs and class members, with respect to any and all

issues which relate in any way to any issue or claim for

monetary or equitable relief in this action.

17. Upon the effective date of this Consent Decree,

each plaintiff and class member who did not properly

and timely opt out of the settlement class is deemed to

have released and is hereby enjoined from suing, and

each plaintiff and class member agrees to refrain from

proceeding in any way against: (i) BancBoston; (ii) any

and all direct and indirect subsidiaries, affiliates and

App. 36

parents of BancBoston; (iii) the entities for which

BancBoston serviced or subserviced their escrowed

mortgage loans (“entities”) (for the period during which

BancBoston serviced or subserviced their escrowed

mortgage loans); (iv) each officer, director, principal,

agent, attorney, employer, employee, division, owner or

partner of BancBoston or such entities (for any period

during which BancBoston serviced or subserviced their

escrowed mortgage loans); and (v) any successor (with

respect for the period for which BancBoston did the

servicing or subservicing), predecessor acquired by

BancBoston, personal representative, estate, heir, bene-

ficiary, administrator, or executor of any of the entities

and persons described in (i), (ii), (iii), (iv) or (v) above, on

any and all past, present, and future claims, actions,

causes of action, rights or liabilities, known or unknown,

based on, arising out of, or in any way relating or per-

taining to (1) the escrow provisions of any mortgage

contract that BancBoston uses in connection with the

escrowed mortgage loans that it services or subservices;

(2) BancBoston’s methodology and formula for calculat-

ing and accumulating escrow deposits; (3) BancBoston’s

collection, accumulation, handling, custody, control, or

use of the escrow funds accumulated as a result of the

methodology and formula referred to in subparagraph

(2) above, whether as trustee or otherwise; or (4) any of

the events, statements, or allegations contained in plain-

tiffs’ complaint, as amended. However, nothing within

this decree shall release the following future individual

claims: (a) late charge claims; (b) disputes over receipts

of payments; (c) failure to make escrow disbursements in

the name of the payee when payment has been received

from the payee; (d) procurement of insurance; and

App. 37

(e) ARM adjustments. This recital of exclusion of claims

is in no way meant to suggest that such claims exist.

Without limiting the generality of the foregoing, the

released claims include all claims, actions, rights or

causes of action arising under the Real Estate Set-

tlement Procedures Act, 12 U.S.C. § 2601 ef seg.

(“RESPA”), regulations promulgated pursuant to RESPA,

the Racketeer Influenced & Corrupt Organizations Act,

18 U.S.C. § 1961 et seq., the Truth in Lending Act, 15

U.S.C. § 1601 et seg., Regulation Z, 12 C.F.R. § 226.1 et

seq., Florida Deceptive and Unfair Trade Practices Act,

Chapter 501, Parts 1-111 (1993), all state statutes pro-

hibiting consumer fraud and/or unfair or deceptive trade

practices of all states wherein class members reside, or

the common law. Further, without limiting the generali-

ty of the foregoing, the released claims include all claims

and causes of action that have been brought, or could

have been brought, in this case, entitled Hoffman, et al.

v. BancBoston Mortgage Corp., et al., CV-91-1880, cur-

rently pending in the Circuit Court of Mobile County,

A!'abama, and the case of Tatelman, et al. v. BancBoston

Mortgage Corp., et al., Case Number 93-3411, currently

pending in the Superior Court Department of the Trial

Court of Suffolk County, Massachusetts.

18. Defendants believe that the practices used by

BancBoston Mortgage Corporation to calculate and ac-

cumulate escrow deposits comply with all federal and

state laws, have been explicitly approved by HUD, and

are used throughout the mortgage banking industry.

Therefore, neither the negotiation, execution nor entry of

this Consent Decree shall constitute an acknowledgment

or admission of liability in any amount by defendants.

App. 38

19. The effective date of the Consent Decree is fourteen

(14) days after the Decree has been finally approved by

a court order which is final, unappealable or otherwise

unreviewable.

20. The Court retains jurisdiction of this action for the

purpose of issuing any and all orders or decrees as may

be necessary to effectuate, clarify, modify, or enforce the

purpose, intent and terms of this Consent Decree.

DONE this 24th day of January, 1994.

/s/

Circuit Judge

/s/ John W. Sharbrough II]

John W. Sharbrough

EZELL & SHARBROUGH

Post Office Box 996

Suite 1001, La Clede Hotel

150 Government Street

Mobile, Alabama 36601

(205) 802-3224

Attorney for Plaintiffs

/s/ 'T.

T. Thomas Cottingham

BURR & FORMAN

3000 SouthTrust Tower

420 North 20th Street

Birmingham, Alabama 35203

(205) 251-3000

Attorney for Defendants

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