# Opposition Brief — Kamilewicz v. Bank of Boston Corp.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1997
- **Citation:** 520 U.S. 1204

## Text

yy. SS
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

i

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
EE aa Sh due Ade ee sh ese deneuapetanends <=

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

13

16

18

8 8

iv

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

v

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

i4
17-18
17
14

i4

14, 18

vi

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

1

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-

2

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

3

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.

4

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.

5

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.

6

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

7

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, +

8

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

9

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

10

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?

11

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

12

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)

13

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

14

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).

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15

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

16

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.

L

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

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17

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

18

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.

19

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

20

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

21

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

22

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’;

(c) Interest payments to the class member’s escrow
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

(c) The new escrow analysis methodology creates a
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

(c) The Fleet and GMACM cases provided for a differ-
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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0162%3A2. Public record. Not legal advice.