Objectors to Ocwen, Assurant Class Action Settlement Adds Decision from 9th Circuit

Class Members objecting to the terms of the force-placed insurance class action settlement with Ocwen Financial Corp. and Assurant Inc. claim that the settlement was reached for the sake of the plaintiffs’ attorneys’ interests, as an appellate court recently argued about another lawsuit.

The Ocwen Financial class action settlement was reached in April to resolve allegations that Ocwen and Assurant inflated the prices of force-placed insurance premiums incurred by those who had mortgages through Ocwen in exchange for a kickback to the bank.

Class Members Shane and Cecilia Valdez, who are objecting to the force-placed insurance class action settlement, filed a supplement on June 4 in support of their objections, citing a ruling by the Ninth Circuit Court of Appeals in which it described signs of bias on the part of class counsel in Allen v. Labor Ready Southwest, Inc.

The ruling was made on June 2, in which the appellate court reversed a decision from a lower court regarding the attorneys’ fees.

“The Ninth Circuit found that the district court abused its discretion by not probing deeper into the fairness of the settlement where the parties had reached the settlement while there was an uncertified class and where there were ‘subtle signs that class counsel have allowed pursuit of their own self-interests . . . to infect the negotiations,” Mr. and Mrs. Valdez wrote.

The three “subtle signs” described by the Ninth Circuit in the Labor Ready decision included (1) an agreement that “any unpaid settlement funds or unpaid attorney’s fees would revert to the defendant; (2) the defendant agreed to a a ‘clear-sailing’ agreement pursuant to which the defendant would not dispute class counsel’s fee request as long as the request did not exceed a certain amount; and (3) the ‘economic reality’ of the fee award (instead of just looking at the fee award in light of the purported value of the settlement) suggested that counsel would get a large share of the actual recovery by the class.”

According to Mr. and Mrs. Valdez, “those same concerns apply here.”

The couple adds that “the Ninth Circuit cautioned that the District Court should not calculate fees using ‘a mechanical or formulaic approach that results in an unreasonable award’ but instead should review the proposed fee award in light of what the record establishes about the actual pay-out to the class.”

The $140 million force-placed insurance class action settlement with Ocwen and Assurant was reached in April. The deal is supposed to provide relief to 400,000 Class Members. It also includes almost $10 million in attorneys’ fees.

The plaintiffs said in their motion for preliminary approval that the attorneys’ fees were “negotiated only after all class benefits had been secured under the direct supervision of a nationally recognized mediator, and payable by defendants beyond and outside of the benefits to the class.”

The objection was filed in May, in which the Valdez’ said that “this is the type of settlement that courts and commentors frequently warn about. It promises large attorneys’ fees to class counsel, but will provide very little to the class.”

“Most class members will receive nothing. Yet, defendants — who unquestionably made hundreds of millions of dollars from their forced-place insurance scheme — will be absolved from liability if the court approves this proposed settlement,” they add.

U.S. Magistrate Judge Jonathan Goodman has said that Mr. and Mrs. Valdez raise valid points that are “worthy of comprehensive discussion,” and on May 13, Judge Goodman issued an order asking for the plaintiffs to issue a response to some of the questions raised by the objection.

The hearing about this issue is scheduled for Thursday.

The class is represented by Adam M. Moskowitz, Thomas Tucker Ronzetti, Rachel Sullivan and Robert J. Neary of Kozyak Tropin & Throckmorton PA, Aaron S. Podhurst, Peter Prieto and Matthew P. Weinshall of Podhurst Orseck PA, and Lance A. Harke, Sarah Clasby Engel and Howard M. Bushman of Harke Clasby & Bushman LLP.

Objectors Shane and Cecilia Valdez are represented by Stephen J. Fearon Jr. of Squitieri & Fearon LLP. Objector Margo Perryman is represented by Barry R. Himmelstein of Himmelstein Law Network and Sheri L. Kelly of the Law Office of Sheri L. Kelly.

Ocwen is represented by Brian V. Otero, Stephen R. Blacklocks, Ryan A. Becker and Corey A. Lee of Hunton & Williams LLP.

Assurant is represented by Frank G. Burt, W. Glenn Merten, Brian P. Perryman and Farrokh Jhabvala of Carlton Fields Jorden Burt PA.

The Ocwen Assurant Force-Placed Insurance Class Action Lawsuit is Lee v. Ocwen Loan Servicing LLC et al., Case No. 0:14-cv-60649, in the U.S. District Court for the Southern District of Florida.

UPDATE: The Ocwen force-placed insurance class action settlement received final approval on Sept. 14, 2015. Class Members have until Dec. 14, 2015 to file a claim.