Objectors to a $140 million deal between homeowners, Ocwen Financial Corp. and Assurant Inc. over allegedly inflated force-placed insurance premiums asked a Florida federal court Thursday to consider a Ninth Circuit ruling pointing to “subtle signs” that class counsel in that case skewed a settlement in their own interest.
The deal proposed in April would settle allegations by a proposed class that the insurer paid the mortgage servicing company to inflate force-placed insurance premiums. Putative class members Shane and Cecilia Valdez said in their supplement to a previous filing that a Ninth Circuit ruling highlighted settlement features implying class counsel bias.
“The Ninth Circuit found that the district court abused its discretion by not probing deeper into the fairness of the settlement,” the objectors wrote. In that case, the appellate court ruled “there were ‘subtle signs that class counsel have allowed pursuit of their own self-interests … to infect the negotiations,’” the objectors said.
The proposed deal would end a suit accusing the companies of entering into an exclusive contract for force-placed insurance for mortgage borrowers without their own insurance. While admitting that insurance premiums would be higher than market price, the bank failed to tell borrowers that it was up to 10 times more expensive and that the bank would make money off the inflated premiums, according to the suit.
The objectors said Thursday that the Ninth Circuit had pointed to signs that could indicate collusion between class counsel and the defendant in a settlement in Allen v. Labor Ready Southwest Inc.
In that ruling, the Ninth Circuit said the fact that the class counsel would receive a disproportionate amount of the award taken together with provisions sending undistributed funds back to the defendants and agreeing that the defendants would not oppose the plaintiffs’ attorney fees warranted extra scrutiny by the district court.
On May 26, the proposed class had responded to similar arguments in the objectors’ initial filing saying that, unlike the Ninth Circuit, the 11th Circuit allows attorneys to recover percentages of a settlement without regard to the final payout and that class counsel “should not be penalized” for proposed class members’ failure to grab a piece of the settlement.
The plaintiffs also said that while the other two features mentioned in the objectors’ latest filing may warrant “closer scrutiny” of the deal, they “should not compel rejection of a settlement that is otherwise reasonable.”
In mid-May, U.S. Magistrate Judge Jonathan Goodman asked the defendants to fill in details on how the settlement would be paid out. Ocwen and Assurant defended the deal as “extremely generous.”
“We are not sure why this serial objector decided to violate the court’s order regarding supplemental filings and with an opinion that does even relate to final approval,” Adam Moskowitz of Kozyak Tropin & Throckmorton, who represents the class in the settlement, told Law360.
“We are glad that 99.99 percent of the nationwide class reviewed this settlement [and] approved it and we thus look forward to the hearing next week,” Moskowitz said.
Counsel for the objectors and the defendants did not reply to requests for comment.
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 case is Lee v. Ocwen Loan Servicing LLC et al., case number 0:14-cv-60649, in the U.S. District Court for the Southern District of Florida.
–Additional reporting by Dani Kass. Editing by Jeremy Barker.
Daily Business Review: Ocwen, Nationstar Pay $217 Million to Settle Force Placed Insurance Suit
Homeowners claimed the insurers automatically issued policies on these properties at lender-approved rates, which were well above market rates, leaving homeowners to cover
the costs.
Law360: Ocwen, Assurant Deal Objectors Say 9th Circ. Is On Their Side
Objectors to a $140 million deal between homeowners, Ocwen Financial Corp. and Assurant Inc. over allegedly inflated force-placed insurance premiums asked a Florida federal court Thursday to consider a Ninth Circuit ruling pointing to “subtle signs” that class counsel in that case skewed a settlement in their own interest.
Law360: Borrowers Seek Final OK For $54M Deal In Nationstar Row
Law360, Los Angeles
Borrowers accusing Nationstar Mortgage LLC of colluding with force-placed insurance providers to make lucrative profits asked a Florida federal judge on Monday to finalize a $54 million settlement of their class action, calling it an “extraordinary” result for the plaintiffs.
Plaintiffs’ motion for final approval of the deal said it would resolve claims by roughly 380,000 borrowers who allegedly had mortgage loans with Nationstar and were overcharged for hazard, flood or wind coverage issued by Assurant Inc. or its subsidiaries between Jan. 1, 2008, and Jan. 30 of this year.
Plaintiffs claimed the issuers and their subsidiaries entered into exclusive relationships with major mortgage lenders and services to provide force-placed insurance policies implemented when borrowers lapsed on their coverage. The issuers allegedly charged inflated premiums and paid tens of millions of dollars in kickbacks to Nationstar and its affiliates.
The settlement would block Nationstar from engaging in practices that allegedly inflated the insurance premium charges imposed on mortgagors for five years, according to Monday’s motion in the U.S. District Court for the Southern District of Florida.
“This result is … extraordinary because it involved the resolution of complex issues against a rising tide of adverse decisions from federal district and appellate courts — decisions class counsel would certainly distinguish, but their opponents would just as vigorously assert,” the filing said.
The Seventh Circuit in February 2013 affirmed the dismissal of a proposed class action alleging Wachovia Mortgage FSB placed fraudulent insurance on a homeowner’s property and paid kickbacks to an insurance agency affiliate, finding the complaint didn’t state a viable claim for relief. The Eleventh Circuit ruled in February 2014 that a mortgage borrower could not prevail in a suit alleging Wells Fargo Bank NA required her to have more flood insurance on her home than the amount mandated by regulations governing Federal Housing Administration-guaranteed loans, saying the amount is a minimum, not an upper limit.
The issue arose from the practice of mortgage banks requiring borrowers to secure hazard insurance to protect their properties. Plaintiffs didn’t challenge the requirement to have insurance but argued that the arrangement that Nationstar had with Assurant and others artificially inflated the cost of premiums beyond what was reasonable or necessary to protect the property, according to court documents.
JPMorgan Chase NA, HSBC USA NA, Citibank NA and Wells Fargo NA — as well as their affiliates and several insurers — agreed to settle claims similar to the ones in the instant suit. In March 2014, Wells Fargo and Assurant Inc. settled for an undisclosed amount in a similar case. And Bank of America NA in April 2014 agreed to pay $228 million to settle a putative class action — in the same court as the instant suit — accusing the bank of overcharging homeowners for force-placed insurance.
Monday’s motion said some of the practices at issue were blocked by a settlement with New York state regulators, but the prohibitions only applied to borrowers in that state and only bound Assurant.
Plaintiffs in the instant suit reached a settlement-in-principle roughly a year ago following mediation, they said in the motion seeking final approval of the deal. The Florida federal court preliminarily approved the settlement and certified the proposed settlement on Jan. 30 of this year, court filings said.
Plaintiffs’ attorneys are seeking $5 million in fees, which amounts to 9.26 percent of the money obtained in the settlement, according to court papers. They said they had received only two objections and 26 opt-outs, which supports the fee request.
Adam M. Moskowitz of Kozyak Tropin & Throckmorton LLP, which is representing the plaintiffs, told Law360 on Monday that they ”are glad to present our ninth nationwide lender placed class action settlement to the court for final approval and are appreciative that over 99.9 percent of the class supported the settlement.”
An Assurant spokesman told Law360 on Tuesday that the company does not acknowledge any wrongdoing in the case, “but we feel it’s in the best interest of our company to attempt to resolve the matter.”
A spokesman for Nationstar declined immediate comment on Tuesday.
The class is represented by Adam M. Moskowitz, Tucker Ronzetti, Rachel Sullivan and Robert J. Neary of Kozyak Tropin & Throckmorton LLP, Lance A. Harke, Sarah Engel and Howard M. Bushman of Harke Clasby & Bushman LLP, and Aaron S. Podhurst, Peter Prieto, John Gravante III and Matthew Weinshall of Podhurst Orseck PA.
Nationstar is represented by Alan G. Greer and Nathaniel M. Edenfield of Richman Greer PA, and John B. Sullivan, Mark D. Lonergan, Erik Kemp and Megan C. Kelly of Severson & Werson PC. Assurant and other defendants are represented by Frank G. Burt of Carlton Fields Jorden Burt PA.
The case is Howard Braynen et al. v. Nationstar Mortgage LLC et al., case number 1:14-cv-20726, in the U.S. District Court for the Southern District of Florida.
–Additional reporting by Kelly Knaub and Zachary Zagger. Editing by Kelly Duncan.