Former DoD OIG Official Sentenced for Accepting Bribes and Defrauding the United States
Meanwhile, Senior Judge Liam O’Grady has heard 66 cases since 2010 in the Alexandria, Va., federal courthouse while his wife was invested in plaintiffs or defendants, Amazon.
JAN 14, 2022 | REPUBLISHED BY LIT: JAN 16, 2022
ALEXANDRIA, Va. – A former official of the U.S. Department of Defense’s Office of Inspector General (DoD OIG) was sentenced today to 7.5 years in prison for accepting bribes and defrauding the government, among other crimes, in relation to a contract he oversaw at the DoD OIG.
According to court documents, Matthew K. LumHo, 47, of Fairfax Station, was employed at the DoD OIG’s Information Services Directorate.
In that position, LumHo oversaw and administered a prime federal contract designed to allow federal agencies in the National Capital Region to order routine telecommunications services and equipment from one of two national telecommunications companies.
Beginning no later than 2012, LumHo solicited and accepted bribes from co-conspirator William S. Wilson, in exchange for steering what nominally was intended to be telecommunications or information technology services through the prime government contract, through an intermediary telecommunications company, to Wilson’s company.
Wilson’s company received all of this business without any competition, despite its lack of any relevant experience or expertise, and despite having no employees based in or near northern Virginia, where all the work was to be performed.
Wilson and LumHo disguised the bribes by falsely masking them as payroll payments to a relative of LumHo for a job that did not in fact exist, with the bribes being deposited into an account that LumHo in fact controlled.
As the scheme progressed, LumHo, who was supposed to be safeguarding the contract, knowingly authorized numerous false and fraudulent service orders through the prime contract.
The false service orders typically described the items supposedly being provided to the government as specialized IT-related support services, when in fact the co-conspirators were simply buying standard, commercially available items, dramatically marking up the price, and billing the government as though it had been provided with the specialized IT-related services.
LumHo and Wilson also used fraudulent service orders to conceal bribes in the form of high-end camera equipment and stereo equipment sent from Wilson to LumHo, thereby defrauding the government into to paying for the very bribes themselves.
The evidence adduced at trial further demonstrated that the co-conspirators repeatedly sought to interfere with the criminal investigation by creating false documentation, making false statements to law enforcement officials, lying on a financial disclosure form, committing perjury during sworn civil deposition testimony, and tampering or attempting to tamper with a witness.
In addition, at sentencing, Senior U.S. District Judge Liam O’Grady found that LumHo had obstructed justice by committing perjury when he testified at trial.
Co-conspirator Ronald A. Capallia, Jr., pleaded guilty on January 25, 2018, to his role in the conspiracy and was sentenced to one year and one day in prison on September 14, 2021.
Today, LumHo was sentenced to 90 months in prison.
Co-conspirator William S. Wilson is scheduled to be sentenced on February 4, 2022.
Jessica D. Aber, U.S. Attorney for the Eastern District of Virginia; Wayne A. Jacobs, Special Agent in Charge of the FBI Washington Field Office Criminal Division; and Kelly P. Mayo, Deputy Inspector General for Investigations at the Department of Defense’s Office of Inspector General, made the announcement after sentencing by Senior U.S. District Judge Liam O’Grady.
Assistant U.S. Attorneys Matthew Burke and Russell L. Carlberg prosecuted the case.
A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:17-cr-222.
USAO – Virginia, Eastern
Updated January 14, 2022
Virginia Supreme Court Confirms the Need for Independent Judicial Oversight
Neither experience nor logic justified the initial sealing of this proceeding. And nothing in today’s order justifies our continued sealing.
Ex-parole chair challenged suspension as judge, unsealed records show
APR 21, 2022 | REPUBLISHED BY LIT: APR 25, 2022
Judge Adrianne Bennett — the former parole board chairwoman at the center of a scandal — challenged the constitutional authority of a state commission to suspend her from the bench last year, according to records unsealed Thursday by the Supreme Court of Virginia. The court denied her request the next day.
The records were unsealed at the request of the Richmond Times-Dispatch, which made a filing with the court in July asking the court to unseal its sealing order. The court’s 4-2 Thursday decision addressed the sealing order and all the records, and the court unsealed some of the records and provided them to the newspaper. But it left key records under seal.
Bennett was the chair of the Virginia Parole Board during a time it was later found to have violated rules in its process used to release certain people from prison.
The court’s opinion said that “in the interest of openness and transparency, we further unseal the remainder of the case” with the exception of attachments filed by Bennett.
Bennett petitioned the court on May 20, 2021, asking it to take action in a matter then pending before the state’s Judicial Inquiry and Review Commission, a panel that investigates allegations of misconduct against judges. JIRC in April 2021 suspended Bennett from the bench in Virginia Beach, where she is a juvenile court judge, and she asked the Supreme Court to order JIRC to reinstate her.
The Supreme Court denied her request a day later and, without any public notice or listed reasoning, the court ordered the record of her filing to be sealed. The unsealed records reveal Bennett’s legal challenge to JIRC. The records that remain under seal appear to address the substance of JIRC’s investigation of Bennett.
Bennett’s filing at the Supreme Court — called a mandamus petition — was against the members of JIRC and its general counsel, Raymond Morrogh, according to the records the court unsealed on Thursday. She challenged their constitutional authority to suspend her.
The JIRC investigation has concluded. Records of such investigations, by state law, only become public if JIRC makes a filing at the Supreme Court against a judge, which did not happen in Bennett’s case. She remains on the bench in Virginia Beach.
The Supreme Court’s opinion said the General Assembly, as the policymaking branch of government, has determined that records such as the exhibits Bennett filed should be confidential. Bennett’s exhibits “are records of a then pending proceeding before the Judicial Inquiry and Review Commission. By law, records of proceedings before the Commission are kept confidential.”
They quoted a state law that says the record of any JIRC proceeding “filed with the Supreme Court shall lose its confidential character.”
A lawyer for The Richmond Times-Dispatch on Friday urged the court to unseal its order that explained why it closed off the records to the public.
“From the start, Judge Bennett made clear that she did not want anyone but us to see the reason why JIRC had suspended her,” the dissent said.
“The majority holds that Judge Bennett has a statutory right to keep that information secret and that the public has no constitutional right to break the seal of secrecy.”
The dissent also said:
“Neither experience nor logic justified the initial sealing of this ‘proceeding.’ And nothing in today’s order justifies our continued sealing of the JIRC documents.”
Attorney David Lacy represents the newspaper and its publisher, Lee BHM Corp., in the case, and oral arguments were heard in March.
“Today’s decision from the Virginia Supreme Court struck the balance between the fundamental notion of public access to the courts and the statutory safeguards which protect judges from unwarranted complaints,”
said Bennett’s attorney, Lee Floyd, in an email for this story.
“Judge Bennett continues to serve honorably on the Juvenile and Domestic Relations bench in Virginia Beach.”
Bennett, who was elected by the General Assembly as a juvenile court judge in Virginia Beach in March 2020 and took the seat the next month, was at the center of a scandal after the Office of the State Inspector General found the parole board violated law and policy that year, including not properly notifying victims and prosecutors about people being released from prison on parole.
At least two complaints were made about Bennett to JIRC.
One was made in April 2021 by a former parole board employee who alleged Bennett directed parole board staff to copy and paste a previous report about a person who was eligible for parole, to be used in a new review. The employee had never been asked to do that in the past and felt that using a previous report as her own work would result in falsification of the report.
Morrogh, JIRC’s general counsel, signed an order indefinitely suspending Bennett from the bench on April 13, 2021, which was authorized by JIRC’s chairwoman. Bennett had not been charged — and hasn’t been — with any violation of the Canons of Judicial Conduct.
Bennett argued that the Virginia Constitution didn’t allow JIRC to remove her — and that indefinite suspension was de facto removal that only could legally be done by the Supreme Court or General Assembly.
She said the state law that allows JIRC to suspend a judge is unconstitutional. She also argued that while the constitution requires JIRC to have seven members, the commission had only six when she was suspended. And she challenged the suspension order because it was signed by JIRC’s lawyer.
“Until a full Commission is appointed, the Commission lacks the authority to act in future proceedings against Judge Bennett,” Bennett argued in the filing.
She asked the court to suspend JIRC’s investigation of her without a full seven members.
The commission was investigating action that happened between Bennett’s election as a judge by lawmakers and her taking the oath as a judge.
In denying Bennett’s request the day after she filed it, the Supreme Court responded that the constitution and state law gave JIRC jurisdiction over matters of judicial censure and removal, regardless of the number of current members, according to the records unsealed Thursday. (JIRC was down one member because one of its members became a judge.)
The court said it did not have authority to review or vacate the interim suspension order, and agreed to seal Bennett’s filing.
Because JIRC’s records remain secret unless the commission makes a filing against a judge at the Supreme Court, it’s unclear when Bennett’s interim suspension ended.
The parole board scandal became an issue in the 2021 election; Gov. Glenn Youngkin and Attorney General Jason Miyares, both Republicans, campaigned by attacking Democrats on parole.
Miyares is now investigating problems that happened at the parole board.
The lead investigator at the Office of the State Inspector General — the agency that made findings of misconduct by the board — was terminated.
Jennifer Moschetti filed a lawsuit over her termination. The Virginia Mercury reported Thursday that her firing was upheld twice in a state employee grievance process because of information security breaches that happened prior to her attempt at whistleblower protection, according to records filed in her wrongful termination suit.
“Moschetti conceded, under oath, that she sent confidential information to her personal email address on numerous occasions, which included, among other things: mental health information of various incarcerated offenders, identifying information of crime victims, witnesses to crimes and other individuals involved in board matters,” according to a filing from the state officials Moschetti is suing.
Judge Albert Diaz Insults Americans Who Pay His Salary With $35 Payout and $1.3M Attorney Fee Deduction
Judge Albert Diaz insults the American homeowners and Judge Stephanie Thacker endorses opinion along with lower court Judge Tim Cullen.
DEMETRIUS ROBINSON; TAMARA ROBINSON,
Plaintiffs – Appellees,
NATIONSTAR MORTGAGE LLC,
Defendant – Appellee.
Amici Supporting Appellant.
Appeal from the United States District Court for the District of Maryland, at Greenbelt.
Timothy J. Sullivan, Magistrate Judge. (8:14−cv−03667−TJS)
Argued: October 28, 2021 Decided: February 10, 2022
Amended: February 10, 2022
Before DIAZ and THACKER, Circuit Judges, and Thomas T. CULLEN, United States District Judge for the Western District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Diaz wrote the opinion, in which Judge Thacker and Judge Cullen joined.
Michael T. Houchin, LAW OFFICES OF RONALD A. MARRON, APLC,
San Diego, California, for Appellant.
Jonathan K. Tycko, TYCKO & ZAVAREEI LLP, Washington, D.C.;
Erik Wayne Kemp, SEVERSON & WERSON, San Francisco, California, for Appellees.
Ronald A. Marron, LAW OFFICES OF RONALD A. MARRON, APLC, San Diego, California;
Thomas J. Minton, GOLDMAN & MINTON, P.C., Baltimore, Maryland, for Appellant.
Dia Rasinariu, TYCKO & ZAVAREEI LLP, Washington, D.C., for Appellee Tamara Robinson.
Jan T. Chilton, SEVERSON & WERSON, San Francisco, California, for Appellee Nationstar Mortgage LLC.
Scott C. Borison, BORISON FIRM LLC, Baltimore, Maryland;
Jennifer S. Wagner, MOUNTAIN STATE JUSTICE, Morgantown, West Virginia, for Amici Curiae.
FEB 11, 2022 | REPUBLISHED BY LIT: FEB 13, 2022
DIAZ, Circuit Judge:
This case arises from a class action alleging that Nationstar Mortgage LLC violated federal and state consumer-protection laws in servicing the class members’ mortgage loans.
Following protracted litigation, Nationstar, and the Robinsons negotiated a $3,000,000 settlement.
Pia McAdams, a class member, objected to the settlement, arguing that the class notice was insufficient; the settlement was unfair, unreasonable, and inadequate; the release was unconstitutionally overbroad; and the attorneys’ fee award was improper.
A magistrate judge (acting on a referral by the district court) overruled McAdams’s objections.
On appeal, McAdams raises those same challenges and questions the magistrate judge’s jurisdiction.
Demetrius and Tamara Robinson filed a class action against Nationstar in the District of Maryland in 2014.
The Robinsons claimed Nationstar violated federal and state law by, among other things, failing to timely acknowledge receipt of class members’ loss mitigation applications,1 respond to the applications, and diligently obtain documents to process them.
The parties litigated the case for nearly six years. In 2020, the Robinsons and Nationstar filed a notice of settlement and a joint motion to proceed before a magistrate
An Insult from Court of Appeals for the 4th Cir. Judge Albert Diaz, joined by Thacker and Cullen.
This is Ochlocracy America and Y’ALL have a Choice.
Read the Opinion. Then Decide. #AmericaFirst https://t.co/qpi7zZ6bOO pic.twitter.com/AQ0yHgSV5P
— LawsInTexas (@lawsintexasusa) February 11, 2022
The magistrate judge (who had mediated the settlement), granted a motion for preliminary approval of the settlement and scheduled a fairness hearing before final approval.
The negotiated settlement created a relief fund of $3,000,000.
In order of priority, the parties proposed that the fund pay for
(1) administrative expenses up to $300,000,
(2) attorneys’ fees,
(3) a service award to the class representative—Demetrius Robinson,
(4) class claims.
Any remainder would go to a nonprofit that advocates for consumers.
The administrative expenses included the cost of providing class members with notice of the settlement.
The settlement proposed three types of notice—Email, Postcard, and Longform.
Both the Email and Postcard Notice informed class members of the amount of the settlement fund, how to submit a claim, how to opt out of the class, and where to find the Longform Notice.
The Longform Notice notified class members of the attorneys’ fee arrangement.
The notices didn’t estimate the recovery for each class member.
As for attorneys’ fees, Nationstar agreed (in a so-called “clear sailing” provision) not to oppose class counsel’s fee request so long as it didn’t exceed $1,300,000.
Class counsel submitted records accounting for over 3,000 billable hours.
Using the District of Maryland’s presumptively reasonable rates, the records supported $1,261,547.50 in fees.
Class counsel also submitted proof of $217,657.26 in unreimbursed expenses, for a total of $1,479,204.76 in costs and fees.
But counsel requested only a $1,300,000 award.
The value of a class member’s claim is determined by a points system.
Class members receive points for answering two questions—the first about Nationstar’s treatment of their mortgage account and the second about expenses the class member incurred.
The settlement funds remaining, after deducting administrative expenses, attorneys’ fees, and the class representative’s service award, are divided by the number of points claimed.
That number is then multiplied by a class member’s points to arrive at the settlement share for each claimant.
The proposed settlement also includes a release of claims.
Upon entry of the Final Approval Order and Judgment, each Settlement Class Member . . . will be deemed to have completely released and forever discharged the Released Parties, and each of them, from all actions . . . that were or could have been asserted by the Class Representative or Class Members in connection with the submission of loss mitigation applications during the Class Period.
McAdams, an absent class member2 who had sued Nationstar in California state court,3 objected to the settlement. She argued that the class notice was insufficient; the
Erie Guesses, Circuit Splits and 43% Paid out of $3M settlement in attorney fees in this WALL ST JUDICIAL OPINION sponsored by NATIONSTAR MORTGAGE in this case. Meet the author of the Opinion; Judge Albert Diaz… #thegreatresignation is what is required. Today. pic.twitter.com/yviueTxLTA
— LawsInTexas (@lawsintexasusa) February 12, 2022
settlement was unfair, unreasonable, and inadequate; the release was unconstitutionally overbroad; and the attorneys’ fee award was improper.
The magistrate judge overruled McAdams’s objections.
The judge found that the distribution of the notice was sufficient because over 97% of the nearly 350,000 class members received notice.
He also found that class members “had information to make the necessary decisions and . . . the ability to even get more information if they so desired.”
In support of that finding, the judge noted the low number of objectors (2), the low opt-out rate (.04%), and the high claims rate (13.8%).4
Turning to the settlement terms, the magistrate judge found them fair, reasonable, and adequate.
The judge considered the three relevant criteria under Federal Rule of Civil Procedure 23(e)(2)(C) and addressed the five adequacy factors from In re Jiffy Lube Securities Litigation, 927 F.2d 155, 159 (4th Cir. 1991).
The judge found: (1) “plaintiffs ha[d] viable claims”; (2) “Nationstar had very strong defenses”; (3) litigating the case to trial “would have likely been lengthy and it would certainly be quite, quite expensive”; (4) “Nationstar can pay the 3 million dollars”; and (5) “[o]nly 137 class members have opted
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— LawsInTexas (@lawsintexasusa) February 12, 2022
out of the settlement, which is about 0.04 percent of the settlement class.”
See J.A. 810– 14.
The magistrate judge also addressed the breadth of the settlement’s release. He found the release was “not too broad” because a class settlement can release “claims based on the identical factual predicate[,] even if those claims” aren’t presented.
But he didn’t opine whether the release would bar class members’ pending claims in other jurisdictions, including McAdams’s California lawsuit.
Finally, the magistrate judge approved the proposed $1,300,000 attorneys’ fee request.
The fee, he said, was based on a presumptively reasonable rate, and using that rate, counsel had shown that their actual costs and fees exceeded their request.
The judge noted that concerns over Nationstar’s agreement not to object to the settlement were misplaced.
And he found “no collusion” between the parties because they negotiated the settlement “at arm’s length in the midst of contentious litigation.”
J.A. 812, 817.
This appeal followed.
McAdams first attacks the magistrate judge’s jurisdiction to approve the class action settlement, alleging that she didn’t consent to have a magistrate judge hear her case.
There’s no dispute that the magistrate judge could approve the class action and enter judgment only by consent of the parties.
28 U.S.C. § 636(c).
McAdams asserts that “parties” for purposes of § 636(c) include absent class members, like her.
This is a question of first impression in this circuit.
But every other circuit to address the issue has concluded that absent class members aren’t parties.
Koby v. ARS Nat’l Servs., Inc., 846 F.3d 1071, 1076 (9th Cir. 2017); Day v. Persels & Assocs., LLC, 729 F.3d 1309, 1316 (11th Cir. 2013); Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 181 (3d Cir. 2012); Williams v. Gen. Elec. Cap. Auto Lease, Inc., 159 F.3d 266, 269 (7th Cir. 1998).
We now join them, holding that the magistrate judge had jurisdiction to approve the settlement.
We review questions of law de novo, including questions of statutory interpretation.
In re Lumber Liquidators Chinese-Manufactured Flooring Prods. Mktg., Sales Pracs. & Prods. Liab. Litig., 952 F.3d 471, 483 (4th Cir. 2020).
Similarly, “[w]e review . . . a lower court’s determination of its subject-matter jurisdiction de novo.”
Barlow v. Colgate Palmolive Co., 772 F.3d 1001, 1007 (4th Cir. 2014) (en banc).
“We begin, as always in deciding questions of statutory interpretation, with the text.”
Othi v. Holder, 734 F.3d 259, 265 (4th Cir. 2013).
28 U.S.C. § 636(c) authorizes magistrate judges to “conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case . . . . [u]pon the consent of the parties.”
Congress didn’t define “parties” in § 636.
Nor has the Supreme Court said whether absent class members are parties in this context.
See Devlin v. Scardelletti, 536 U.S. 1, 9–10 (2002)
(“Nonnamed class members, however, may be parties for some purposes and not for others. The label ‘party’ does not indicate an absolute characteristic, but rather a conclusion about the applicability of various procedural rules that may differ based on context.”).
“We give the words of a statute their ordinary, contemporary, common meaning, absent an indication Congress intended them to bear some different import.”
Williams v. Taylor, 529 U.S. 420, 431 (2000) (cleaned up).
When Congress adopted the relevant language in § 636, the ordinary meaning of “party” included those whose names are designated as a plaintiff or defendant and those who can control the proceedings.
See Day, 729 F.3d at 1317.
Absent class members aren’t named parties, and they can’t control proceedings.
See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810 (1985)
(“Unlike a defendant in a normal civil suit, an absent class-action plaintiff is not required to do anything. He may sit back and allow the litigation to run its course, content in knowing that there are safeguards provided for his protection.”).
So absent class members aren’t within the contemporary, common meaning of the term “parties” as used in § 636.
Nor do we believe Congress intended absent class members to be parties.
Interpreting “parties” to include absent class members would prevent magistrate judges from entering judgment against absent class members who haven’t given their explicit consent.
That reading “would virtually eliminate § 636(c) referrals to magistrate judges” by hindering the judgment’s preclusive effect.
Williams, 159 F.3d at 269.
Congress has limited the preclusive effect of judgments by restricting the definition of a party in other contexts.
See, e.g., 29 U.S.C. § 216(b)
(“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”).
But when it has done so, Congress has spoken clearly. Nothing in § 636 suggests Congress intended to limit the preclusive effect of judgments entered by magistrate judges.
McAdams doesn’t account for the adverse practical effects of administering class actions if her reading were to prevail.
The Ninth Circuit has observed that § 636 uses the term “parties” “multiple times in a way that cannot sensibly be read to include absent class members” because “[t]he identities of all absent class members will often not be known until later in the case.”
Koby, 846 F.3d at 1076; see, e.g., 28 U.S.C. § 636(c)(2)
(“[T]he clerk of court shall, at the time the action is filed, notify the parties of the availability of a magistrate judge to exercise such jurisdiction.”).
“Even if the identities of all absent class members are known,” it would be unduly burdensome on the clerk of court to compile all their contact information and prohibitively expensive “even for the most well-funded district courts.”
Koby, 846 F.3d at 1077.
This case exemplifies the need to have a practical system for administering class actions.
The class here consists of almost 350,000 members.
McAdams’s reading of “parties” for purposes of § 636 would require notifying each of them of the intent to proceed before a magistrate judge.
“We doubt Congress would have imposed these substantial budgetary and manpower burdens on clerks’ offices across the country without making that intent explicit.”
Id. at 1077.
And to what end? In this case, over 97% of class members received notice of the settlement. 13.8% submitted claims. Only .04% opted out. So over 80% of the class received notice but didn’t act on it.
Yet under McAdams’s reading of § 636, the magistrate judge would be powerless to act.
Because the contemporary, common meaning of “parties” excludes absent class members and the statute lacks signs showing any legislative intent to classify them as such, we conclude “parties” as used in § 636 doesn’t include absent class members.
Since Nationstar and the Robinsons consented to having the magistrate judge preside over the fairness hearing, McAdams’s jurisdictional claim fails.5
McAdams next asserts that the settlement notice was inadequate because it didn’t include the attorneys’ fees to be deducted from the settlement fund, estimate individual class members’ recovery, or explain the distribution method.
The parties dispute our standard of review.
We haven’t spoken on this question, and our sister circuits are split.
Two circuits review a district court’s finding on the adequacy of class action notice for abuse of discretion.
Pollard v. Remington Arms Co., 896 F.3d 900, 905–06 (8th Cir. 2018); Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 438 (2d Cir. 2007).
Three others review the issue de novo.
In re Online DVD-Rental
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— LawsInTexas (@lawsintexasusa) February 3, 2022
Antitrust Litig., 779 F.3d 934, 946 (9th Cir. 2015); DeJulius v. New England Health Care Emp. Pension Fund, 429 F.3d 935, 942 (10th Cir. 2005); Fidel v. Farley, 534 F.3d 508, 513 (6th Cir. 2008).
But even assuming de novo review is proper, the class notice was adequate.
McAdams’s challenge to the adequacy of the notice has both a constitutional and a procedural component.
To bind an absent class member, notice to the class must provide “minimal procedural due process protection.”
Phillips Petroleum Co., 472 U.S. at 811–12.
“The [absent class member] must receive notice plus an opportunity to be heard and participate in the litigation.”
Id. at 812.
That notice must be “reasonably calculated, under all the circumstances, to apprise [absent class members] of the pendency of the action and afford them an opportunity to present their objections.”
Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950).
On the procedural front, Federal Rule of Civil Procedure 23(e) governs notice to absent class members. It requires “direct notice in a reasonable manner to all class members who would be bound by the proposal.”
Fed. R. Civ. P. 23(e)(1)(B).
But it doesn’t specify what the notice must say. Rather, the notice need only “fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with the proceedings.”
Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 114 (2d Cir. 2005) (cleaned up).
Put another way, “Rule 23(e) requires notice that describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard.”
In re Online DVD-Rental Antitrust Litig., 779 F.3d at 946 (cleaned up).
Here, the magistrate judge approved three types of notice—Email, Postcard, and Longform.6
The settlement administrator emailed notice to class members for whom it had an email address.
It also mailed notice to class members for whom it had a physical address.
And it searched the National Change of Address database to update the addresses for those whose Postcard Notice was returned as undeliverable.
Both the Email and Postcard Notice informed class members that there was a $3,000,000 settlement fund, explained how to file a claim, and presented the option to opt- out.
They also listed a website and telephone number where class members could get the Longform Notice.
The Longform Notice explained the settlement in greater detail.
Among other things, it stated that class counsel intended to request up to $1,300,000 in attorneys’ fees and costs, that this amount would be deducted before any payout to the class, and that class members submitting valid claims would receive proportionate shares of the settlement fund.7
In other words, the Longform Notice included two of the three pieces of
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— LawsInTexas (@lawsintexasusa) February 4, 2022
information—the attorneys’ fees to be deducted from the settlement fund and the distribution method—which McAdams complains is missing.
Nor was the notice inadequate because it didn’t estimate the class members’ recovery.
In general, it would be difficult, if not impossible, for parties to reliably predict the number of valid claims when drafting notices.
Indeed, the Longform Notice acknowledges this difficulty:
“The amount of this payment will depend on how many Settlement Class Members file valid claims and how each Settlement Class Member answers questions in the Claim Form.”
And even if an estimated recovery is appropriate in some cases, McAdams makes no compelling argument for one here.
There’s nothing in the record suggesting the parties had a reliable method of estimating the percentage of class members who would file claims, let alone the average number of points they would claim.
Nor could the parties know that the magistrate judge would approve the proposed award of attorneys’ fees.
Without some evidence proving an average recovery calculation would be reliable, we think it inappropriate to impose such a requirement.
See, e.g, Does 1-2 v. Déjà Vu Servs., Inc., 925 F.3d 886, 901 (6th Cir. 2019)
(“Objectors cite no authority that requires a notice to state how much money each class member would receive, nor do they explain how the notice could have accurately stated the amount each [class member] was eligible to receive from the cash pool.”).
In sum, we find the methods of notice here fairly apprised class members of the proceedings as well as their options.
Class members had access to information about the total settlement, attorneys’ fees, and distribution method.
The notices also provided them with the means to find more information if they wanted it.
Thus, the notices were adequate.
McAdams next contests the magistrate judge’s finding that the settlement was fair, reasonable, and adequate. She asserts that the magistrate judge neglected to estimate the average recovery, and thus the settlement fund won’t adequately compensate the class members.
“We review a district court’s approval of a class-action settlement for an abuse of discretion.”
In re Lumber Liquidators, 952 F.3d at 483.
Rule 23 requires courts to find that class settlements are “fair, reasonable, and adequate” before approving them.
Fed. R Civ. P. 23(e)(2).
When reviewing the adequacy of a settlement, the court must consider
“(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims;
(iii) the terms of any proposed award of attorneys’ fees, including timing of payment;
(iv) any agreement required to be identified.”
Id. at 23(e)(2)(C).
We have identified five other factors for assessing a settlement’s adequacy:
“(1) the relative strength of the plaintiffs’ case on the merits;
(2) the existence of any difficulties of proof or strong defenses the plaintiffs are likely to encounter if the case goes to trial;
(3) the anticipated duration and expense of additional litigation;
(4) the solvency of the defendant and the likelihood of recovery on a litigated judgment;
(5) the degree of opposition to the settlement.”
In re Lumber Liquidators, 952 F.3d at 484 (citing In re Jiffy Lube, 927 F.2d at 159).
Here, the magistrate judge considered the three relevant Rule 23(e)(2) criteria.8
(i) “[t]here was a great risk [for the plaintiffs] to proceed to trial given the logistical difficulties and Nationstar’s defense”;
(ii) “[t]he point system alloc[a]tion in the settlement agreement ensure[d] that those with the greater loss will be compensated to a greater degree”;
(iii) “the proposed attorneys’ fees and costs in this case [were] fair and reasonable given the contentious nature of this case and the amount of time spent in litigation.”
The magistrate judge also weighed the five Jiffy Lube factors.
(1) “plaintiffs ha[d] viable claims”;
(2) “Nationstar had very strong defenses”;
(3) litigating the case to trial “would have likely been lengthy and it would certainly be quite, quite expensive”;
(4) “Nationstar can pay the 3 million dollars”;
(5) “[o]nly 137 class members have opted out of the settlement, which is about 0.04 percent of the settlement class.”
J.A. 810, 813–14.
McAdams doesn’t claim that the magistrate judge failed to address these factors; nor does she argue that he improperly weighed them.
Instead, she complains that the magistrate judge “failed to make a ‘rough estimate’ of what class members would have received had they prevailed at trial.”
Appellant’s Br. at 25.
But we have never required such an estimate.
Even the out-of-circuit cases McAdams cites don’t require an estimate in every case.
See Lusk v. Five Guys Enters. LLC, No. 17-cv-00762, 2019 WL 7048791,
at *7 (E.D. Cal. Dec. 23, 2019)
(explaining that a rough estimate of a plaintiff’s recovery is “meaningless” when one of its components lacks “factual and evidentiary foundation”).
And we’re not persuaded to impose this new requirement here.
In any event, while the magistrate judge didn’t estimate the potential recovery should the case proceed to trial, he found that most class members “probably only had nominal damages.”
That’s consistent with the resulting settlement.
At the fairness hearing, the judge said that 13.8% of the nearly 350,000 class members submitted claims.
He also noted that $1,300,000 in attorneys’ fees and costs would be deducted from the $3,000,000 fund.
Using only that information, one could roughly estimate that the average class member would recover $35, an amount that would adequately compensate a plaintiff with only nominal damages.
We’re satisfied that the magistrate judge correctly analyzed all the relevant Rule 23 criteria and thus didn’t abuse his discretion in finding the settlement agreement adequately compensated the plaintiffs.
McAdams also argues that the settlement release is “ambiguous, overbroad, and beyond the permissible scope of release for class action settlements.” Appellant’s Br. at 17.
A court can approve a release of claims that share an “identical factual predicate” with claims alleged in a case.
Berry v. Schulman, 807 F.3d 600, 616 (4th Cir. 2015).
Claims have an “identical factual predicate” when they “depend upon the very same set of facts.”
TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456, 460 (2d Cir. 1982) (quoting Nat’l Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9, 18 n.7 (2d Cir. 1981)).
We have twice held that a class action settlement can dispose of unalleged claims relying on an identical factual predicate.
In re MI Windows & Doors, Inc., Prod. Liab. Litig., 860 F.3d 218, 225 (4th Cir. 2017); Berry, 807 F.3d at 616.
Here, the release provides that “each Settlement Class Member . . . will be deemed to have . . . discharged the Released Parties . . . from all actions . . . in connection with the submission of loss mitigation applications during the Class Period.”
As the magistrate judge recognized, this is “a broad release.”
It encompasses a large swath of claims that might have been brought.
But nothing on the face of the release purports to apply to cases with a different factual predicate. Rather, the release is tied to cases arising out of a set action and time frame.
Our inquiry ends there.
Neither we nor the magistrate judge can decide the outer limit of the release’s scope. To do so would be advisory.
See Pelt v. Utah, 539 F.3d 1271, 1285 (10th Cir. 2008)
(“It is well settled that a court adjudicating a class action cannot predetermine the res judicata effects of its own judgment; that can only be determined in a subsequent suit.”).
Whether the release covers claims not alleged in the class action complaint is for a court enforcing the release to decide.
In fact, that’s exactly what happened with McAdams’s California claims.
In that case, McAdams alleges that Nationstar violated California law by falsely telling her that it was processing her loan modification application while it continued to foreclose on her home.
McAdams, 2021 WL 4462909, at *1.
The California court considered the release’s scope and found that her claims weren’t barred. Id. at *4–6.
The magistrate judge didn’t abuse his discretion in approving the release.
Finally, McAdams contends that the magistrate judge abused his discretion by approving the $1,300,000 attorneys’ fee request.
She raises three challenges to this ruling:
(1) the magistrate judge didn’t comply with Rule 23(h)(3)’s requirement that he “find the facts and state [his] legal conclusions”;
(2) the attorneys’ fee award constitutes an unacceptably large portion of the overall award;
(3) the “clear sailing” provision is impermissible.
All three challenges fail.
“We  review an award of attorney’s fees for an abuse of discretion.”
In re Lumber Liquidators, 952 F.3d at 483. Thus, our “review is sharply circumscribed, and [the] fee award must not be overturned unless it is clearly wrong.”
Berry, 807 F.3d at 617 (cleaned up).
McAdams’s first argument is frivolous.
True, the magistrate judge had to “find the facts and state [his] legal conclusions.”
Fed R. Civ. P. 23(h)(3).
But he did so. He stated at the fairness hearing:
“Both sides are represented by skilled counsel[,] and I have concluded that the proposed attorneys’ fees and costs in this case are fair and reasonable given the contentious nature of this case and the amount of time spent in litigation.”
The judge elaborated:
I don’t accept and I reject Ms. McAdams’ suggestion that the settlement was somehow collusive with respect to plaintiffs’ attorney fees.
The parties negotiated the settlement at arm’s length in the midst of contentious litigation.
Ms. McAdams complained that because defendants do not object to the attorneys’ fees request, the Court is deprived of the necessary adversary process to determine a reasonable award, the whole clear sailing provision.
But Ms. McAdams herself only presents general arguments about the fee award. She doesn’t cite to any work that counsel performed that was unwarranted or unnecessary or duplicative or provide evidence that the rates charged by counsel are unreasonable.
An award of 1.3 million dollars for attorneys’ fees and expenses is reasonable in this case.
Class counsels’ fee award is based on the presumptively reasonable rate set forth in our court’s local rules.
Class counsel has supported their request of [sic] billing records and other competent evidence to support their request. Lawyers routinely complain that these rates are too low, especially the rates that pertain to more experienced attorneys.
Counsel seeks 86 percent of their reasonable fee under the lodestar method. This is a significant reduction.
The Court has reviewed class counsels’ motion for attorneys’ fees and finds that the fees claimed are reasonable.
Because the magistrate judge “referred to Plaintiffs attorneys’ substantially uncontradicted evidence and arguments that the requested fees are justified by their work on the case,” he complied with Rule 23(h)(3).
CLRB Hanson Indus., LLC v. Weiss & Assocs., PC, 465 F. App’x 617, 619 (9th Cir. 2012).
McAdams’s second argument, that the attorneys’ fees constitute an unacceptably large portion of the overall settlement, fares no better.
There are two main methods for calculating the reasonableness of attorneys’ fees—the lodestar method and the percentage- of-recovery method.
The lodestar method calculates reasonable fees “by multiplying the number of reasonable hours expended times a reasonable rate.”
McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013) (cleaned up).
“[T]here is a ‘strong presumption’ that the lodestar figure is reasonable.”
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 554 (2010).
The percentage-of-recovery method considers the portion of the total settlement fund that will go to attorneys’ fees. In re Lumber Liquidators, 952 F.3d at 481.
A district court may choose the method it deems appropriate based on its judgment and the facts of the case.
See Jones v. Dominion Res. Servs., Inc., 601 F. Supp. 2d 756, 760 (S.D. W. Va. 2009)
(“The Fourth Circuit has neither announced a preferred method for determining the reasonableness of attorneys’ fees in common fund class actions nor identified factors for district courts to apply when using the percentage method.”).
Here, the magistrate judge chose the lodestar method for assessing the fee request.
Using the presumptively reasonable rates set forth in the District of Maryland’s Local Rules, class counsel documented earned fees of $1,261,547.50. See D. Md. Local R. App. B(3).
They also proved $217,657.26 in unreimbursed expenses, for $1,479,204.76 in costs and fees.
But counsel requested only $1,300,000.
As the magistrate judge correctly recognized, we presume that figure is reasonable because it’s less than the lodestar figure.
McAdams doesn’t challenge counsel’s billing practices. Instead, she contends the fee award isn’t reasonable under the percentage-of-recovery method.
Counsel’s fees totaled $1,300,000, 43% of the common fund. We acknowledge that this percentage approaches the upper limit of a permissible recovery.
But it isn’t unheard of.
See In re SmithKline Beckman Corp. Sec. Litig., 751 F. Supp. 525, 533 (E.D. Pa. 1990)
(“Courts have allowed attorney compensation ranging from 19 to 45% of the settlement fund created.”).
Because the fee award isn’t so far afield of a standard recovery, we can’t, without more, find that the percentage-of-recovery calculation outweighs the strong presumption that the award is reasonable.
Nor does McAdams’s third argument, that the fee award is unreasonable due to the “clear sailing” provision, hold water.
“[Clear sailing] agreements are troubling because they demonstrate that class counsel negotiated some aspect of their fee arrangement with the defendant, when counsel’s ethical obligation is to the class.”
Newberg on Class Actions § 13:9 (5th ed.).
But they are “not per se unreasonable.”
Bezdek v. Vibram USA, Inc., 809 F.3d 78, 84 (1st Cir. 2015).
“Rather, courts are directed to give extra scrutiny to such agreements.”
Id.; accord In re Southwest Airlines Voucher Litig., 799 F.3d 701, 712–13 (7th Cir. 2015); In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 949 (9th Cir. 2011).
That’s precisely what the magistrate judge did here.
He rejected the “suggestion that the settlement was somehow collusive” and found that the parties negotiated the settlement “at arm’s length in the midst of contentious litigation” that spanned six years and included “a Motion to Dismiss, two Motions for Summary Judgment, a contested Motion for Class Certification, numerous discovery motions, [and] numerous depositions.”
J.A. 807, 817.
And he noted that class counsel “supported their request [with] billing records and other competent evidence.”
McAdams doesn’t challenge these findings.
Offering only generalized objections to clear sailing provisions, she doesn’t point to a single example in the over 150 pages of billing records indicating class counsel breached their ethical obligations.
We reject McAdams’s challenge to the fee award.
For the reasons given, the magistrate judge’s judgment is
Akerman’s Lawyer Travers Clark On A Saturday Foreclosure Filin’ Bonus
Morrison, a homeowner represented by the local legal aid society, loses his case when dismissed WITH PREJUDICE.
STIPULATION OF VOLUNTARY DISMISSAL PURSUANT TO FED. R. CIV. P. 41(a)(1)(A)(ii)
Pursuant to Fed. R. Civ. P. 41(a)(1)(A)(ii), Plaintiff James Morrison, Jr. stipulates that this action shall be dismissed with prejudice as to Defendants Carrington Mortgage Services LLC, Wilmington Savings Fund Society, FSB as Trustee of ACM Stanwich Alamosa 2020 Trust and Professional Foreclosure Corporation of Virginia and that each party to this Stipulation shall bear their own costs and attorney fees incurred in this action. Pursuant to Kokkonen v. Guardian LifeInsurance Co. of America, 511 U.S. 375 (1994), this Stipulation of Dismissal explicitly reserves in this Court jurisdiction to enforce the terms of the Parties’ Settlement Agreement.
As evidenced by the endorsements herein, Defendants consent to the dismissal provided for herein.
DATED this 13th day of March, 2022.
/s/ Jessica W. Thompson
Jessica W. Thompson (VSB # 75514)
CENTRAL VIRGINIA LEGAL AID SOCIETY, INC.
101 W. Broad Street, Suite 101
Richmond, VA 23220
Telephone: (804) 200-6037
Facsimile: (804) 864-8794 Email: firstname.lastname@example.org Counsel for Plaintiff
SEEN AND AGREED:
/s/ J. Travers Clark
James Travers Clark (VSB # 94706)
750 Ninth Street, N.W., Suite 750
Washington, D.C. 20001
Telephone: (202) 393-6222
Facsimile: (202) 393-5959 Email: email@example.com
Counsel for Carrington Mortgage Services LLC and Wilmington Savings Fund Society, FSB
as Trustee of ACM Stanwich Alamosa 2020 Trust
/s/ Malcolm B. Savage, III
Malcolm Savage, Esq. (VSB # 91050)
LOGS Legal Group, LLP
10021 Balls Ford Road, Suite 200
Manassas, VA 20109
Telephone: 703-449-20109 Email: firstname.lastname@example.org
Counsel for Professional Foreclosure Corporation of Virginia
Defense Counsel for James Morrison, Jr.
LIV would have transcribed this removal notice, but for it being modified to an image PDF version by the Virginia Federal Court.
Just Call Me Trav
The internal memo from @uscourts has gone viral
U.S. District Court
Eastern District of Virginia – (Richmond)
CIVIL DOCKET FOR CASE #: 3:22-cv-00013-DJN
|Morrison v. Carrington Mortgage Services LLC et al
Assigned to: District Judge David J. Novak
Cause: 28:1441 Notice of Removal -Violation of Real Estate Settlement Procedure Act
|Date Filed: 01/05/2022
Date Terminated: 03/16/2022
Jury Demand: None
Nature of Suit: 220 Real Property: Foreclosure
Jurisdiction: Federal Question
|James Morrison, Jr.||represented by||Jessica Wagner Thompson
Central Virginia Legal Aid Society
229 N Sycamore Street
Petersburg, VA 23803
ATTORNEY TO BE NOTICED
|Carrington Mortgage Services LLC||represented by||James Clark
750 Ninth Street, NW
Washington, DC 20001
ATTORNEY TO BE NOTICED
|Wilmington Savings Fund Society, FSB as Trustee of ACM Stanwich Alamosa 2020 Trust||represented by||James Clark
(See above for address)
ATTORNEY TO BE NOTICED
|Professional Foreclosure Corporation of Virginia||represented by||Malcolm Brooks Savage , III
Shapiro & Brown, LLP
501 Independence Parkway
Chesapeake, VA 23320
Fax: (703) 449-5850
ATTORNEY TO BE NOTICED
|Date Filed||#||Docket Text|
|01/06/2022||2||Civil Cover Sheet re 1 Notice of Removal, by Carrington Mortgage Services LLC. (Clark, James) (Entered: 01/06/2022)|
|01/18/2022||3||ANSWER to Complaint by Carrington Mortgage Services LLC, Wilmington Savings Fund Society, FSB as Trustee of ACM Stanwich Alamosa 2020 Trust.(Clark, James) (Entered: 01/18/2022)|
|01/24/2022||4||ORDER Setting Pretrial Conference – Initial Pretrial Conference set for 2/17/2022 at 02:00 PM in Richmond Telephonically before District Judge David J. Novak. Signed by Patrick F. Dillard with permission of District Judge David J. Novak on 1/24/2022. (cgar) (Entered: 01/24/2022)|
|03/09/2022||5||NOTICE of Appearance by Malcolm Brooks Savage, III on behalf of Professional Foreclosure Corporation of Virginia (Savage, Malcolm) (Entered: 03/09/2022)|
|03/13/2022||6||STIPULATION of Dismissal by James Morrison, Jr. (Thompson, Jessica) (Entered: 03/13/2022)|
|03/16/2022||7||ORDER pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii), the Court hereby DISMISSES WITH PREJUDICE all claims by Plaintiff against Defendants.
Each party shall bear their own costs and attorney fees incurred in this action.
The Court retains jurisdiction to enforce the terms of the Parties’ Settlement Agreement pursuant to Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375 (1994).
This case is now CLOSED.
Signed by District Judge David J. Novak on 3/16/22. (adun, )
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