Opinion
MDL 1192; No. 98 CV 3065, No. 97 CV 9002
March 9, 2000
MEMORANDUM OPINION AND ORDER
Defendants General Electric Capital Corporation ("GECC") and Montgomery Ward Credit Corporation ("MWCC") filed a Motion to Enforce the Final Order and Stipulation entered by this court in the above captioned cases which were a part of In re General Electric Capital Corp. Bankruptcy Debtor Reaffirmation Agreements Litigation, MDL No. 1192 ("MDL 1192). Defendants request this court to permanently enjoin Julius and Tessia Stastny, individually and on behalf of other similarly situated plaintiffs ("The Stastny Plaintiffs") from prosecuting their putative class action against Exxon, Stastny v. Exxon, No. 99-386 (S.D. Tex.) in any state or federal court. The Stastny Plaintiffs responded to the pending motion as real parties in interest, arguing that the Final Order and Stipulation should not be enforced against them. For the following reasons, Defendant's Motion to Enforce the Final Order and Stipulation is GRANTED.
BACKGROUND
On January 22, 1999, after two years of discovery and negotiations, this court entered a Final Order and Stipulation in the above captioned cases which were part of MDL 1192. That Order certified a class for settlement purposes and approved the parties' Stipulation. The Order brought to an end the multidistrict consolidated litigation concerning bankruptcy debtor reaffirmation agreement practices engaged in by the Defendants.
The plaintiffs in MDL 1192 alleged that GECC, MWCC, and their subsidiaries (collectively "Defendants") sought and obtained reaffirmation agreements from bankruptcy debtors in violation of the Bankruptcy Code in the course of administering retail credit card programs for their clients and customers. The Multidistrict Litigation Panel entered an order which transferred several nationwide class action suits alleging identical factual and legal issues to this court for pretrial purposes. On August 24, 1998, this court entered a Revised Hearing Order that preliminarily approved the parties' Settlement Stipulation. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Notice Of The Pendency of Class Action, Class Action Determination, Proposed Settlement of Class Action, Right To Request Exclusion, And Right To Appear was mailed to members of the Settlement Class and published three times over two weeks in USA Today. On January 22, 1999, this court held a Settlement Hearing on the proposed settlement, at which time all interested parties were afforded an opportunity to be heard. Also on January 22, this court entered the Final Order, which certified the class for settlement purposes, approved the Stipulation, and dismissed the litigation with prejudice on the merits.
The Settlement Class, certified in this court's Final Order, is defined as follows:
All Debtors who between January 1, 1993, and June 30, 1997: (a) filed a petition for relief under the Bankruptcy code; (b) listed one or more of Defendants (including their subsidiaries) or any of their clients, customers or predecessors-in-interest (collectively, "Creditors") as a creditor, against whom one or more Creditors filed a claim, or who owed a debt or alleged debt to one or more Creditors; (c) after the filing of the bankruptcy petition, executed an agreement with one or more of the Creditors purporting to reaffirm such debt or alleged debt, or which agreement is otherwise subject to the provisions of 11 U.S.C. § 524 (c)(3); (d) which agreement either was not filed with the appropriate bankruptcy court in accordance with 11 U.S.C. § 542 (c)(3) before the order of discharge, or was filed with the bankruptcy court and was either (i) disapproved or rejected by the bankruptcy court or not approved by such court when necessary to the enforceability such agreement, or (ii) rescinded by the debtor; (e) the Account of the Debtor was owned by a Defendant at any time between April 15, 1997 and the date hereof; and (f) for Accounts purchased by a Defendant, it is a Defendant that obtained the reaffirmation agreement.
(Final Order ¶ 3). The capitalized words used in the order have the same meaning as those in the Stipulation. (Final Order ¶ 1). The Stipulation and Notice define the word "Debtor" as "any person who owes, owed, or whom any Defendant, including its subsidiaries, contends or claims to owe, any obligation in connection with the extension of open end credit under a plan to finance the purchase of goods and services, including credit insurance, where any Defendant or its subsidiaries and predecessors-in-interest was or is the creditor, holder, and/or servicer under such plan." (Stipulation at ¶ 1.1). "Released Persons," in turn, are defined as "Defendants and/or their clients (including, but not limited to [a non-exclusive list, which does not include Monogram or Exxon], customer or assignees, predecessors-in-interest, or any of their present or former . . . subsidiaries, parent companies, affiliated companies, divisions, successors, predecessors-in-interest, heirs and agents." (Final Order ¶ 10).
Pursuant to the Final Order, all members of the Settlement Class agreed to release as to the Defendants all claims, rights, and causes of action, state or federal, including but not limited to, claims arising under the U.S. Bankruptcy Code and state and federal laws regarding consumer or debtor fraud or unfair or deceptive trade practices, for all damages or injunctive relief in connection with the "soliciting or obtaining of a reaffirmation agreement from a member of the Settlement Class, the nonfiling (or untimely filing) of any such agreement with the appropriate bankruptcy court, the solicitation of past, present or future billing of or collecting under or any steps to enforce any reaffirmation agreement. . . ." (Final Order ¶ 10). The Order further barred and enjoined all Settlement Class Members from instituting, prosecuting, or continuing to prosecute any action, suit, proceeding, claim, or cause of action, legal or equitable, state or federal, which assert claims that are Settled Claims against any of the Released Persons." (Final Order ¶ 11).
The Final Order is Binding on all Settlement Class Members, excluding those who filed a timely request for exclusion. (Final Order ¶ 6). This court determined that the Notice provided for and given to the Settlement Class constituted the best notice practicable under the circumstances and was in full compliance with the notice requirements of due process and Federal Rule of Civil Procedure 23. (Final Order ¶ 8). This court "reserve[d] continuing and exclusive jurisdiction over the parties to the Stipulation, including the Defendants and all Settlement Class Members, to administer, supervise, construe, and enforce the Stipulation and this Final Order in accordance with their terms for the mutual benefit of the parties and the Settlement Class." (Final Order ¶ 16).
Monogram Credit Card Bank of Georgia ("Monogram") is a subsidiary of GECC, and thus was covered by the Final Order, though it was not specifically named in the Order or Stipulation. Exxon is a client and customer of GECC and Monogram. GECC, through Monogram, issued Exxon credit cards, extended credit with respect to those cards, billed customers, and collected balances owed by customers.
On October 27, 1999, Julius and Tessia Stastny, individually and on behalf of other similarly situated plaintiffs ("The Stastny Plaintiffs"), filed an amended complaint naming Exxon as a defendant in the United States District Court for the Southern District of Texas. That action "seeks classwide relief for defendant's practice of disregarding the provisions of the Bankruptcy Code relating to the solicitation and filing of reaffirmation agreements and the collection and attempted collection of discharged debts, 11 U.S.C. § § 362, 524." The reaffirmation agreement practices alleged by the Stastny Plaintiffs were undertaken by Monogram, a subsidiary of GECC, in the administration of the Exxon credit card program. The reaffirmation agreement practices alleged by the Stastny Plaintiffs are, by those plaintiffs' own admission, identical to the claims alleged in MDL 1192 and settled by this Court's Final Order and Stipulation.
Defendants GECC and MWCC filed a motion to enforce the Final Order and Stipulation entered by this court in MDL 1192. Defendants request this court to permanently enjoin the Stastny plaintiffs from prosecuting their putative class action, Stastny v. Exxon, No. 99-386 (S.D. Tex.), against Exxon, in any state or federal court.
ANALYSIS
The Stastny Plaintiffs do not dispute that their Texas complaint involves claims which were covered by this Court's Final Order and Stipulation in MDL 1192. Rather, the Stastny Plaintiffs claim that they are not included in the Settlement Class, as defined in this court's Final Order. The Stastny Plaintiffs further argue that, even if they are included in the Class, they cannot be bound by the Order because they did not receive constitutionally adequate notice of the Settlement, and were not properly represented by the class representatives. Lastly, the Stastny Plaintiffs argue that the relief sought by Defendants is overly broad in seeking an injunction against the entire Texas action. None of the Stastny Plaintiffs' arguments is availing. It is clear that, although the Stastny Plaintiffs may not have received personal notice of the class action, they were included in the Settlement Class and that they received constitutionally adequate notice and representation of their interests. Accordingly, they are bound by this court's Final Order and Stipulation and must be enjoined from prosecuting the action against Exxon in Texas.
I. The Stastnv Plaintiffs Are Within the Definition of the Settlement Class as Certified by this Court.
The Stastny Plaintiffs do not contest that they meet qualifications (a)-(d) in the definition of the Settlement Class, as defined in paragraph 3 of this court's Final Order and Stipulation. That is, the Stastny Plaintiffs admit that they filed a petition for Bankruptcy between January 1, 1993 and June 30, 1997, that they listed one of the Defendants (including their subsidiaries) as a creditor, executed an agreement with one of the Defendants purporting to reaffirm such debt, and that the agreement was not properly filed in the appropriate bankruptcy court. The Stastny Plaintiffs do, however, contest that their account was owned by a Defendant and that a Defendant obtained the reaffirmation agreement. In support, the Stastny Plaintiffs point to the absence of the "including their subsidiaries" language following the word "Defendants" in subparts (f) and (g) of paragraph 3. Because it was Monogram and Exxon, not GECC, who owned their account and obtained a reaffirmation agreement, the Stastny Plaintiffs argue that they did not have an account with a "Defendant" and did not enter into a reaffirmation agreement with a "Defendant." This argument is unavailing for several reasons.
First, the Stastny Plaintiffs ignore that GECC did own their account and that GECC obtained a reaffirmation agreement with them, through its subsidiary. Monogram. That subsections (e) and (f) did not expressly state that "Defendant" includes its subsidiaries does not change the fact that Defendant GECC did own the account and obtain the reaffirmation agreement, albeit through a subsidiary.
Second, the Stastny Plaintiffs ignore the second paragraph of the Definition of the Settlement Class, which appears both in the Notice of Class Action and the Stipulation. That paragraph defines "debtor" as "any person who owes, owed, or whom any Defendant, including its subsidiaries, contends or claims to owe, any obligation in connection with any extension of open credit under a plan to finance the purchase of goods and services, including credit insurance, where any Defendant or its subsidiaries and predecessors-in-interest was or is the creditor, holder, and/or servicer under such plan." (Stipulation at ¶ 1.1). Likewise, they ignore the heading of the mailed and published Class Action Notice, which is addressed to "ALL INDIVIDUALS WHO PREVIOUSLY FILED FOR PERSONAL BANKRUPTCY AND ENTERED INTO REAFFIRMATION AGREEMENTS WITH GENERAL ELECTRIC CAPITAL CORPORATION, MONTGOMERY WARD CREDIT CORPORATION OR THEIR CLIENTS, CUSTOMERS OR PREDECESSORS IN INTEREST." The Stastny Plaintiffs' reading of the Stipulation and Final Order reads the definition of the Settlement Class as expressly including debtors with debts owed to the creditors' subsidiaries and predecessors-in-interest in one paragraph, and expressly excluding them only two sentences earlier. A reading of the Notice and Final Order as a whole makes clear that debtors who had an account and entered into a reaffirmation agreement with a subsidiary, customer, or predecessor-in-interest of GECC are covered by this court's Final Order in MDL 1192.
Lastly, the Stastny Plaintiffs' reading would produce the absurd result of excluding the vast majority of people whom actually received benefits under the settlement agreement from the definition of "Settlement Class Members," and would mean that the injunctive provisions of the order, which also refer generally to "Defendants," do not bind subsidiaries of GECC. The majority of benefits paid to debtors under the agreement went to persons whose accounts were managed by Monogram (the same subsidiary that managed the Stastny Plaintiffs' account), not GECC. Additionally, three of the four class representatives of MDL 1192 entered into reaffirmation agreements with Monogram, not GECC. If the Stastny Plaintiffs' reading of the Final Order is correct, those class representatives are not even members of the Settlement Class. That is not the correct reading of the definition of the Settlement Class.
The Stastny Plaintiffs held an account with Monogram, a subsidiary of GECC, and Monogram obtained the reaffirmation agreement from them. Accordingly, they are within the definition of the Settlement Class, as defined in this court's Final Order and Stipulation. The Final Order is binding on all Settlement Class Members, excluding those who filed a timely request for exclusion. (Final Order ¶ 6). Thus, the Stastny Plaintiffs are bound by this court's Final Order and Stipulation in MDL 1192.
II. Plaintiffs Received Constitutionally Adequate Notice
The Stastny Plaintiffs next contend that, even if they are included in the definition of the Settlement Class, they are not bound by this court's Final Order in MDL 1192 because the Settlement Notice was not constitutionally adequate with respect to them or others similarly situated, who have claims against Exxon. In the Class Hearing Order, this court ordered that notice be mailed to Settlement Class Members, and that notice be published three times on three separate days in USA Today. In the Final Order, this court determined that the provisions of the Hearing Order with regard to notice had been complied with, and that the Notice provided for and given to the Settlement Class constituted the best notice practicable under the circumstances and was in full compliance with the notice requirements of due process and Federal Rule of Civil Procedure 23. (Final Order ¶ 8). The record amply supports that conclusion.
The Stastny Plaintiffs apparently base the argument that notice was constitutionally inadequate on the fact that they did not receive personal notice in the mail. Due process requires that class action notice be "reasonably calculated, under all the circumstances, to appraise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657 (1950). Rule 23(c)(2) and due process require the court to direct to class members "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed.R.Civ.Pro. 23(b)(3); Eisen v. Carlisle Jacquelin, 417 U.S. 156, 177, 94 S.Ct. 2140 (1974). However, the "dictates of due process do not require that every class member actually receives notice." In re VMS Partnership Securities Litigation, 156 F.R.D. 635, 638 (N.D. Ill. 1994). Due process and Rule 23 merely require good faith compliance with the presumptively valid notice procedures ordered by the court. Id.; Langford v. Devitt, 127 F.R.D. 41, 4 (S.D.N Y 1989).
Here, the Defendants did comply with the notice procedures ordered by this court on August 24, 1998. Defendants caused actual notice to be sent by first class mail to 115,311 persons identified as members of the Settlement Class. Defendants also caused notice to be published in USA Today on November 6, 1998, November 9, 1998, and November 12, 1998. The Stastny Plaintiffs are bound by the Final Order, even if they did not receive actual notice of their right to opt out or in, so long as the Defendants provided the best practicable notice. See VMS Partnership Securities Litigation, 156 F.R.D. at 638. Because Defendants complied with the notice procedures authorized by this court, whether plaintiffs actually received the Notice is irrelevant. See id.
The Stastny plaintiffs also argue that the Notice is constitutionally inadequate because, even if they had received the mailed and published Notice, they would not have understood that it applied to any claim that they had against Exxon. They argue that the Settlement Notice does not provide any information which would allow them or others similarly situated to determine that their claims against Exxon were being settled or released. Specifically, The Stastny Plaintiffs contend that the Notice did not mention Exxon or Monogram, the only parties with whom they had relevant dealings, and they "had no way of knowing that there was any relationship between Exxon and Monogram and the named Defendants, GECC and MWCC."
Rule 23 and due process require that class members be notified so they may request exclusion from the action and thereby preserve their opportunity to press their claims separately or that they may remain in the class and perhaps participate in the management of the action.Eisen, 47 U.S. at 76, 94 S.Ct. at 2152. The notice required by the Rule must fairly appraise the members of the class of the proposed compromise and of the options open to dissenting class members in connection with the proceedings. Air Lines Stewards Stewardesses Assoc. v. American Airlines, Inc., 455 F.2d 101, 108 (7th Cir. 1972).
The Notice mailed and published for the cases in MDL 1192 satisfied the requirements of due process and Rule 23. The mailed and published Notice were both specifically addressed to:
ALL INDIVIDUALS WHO PREVIOUSLY FILED FOR PERSONAL BANKRUPTCY AND ENTERED INTO REAFFIRMATION AGREEMENTS WITH GENERAL ELECTRIC CAPITAL CORPORATION, MONTGOMERY WARD CREDIT CORPORATION, OR THEIR CLIENTS, CUSTOMERS OR PREDECESSORS-IN-INTEREST.
Subsection (b) of the definition of the Settlement Class included those with claims against GECC (including its subsidiaries) or clients, customers, or predecessors-in-interest. Moreover, both the mailed Notice and the publication Notice expressly advised persons who were unsure of their status to call a toll-free telephone number to request more information about the settlement, including the actual settlement documents.
The Notice provided in MDL 1192 struck the proper balance between informing Class Members of their rights without being unduly detailed or lengthy. GECC has more than 8,000 clients and customers. Listing all of them would have been excessively long, confusing, and impractical. See In re Nissan Motor Corporation Antitrust Litigation, 552 F.2d 1088, 1104 (5th Cir. 1977) ("[A]n overly detailed notice would not only be unduly expensive, but would also confuse class members and impermissibly encumber their rights to benefit from the action.") (internal citations omitted). This Notice sufficiently conveyed the required information and afforded a reasonable opportunity for potential Class Members to determine whether they were included in the Settlement Class, thus satisfying the demands of due process. See Air Lines Stewards Stewardesses, 455 F.2d at 108. That the Notice was adequate to appraise persons with claims against Monogram and Exxon of their rights is clear from the high number of such persons who actually participated in the settlement, despite the fact that Monogram and Exxon were not explicitly named in the Notice.
III. The Class Representatives in the MDL 1192 Cases Adequately Represented the Interests of the Stastny Plaintiffs.
The Stastny Plaintiffs assert that their claims are not barred by this court's Final Order because their interests were not adequately represented by the named Plaintiffs in MDL 1192. Specifically, they argue that their interests were not properly protected because no class representatives asserted a claim against Exxon and Exxon did not contribute to the settlement.
Rule 23(a)(4) requires adequacy of representation (representatives that will fairly and adequately protect the interests of the class) as threshold requirement applicable to all class actions. To that end, "a class representative must be part of the class and possess the same interest and suffer the same injury as the class members." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625-26, 117 S.Ct. 2231, 2250-51 (1997) (quoting East Tex. Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 1896 (1977); Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216, 94 S.Ct. 2925, 2930 (1974)). The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent. Amchem, 521 U.S. at 625, 117 S.Ct. at 2250.
Here, the interests of the MDL 1192 named plaintiffs did not and do not conflict with those of the Stastny Plaintiffs. In fact, the named plaintiffs suffered the exact same injury and advanced the exact same interest as the Stastny Plaintiffs. Three of the four class representatives, in fact, had accounts that were owned and managed by Monogram and entered into reaffirmation agreements with Monogram. The Stastay Plaintiffs make much of the fact that none of the representatives were Exxon card holders, but the injury alleged in the Texas action, just as the injury of the MDL 1192 class representatives, came not from holding an Exxon credit card, but from entering into a reaffirmation agreement. That agreement was obtained by and signed with Monogram, not Exxon. Thus, the Stastny Plaintiffs injury is indistinguishable from that of the named plaintiffs. The named plaintiffs' interests are aligned with those of the Stastny Plaintiffs, as well: obtaining maximum financial benefit for all class members.
That Exxon did not contribute to the settlement is irrelevant for the same reason — Monogram obtained the reaffirmation agreement, not Exxon. How the Defendants choose to fund the settlement has no bearing on whether Exxon's cardholders's interests were adequately represented.
The Stastny Plaintiffs' interests were no doubt properly represented in this Settlement Agreement. Unlike in Amchem, their interests and injuries are perfectly aligned with those of the named plaintiffs. To accept the Stastny Plaintiffs' argument would require this court to find that a person from each of GECC's 8,000 clients and customers was required to have been a named plaintiff in order for the settlement to be fair and binding on the debtors of all those customers and clients. Such a result would defeat the purpose of class action suits.
IV. An Injunction on the Entire Texas Action Is Not Overly Broad.
The Stastny Plaintiff's last argue that an injunction on the entire Texas action on the basis of a settlement in this case is overly broad, in that it may enjoin parties who do not fall within the Settlement Class certified by this court. It is possible, the Stastny Plaintiffs argue, to construct a class definition in the Texas case that would not encompass claims that fall within the MDL 1192 Settlement Class. In so arguing, the Stastny Plaintiffs ignore the fact that their action, as it currently stands, does cover claims which were settled by this court's Final Order in MDL 1192, and that this court expressly reserved continuing exclusive jurisdiction "to administer, supervise, construe, and enforce the Stipulation and this Final Order in accordance with their terms for the mutual benefit of the parties and the Settlement Class." (Final Order ¶ 16). The Stastny Plaintiffs suggest that this court should defer to the U.S. District Court for the Southern District of Texas for any determination of whether any present or future class definitions overlap or include claims that were settled in the MDL 1192 cases. This court declines to follow that suggestion. This court, as the court that approved the MDL 1192 Settlement and entered the Final Judgment enforcing it, is best situated to decide its scope and settlement. See In re: "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425, 1431 (2nd Cir. 1993).
CONCLUSION
For the reasons stated, Defendants General Electric Capital Corporation ("GECC") and Montgomery Ward Credit Corporation ("MWCC") Motion to Enforce the Final Order and Stipulation entered by this court in In re General Electric Capital Corp. Bankruptcy Debtor Reaffirmation Agreements Litigation, MDL No. 1192 is GRANTED. In accordance with this Court's Final Order and Stipulation in MDL 1192 ¶¶ 6, 10, Julius and Tessia Stastny, individually and on behalf of other similarly situated plaintiffs ("The Stastny Plaintiffs"), are permanently enjoined from prosecuting their putative class action, Stastny v. Exxon, No. 99-386 (S.D. Tex.), against Exxon, in any state or federal court on behalf of themselves or any putative class members who are within the Settlement Class certified by this court's Final Order in this case.