WINSTON-SALEM, N.C.–A potential class action suit filed against Allegacy FCU related to its overdraft practices could be settled in the near future, but one analysis is suggesting the case indicates the “potential pitfalls” for plaintiffs in such cases and the court is questioning how much lawyers are benefitting vs. their client.
In the case, Terri Moose vs. Allegacy Federal Credit Union, Moose sued as a putative class representative for damages resulting from the alleged practices of Allegacy FCU in assessing overdraft fees for debit-card transactions (“APSN” or “Authorize Positive, Settle Negative” transactions), according to JDSupra.com.
As CUToday.info has reported numerous times, such APSN cases have been filed against credit unions across the country.
Grounds for Suit
JDSupra.com reported Moose’s complaint included individual, and class claims for breach of contract, unjust enrichment, and unfair or deceptive trade practices under N.C.G.S. § 75-1.1.
“The lawsuit was pending for nearly three years, and despite its duration, Moose and her legal team never took the necessary steps to certify the class,” JDSupra.com stated. “Without a certified class, and without a process for class notification, a settlement deal was reached. Both parties jointly moved for an order that would approve the dismissal of Moose’s individual claims with prejudice and the putative class claims without prejudice.
No ‘Collusion,’ Say Parties
“Typically, a so-called bilateral settlement of a putative class is allowed, but this is true only if it does not prejudice absent class members,” JDSupra.com added. “Even in pre-class-certification cases, an individual settlement can trigger notice to putative class and a fairness hearing if there is a complicating barrier such as a statute of limitations issue.”
JDSupra.com said both parties denied any collusion and contended that practical considerations drove the decision to settle.
“Moose’s counsel claimed that they initially had severely overestimated the damages that the putative class would recover if successful, partly because Allegacy stopped assessing overdraft fees for APSN transactions in May 2020,” the report added.
Red Flags
According to JDSupra.com, the court expressed “significant reservations regarding the proposed settlement,” stating that there were too many “red flags” to ignore.
“Potential issues included the uneven allocation of settlement proceeds between Moose and her counsel, the lack of a fairness hearing, and the possibility of prejudice against absent class members,” JDSupra.com said. “The substantial difference between the settlement payments to Moose and to her counsel may derail the entire case. To settle the case, Allegacy agreed to pay several hundred times more than the four overdraft fees of $150 each that were at issue in the case.
‘The Lion’s Share’
“Moose’s counsel is poised to receive the lion’s share of the recovery – leaving less than 5% of the total to Moose – raising concerns about whether the settlement serves the class’s best interests or, as the court calls it, a ‘sweetheart deal’,” JDSupra.com added.
Moving Forward
JDSupra.com said documents show the “court highlighted the need for more information before reaching a final decision.?
“To accomplish that, the court requires that the parties publicly disclose the settlement agreement, ensuring transparency in the process,” JDSupra.com said.
Hearing to be Held
“Additionally, the court requested supplemental briefing submissions that would provide insights into the size of the putative class, potential costs associated with class-wide settlement, and the extent of damages incurred by Moose and absent class members.”
Once that information is gathered, the court said it will hold an in-person hearing. JDSupra.com said that hearing could result in a reduction of fees for the plaintiff’s attorneys.
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