chapter 12 cy pres remedy pl94ch12
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Chapter 12 Cy Pres Remedy
12.1 Memorandum In Support of Approval ofCy Pres Remedy
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
BEASLEY, et al.,Plaintiffs
[vs.]
WELLS FARGO BANK, N.A.,Defendants
KOVITZ, et al.,Plaintiffs
[vs.]CROCKER NATIONAL BANK, N.A., et.al.
DefendantsNos. 861555 and 868914(CASES CONSOLIDATED)PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OFMOTION FOR APPROVAL OF CYPRES REMEDY AND FOR AN ADDITIONALAWARD OF ATTORNEYS' FEES, COSTS AND EXPENSES
HEARING:Date: December 3, 1992Time: 2:00 p.m.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUNDII. DESCRIPTION OF THE PROJECT
A. The ConceptB. Project Goals and Services Provided
1. Identification of Consumer Problems2. Direct Service to Consumers3. Preventative Education4. Issue Screening5. Administrative Advocacy6. Legislative Advocacy7. Litigation
C. The Recipient Organizations and Proposed Activities1. Consumers Union2. Volunteer Legal Services Program (VLSP)3. Consumer Action4. San Francisco Neighborhood Legal Assistance
Foundation (SNFLAF)5. National Consumer Law Center
D. Project Oversight and CoordinationIII. BENEFIT TO THE PLAINTIFF CLASSES
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1These estimates were supplied by defendants and are set forth in the Declaration of SharonBender, Exhibit D to the Declaration of Patricia Sturdevant, filed herewith [not reprinted infra].
IV. REQUEST FOR ADDITIONAL ATTORNEYS' FEESV. CONCLUSION
TABLE OF AUTHORITIES
CASES:
Beasley v. Wells Fargo Bank. N.A. (1991) 235 Cal.App.3d 1383Folding Carton Anti-Trust Litigation, MDL 250 (N.D. Ill. July 25, 1991)Ocean Shipping Antitrust Litigation, MDL 395 (S.D.N.Y. July 29, 1991)People v. Parlanerced Co., (1988) 198 Cal.App.3d 683People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330, reh'g deniedState of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460
STATUTES:Civil Code Section 1801
I. INTRODUCTION AND BACKGROUND
These consolidated class action lawsuits challenged defendants' unlawful practice of
imposing excessive and punitive late and over limit fees on consumer credit card customers. On
February 14, 1989, after a trial on the merits, the jury in Beasley v. Wells Fargo Bank returned a
verdict of over $5.2 million in favor of the plaintiff class. Following the verdict in Beasley, the
parties settled the companion case of Kovitz v. Crocker National Bank for over $3.78 million in
damages for the plaintiff class, contingent upon the successful defense of the Beasley judgment
on appeal. The Beasley judgment was upheld by the Court of Appeal in a published decision on
November 12, 1991. See Beasley v. Wells Fargo Bank, N.A. (1991) 235 Cal.App.3d 1383. The
Supreme Court denied review on March 12, 1992. Not long thereafter, with this Court's
approval, the bank began the process of distributing the Beasley and Kovitz funds to the plaintiff
classes by way of direct refunds. As of September 8, 1992, approximately $4.4 million had been
distributed in refunds to members of the Beasley plaintiff class; approximately $1.6 million had
been distributed to members of the Kovitz plaintiff class.1
In 1989, as part of the post-trial briefing in Beasley, the parties addressed the issue of the
allocation of any residue remaining in the damages fund after distribution to class members.
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2See Plaintiffs' Opening and Reply memoranda of Points and Authorities in Support of TheirProposal for a Distribution of the Damages Verdict to Class Members, filed with the Court onJune 23, 1989, and June 29, 1989, respectively.
3See Wells Fargo Bank, N.A.'s Opening and Reply Memoranda of Points and Authorities ReDistribution Issues, filed with the Court on June 23, 1989, and June 30, 1989, respectively.
Plaintiffs proposed that any residue be used to create a cypres remedy, through which the funds
would be awarded to a non-profit consumer protection organization, recommended by plaintiffs'
counsel and approved by the Court, for the indirect benefit of the plaintiff class.2 Defendants
proposed that the entire damages fund be distributed by way of prospective credits to current
cardholders for future late and overlimit charges, or in the alternative, that any residue remaining
after distribution by direct refund be allocated to prospective credits.3 After a full hearing on the
matter, Judge Dossee entered his ruling on September 13, 1989.
That Order provides that any funds remaining after the damages award is distributed to
the plaintiff class by way of direct refund be apportioned as follows: fifty percent of the residue is
to be distributed to Wells Fargo's existing cardholders through prospective reduction in late and
overlimit fees, and fifty percent is to be distributed as a cypres remedy for the indirect benefit of
the class subject to the approval of the court. See Order Regarding Expansion of Class and
Distribution of Damages Award, September 13, 1989, pp. 4-5, attached as Exhibit A to the
Sturdevant Declaration. In the Settlement Agreement in Kovitz v. Crocker National Bank, the
parties agreed that distribution of the settlement fund in that case would be accomplished in the
same manner as ordered by Judge Dossee in the Beasley action, and that any residue in the fund
would be distributed in like manner (fifty percent by way of prospective credits and fifty percent
by way of a cy pres remedy). See Kovitz Judgment and Settlement Agreement, p. 12, attached as
Exhibit B to the Sturdevant Declaration, filed herewith. The Court in Beasley reserved
jurisdiction, pending all appeals and determination of the actual amount of the residue, to
determine the particular use of the cypres fund.
The distribution of the damages award in Beasley and of the settlement fund in Kovitz by
way of direct refund has now largely been accomplished. According to estimates provided by
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4As part of the settlement in Sousa v. Wells Fargo Bank, San Francisco Superior Court No.
919571, a class action lawsuit seeking to permanently enjoin Wells Fargo's practice of imposingexcessive late and overlimit fees on its credit card customers, Wells Fargo agreed to theprospective elimination of its overlimit fee for a period of at least four years, commencing inJune, 1991. As a result, the parties agreed that the percentage of the residues in both Beasley andKovitz that would have been used for prospective credits of overlimit fees to current Wells Fargocardholders would instead be reallocated to the cy pres portion of the residues. Accordingly,because approximately 19.99 percent of the damage award in Beasley was attributable tooverlimit charges, 19.99 percent of the Beasley residue allocated to prospective credits will bereallocated to the cy pres remedy. Similarly, because approximately 10.80 percent of thesettlement fund in Kovitz was .attributable to overlimit fees, 10.80 percent of the Kovitz residueallocated to prospective credits will be reallocated to the cy pres remedy. This agreement is setforth in the Stipulation and Order Regarding Distribution of the Residue, entered by the Court onOctober 22, 1992, a copy of which is attached as Exhibit C to the Sturdevant Declaration. A chartsetting forth estimated amounts remaining in the residue and available for the cy pres remedy isprovided as Exhibit A to this motion. The chart is based on estimates provided by defendants asset forth in the Declaration of Sharon Bender, filed with this Court on October 22, 1992 andattached as Exhibit D to the Sturdevant Declaration.
5A chart showing estimated amounts remaining in the residue is attached to this motion asExhibit A [not reprinted infra].
counsel for defendants, after all appropriate deductions have been made, there remains
approximately $1.8 million in the Beasley damages fund and $2.4 million in the Kovitz
settlement fund (exclusive of interest accruing on those sums since 1989). Fifty percent of this
total amount of $4.2 million (adjusted in accord with the parties' agreement following the
settlement in Sousa v. Wells Fargo Bank) will be distributed by Wells Fargo through prospective
credits to existing cardholders.4 The remaining fifty percent, amounting to approximately $3.3
million, including accrued interest, is available for the cypres remedy.5 Plaintiffs' counsel have
devoted substantial time and effort to considering, the best cy pres remedy for the benefit of the
plaintiff classes, drawing on their experience in overseeing a similar cy pres remedy over the past
eight years. They now submit for this Court's approval a comprehensive plan for implementation
of that remedy through the California. Credit and Finance Project II, which builds and expands
upon an existing, ongoing cy pres project.
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6The Vasquez action challenged Avco's unlawful practices inthe "flipping" of retail installment contracts into loans with higher interest rates and in thesale of credit insurance. See Sturdevant Declaration, filed herewith, at para. 8.
II. DESCRIPTION OF THE PROJECT
A. The Concept
Plaintiffs propose a comprehensive, long-term consumer education and advocacy project
modeled after and improving upon the highly successful cypres remedy ordered in Vasquez v.
Avco Financial Services, Los Angeles Superior Court No. NCC11933B. In 1984, plaintiffs'
counsel obtained a judgment and restitution order against Avco Financial Services in a statewide
private attorney general action alleging violations of consumer protection statutes.6 After all
appropriate refunds had been distributed to affected Avco customers, more than $1.5 million
remained in the restitution fund. Upon- motion of plaintiffs' counsel, the court approved
distribution of this money as a cypres remedy to the West Coast Regional Office of Consumers
union for the creation of a "California Credit and Finance Project" to benefit the plaintiffs and
other affected members of the general public. See Sturdevant Declaration, para. 8.
Over the past eight years, Consumers Union has used the Vasquez cypres funds in the
California Credit and Finance Project to support research, legislative and administrative
advocacy, litigation, and educational activities on behalf of low and moderate income California
consumers in the areas of banking, credit, insurance, and other finance issues. Through the
Project, Consumers Union has sponsored a number of legislative proposals on consumer finance
issues and has opposed anti-consumer legislation. For example, Consumers -Union sponsored
state legislation to increase disclosure to Consumers about adjustable rate mortgages, opposed
legislation to increase foreclosure fees, negotiated with the sponsors of legislation to revise the
articles of the Uniform Commercial Code governing checking accounts, and opposed
deregulation of retail credit interest rates. The latter activity alone resulted in $100 million in
benefits to California consumers through postponing for two years the elimination of the interest
rate ceiling in the Unruh Retail Installment Sales Act, Civil Code SS1801, et seq. Two other
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notable accomplishments of the Project include the successful sponsoring of legislation that
re-regulated credit insurance and successfully negotiating with California banks to offer a basic
checking account to low-income consumers.
The Project has also supported extensive public education efforts, including the issuance
of reports on a variety of consumer finance issues, and litigation challenging various unlawful
and unfair business practices affecting consumers. In litigation activities, Project staff
represented Consumers Union as an organizational plaintiff in Fallat, et al. v. Central Bank, San
Francisco Superior Court Case No. 865592, a class action and private attorney general action
challenging numerous unfair practices in the financing of automobile insurance premiums,
represented bank customers in a class action challenging charges imposed when customers
exercise their right to stop payment on checks, and filed amicus briefs in the California Supreme
Court in support of Proposition 103. In their research and publication efforts, Consumers Union
staff supported by the Project prepared a self-help manual for senior citizens facing problems
with medigap insurance, completed surveys regarding interest rates on unsecured personal loans,
conducted weekly radio shows, and negotiated with banks under the Community Reinvestment
Act to secure commitments for lending in low-income communities.
Just recently, the last of the funds from the original Vasquez award were expended by the
Project. Because the Project has been supplemented by several subsequent cy pres awards and by
awards of attorneys' fees to Project staff, however, the Credit and Finance Project is active and
ongoing. The Project currently provides funding for three full-time staff attorneys who work on
issues related to credit, finance and insurance. The Project is administered by Project Director
Judith Bell and guided by a 12-member advisory board composed of private attorneys, legal
services attorneys, academics, and governmental employees, all of whom are specialists in
consumer law. See Declaration of Judith Bell and attached exhibits, filed herewith.
Using the cy pres funds available in these cases, plaintiffs propose the creation of the
California Credit and Finance Project II. This Project will be a comprehensive, multi-faceted
consumer education and advocacy effort that expands and builds upon the proven track record of
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the first Credit and Finance Project by providing additional funding and by incorporating and
coordinating the resources and expertise of additional consumer advocacy and legal services
organizations.
One of the primary goals of this Project is to enhance consumer advocacy efforts
throughout California by providing direct services to low and moderate income persons and by
facilitating and encouraging communication and cooperation among organizations that serve
consumers at different levels and in different functions. To this end, plaintiffs' counsel propose
that the available cy pres II funds be divided among five consumer advocacy organizations:
Consumers Union, the Volunteer Legal Services Program of the Bar Association of San
Francisco (VLSP), San Francisco Neighborhood Legal Assistance Foundation (SNFLAF),
Consumer Action, and the National Consumer Law Center (NCLC). These organizations will use
the cy pres funds over a three-year period in a cooperative effort to provide a broad range of
direct services, education, and advocacy for California consumers on a variety of banking, credit
and finance issues. Each of the organizations has been consulted extensively in the development
of this proposal, and each has prepared its own outline of activities that will be performed using
the cy pres funds. See Proposals of each proposed recipient attached as Exhibits H - L to the
Sturdevant Declaration [not reprinted infra]. These activities will be monitored and coordinated
throughout the duration of the Project by plaintiffs, counsel and by the California Credit and
Finance Project Advisory Board composed of experienced consumer protection advocates.
B. Project Goals and Services Provided
The California Credit and Finance Project II has as its primary goal the protection of
consumers in the areas of credit, banking, and financial services by building and expanding upon
the first Credit and Finance Project. Although the first Credit and Finance Project has been
enormously successful, plaintiffs perceive two areas that could be improved. First, there is a need
for the provision of more direct services to individual consumers with credit and finance
problems. Second, there is a need to obtain greater input from consumers at the grass roots level
and to screen this information for common issues and problems. The Credit and Finance Project
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II is designed to redress deficiencies of the prior Project in these two areas and to accomplish its
overall goal of consumer protection in the areas of credit and finance. It would do so by creating
a structure to coordinate efforts among established consumer advocacy organizations and legal
services providers and by providing funds to these organizations to permit them to implement
projects and provide consumer services in the areas set forth below.
1.Identification of Consumer Problems. One of the primary needs perceived by
consumer advocates and legal services providers is a comprehensive system for identifying
common issues faced by consumers at the grass roots level and sharing that information. The
Project will create a network to identify problems relating to credit and finance faced by
consumers statewide. This will include creating a database of consumer complaints categorized
by topic and perpetrator and sharing this information among all recipients for use in advocacy
and education projects.
2.Direct Service to Consumers. Primarily through the resources of the VLSP and
SNFLAF, the Project will provide direct services to individual consumers in the relevant subject
areas. The available services will include increased complaint handling capacity, self-help
advice, education, and referral for further representation, where appropriate.
3. Preventative Education. Drawing primarily on the experience and expertise of
Consumers Union and Consumer Action, the Project will provide preventative education for
consumers in the areas of credit, banking and finance. This educational component will include
the use of the media, multi-lingual pamphlets and brochures on legal rights and self-help
remedies, outreach to community-based organizations, and training on legislative and
administrative.advocacy for consumer advocates and lay people.
4. Issue Screening. Through the Advisory Board and the consumer complaint database,
the Project will provide a mechanism for the screening of common and significant issues facing
consumers and create a forum for the different recipient organizations to develop cooperative
strategies for resolving those issues.
5.Administrative Advocacy. Where appropriate, the recipient organizations will engage
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Total: 95% (approx. $3.1 million)
The remaining five percent (approximately $165,000) will be placed in reserve in a
special client trust fund to compensate plaintiffs' counsel for attorneys' fees incurred in
monitoring the Project, provide honoraria for members of the Project's Advisory Board, and
provide funding for duplication of educational materials and other miscellaneous expenses of the
Project. Each of the recipient organizations has been consulted at length in the development of
this proposal and each has drafted its own proposal for use of the funds. See Sturdevant
Declaration, Exhibits H through L [not reprinted infra]. A summary of the proposed activities to
be undertaken by each organization is provided below.
1. Consumers Union. Consumers Union is a nationwide, non-profit, membership
organization best known for its publication of the well-known magazine. The West Coast
Regional Office of Consumers Union has engaged in education, legislative and
administrative advocacy, and litigation on behalf of consumers for over 17 years. Consumers
Union has extensive experience in the areas of consumer credit, banking and finance, and, for the
past eight years, has done extensive work in these areas through the initial California Credit and
Finance Project. See Declaration of Judith Bell, filed herewith. Consumers Union's share of the
cy pres funds awarded in these actions will be added to its existing Credit and Finance Project.
This Court will then assume jurisdiction over all funds in the new Credit and Finance Project II.
Drawing on its experience in the first Credit and Finance. Project, and its expertise in
legislative and administrative advocacy and litigation, Consumers Union will use its share of the
cypres funds to perform in the following activities: (1) legislative advocacy, including promoting
pro-consumer legislation and opposing legislation that would reduce the rights of consumers of
banking or credit services; (2) administrative advocacy, including the presentation of
administrative complaints on behalf of consumers, intervention in administrative proceedings,
and review of administrative regulations of agencies that govern state and federally-chartered
banks, savings and loan associations, credit unions, consumer finance lenders, and other financial
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services institutions; (3) litigation and amicus curiae representation when appropriate to enjoin an
unfair practice or to advance the law protecting consumers of financial services; (4) education for
consumers about the financial services marketplace and their rights and responsibilities; (5)
research to evaluate the effect of actual and proposed changes in the law and regulations affecting
consumers of financial services; and (6) negotiation with banks and savings and loan associations
to improve the array of products and financial services available to low and moderate income
consumers, in California, including negotiations pursued under the federal Community
Reinvestment Act. The activities of Consumers union will be supervised by Judith Bell, who has
served as the Project Director of the first Credit and Finance Project for the past 3 years. See
Consumers Union Proposal for Use of fly Pres Funds, Exhibit H to the Sturdevant Declaration.
2. Volunteer Legal Services Program (VLSP). The Volunteer Legal Services Program is a
project of the Bar Association of San Francisco. Using the resources of the Bar and volunteer
attorneys, VLSP provides a variety of free legal services to indigent and low-income clients,
including advice, screening, and referral. Although the VLSP has had only limited experience in
the areas of consumer credit and finance, it is uniquely positioned to fill the current void in the
provision of direct services to consumers on credit and finance issues. Because of the severe
cutbacks in funding for legal services in the 1980.'s, most legal services organizations have been
forced to curtail substantially, if not eliminate, their legal advice and representation in the areas
of consumer credit and finance. In order to address this void, plaintiffs propose that
approximately one-third of the cypres funds be awarded to VLSP. Using the funds provided
through the Credit and Finance Project, the VLSP proposes to add new services to its existing
structure and to educate its staff and volunteer attorneys to provide the following direct services
to consumers: (1) information and referral provided by VLSP staff specially-trained in consumer
protection issues; (2) a new monthly Consumer Advice Clinic staffed by a trained VLSP staff
attorney and expert volunteer attorneys through which consumers will be given a free, 20-minute
legal consultation, educational materials, and any appropriate referral information; (3) consumer
self-help packets, developed and distributed by expert volunteer attorneys to help consumers
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handle common problems on a pro se basis; (4) a bankruptcy clinic to provide free consultation
and information for those considering filing for bankruptcy; (5) a consumer advocacy referral
panel through which clients requiring direct representation will be referred to private attorneys
with experience and expertise in consumer protection law; (6) homeless advocacy services
through which volunteer and staff attorneys representing homeless individuals will be trained to
identify issues related to credit and finance and to provide the appropriate advice or referral; and
(7) provision of training and materials for volunteer attorneys serving on other VLSP panels to
help attorneys recognize consumer-related issues in the context of other litigation or service
provision. Information about consumer problems obtained by VLSP will be shared with the
other organizations and added to the database maintained by Consumer Action. The activities of
the VLSP in the Credit and Finance Project will be supervised by Director Tanya Nieman. See
VLSP Proposal, attached as Exhibit I to the Sturdevant Declaration. 3. Consumer Action.
Consumer Action is a statewide non-profit consumer education and advocacy organization. The
organization works with an extensive network of social service and community based
organizations (CBO's) and annually distributes over one million pieces of literature in eight
languages to California consumers. Consumer Action also performs research on consumer
issues, including an annual survey concerning the fees and charges assessed on bank credit card
accounts, works extensively with the media, and performs legislative and administrative
advocacy.
For its role in the Credit and Finance Project, Consumer Action has proposed activities in
three areas: identification of consumer problems and issue screening, direct services, and
legislative and administrative advocacy. In order to identify common consumer problems in the
credit, banking and finance areas and screen important issues, Consumer Action, will utilize its
network of more than 1000 CBO's to obtain information about problems faced by consumers in
the community. Consumer Action will also publish information pamphlets and flyers and use the
media to invite consumers to telephone or write in about their banking, credit, or finance
complaints. In order to use and to share this .information, to identify patterns and screen for
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7Plaintiffs' counsel expect to be able to persuade one of the 'Big Six' accounting andconsulting firms (either Price Waterhouse or Deloitte & Touche) to offer its services pro bono forthe design of this computer database for screening and tracking consumer complaints.
common issues, the information gathered from CBO's and consumer complaints will be entered
into a computer database categorized by consumer, type of complaint, offending institution,
community, etc.7 All recipient organizations will be encouraged to contribute information to the
database. The data about consumers and their complaints will be available to all participating
organizations to support education, legislative and administrative advocacy and litigation
activities.
Consumer Action will also provide direct services to consumers in the form of telephone
advice and referral, follow-up written information related to the consumer's complaint or
question, and multi-lingual publications containing information about how consumers can best
shop for and use credit and other financial services. As a way to disseminate information within
communities, Consumer Action proposes to develop and offer training sessions on credit and
finance issues for the staff of community-based organizations and lay members of the
community. The presentations will be made in Cambodian, Chinese, English or Spanish,
depending upon the needs of the community.
In the area of legislative and administrative advocacy, Consumer Action will use its
database of consumer complaints to identify state or local agencies that are failing to respond
properly to consumer complaints, in particular agencies that do not or cannot address the
complaints of limited-English speaking consumers. These agencies will be targeted for advocacy
activities. Working closely with Consumers Union, Consumer Action will monitor legislative
activity affecting consumers in the credit and finance area. This information will be provided to
an "advocacy network" of community-based organizations interested in participating in
legislative advocacy. The cy pres funds will also be used to distribute an advocacy alert
newsletter to CBO's and to provide education and technical assistance to CBO's interested in
joining the legislative process. The activities of Consumer Action will be supervised by Director
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Ken McEldowney. Consumer Action's Proposal for the Credit and Finance Project, attached as
Exhibit J to the Sturdevant Declaration.
4. San Francisco Neighborhood Legal Assistance Foundation (SNFLAF). Founded in
1966, SNFLAF is the largest provider of free legal services to the poor in San Francisco. In 1991,
SFNLAF served over 12,000 clients in 16,000 different cases. Because of limited resources,
SNFLAF focuses on three priority areas addressing the clients' most immediate and basic needs
housing, public benefits, and ,domestic violence. Although a lack of adequate resources prevents
SNFLAF from being able to focus on consumer issues, the staff often become aware of consumer
problems as they address their clients' needs in the priority areas. An award of funds from the
Credit and Finance Project II will enable SNFLAF to develop a "Consumer Education Project"
through which SNFLAF will provide consumer education and advice on how clients may achieve
financial independence and stability and protect the receipt of government benefits. The purpose.
of the Consumer Education Project will be to help clients avoid legal problems before they arise
and to help clients deal effectively with their financial affairs so they avoid unnecessary fees,
charges, or interest.
SNFLAF will target four client groups in its Consumer Education Project: battered
women, immigrant families, single- parent families, and the disabled. For battered women,
SNFLAF Will develop materials and provide advice on how women can establish financial
independence, including advice on how to obtain credit or open a checking account in their own
names and how to limit potential liability for an abusive partner's debts. For immigrant families
who often lack rudimentary knowledge of financial institutions and their practices, SNFLAF will
provide materials and advice on banking and credit services and the advantages of using them,
and on the connection between financial institutions and government entities such as the Internal
Revenue Service and the Immigration and Naturalization Service. These services will be
provided in languages other than English according to the needs of the client communities.
For single-parent families receiving public benefits (primarily AFDC), SNFLAF will
provide information and advice on how they can maintain their financial eligibility for assistance,
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how they can utilize banking services with their limited income, and what they can do when they
are discriminated against by financial institutions because of the source of their income. For the
elderly and disabled, SNFLAF will provide information and advice on money management and
ways to take advantage of any benefits for the elderly offered by financial institutions. In
addition to the services listed above, SNFLAF will also expand its voice mail system to create a
self-help menu for consumer problems. The service will be multi-lingual and available 24 hours
a day. Information about common consumer complaints and problems obtained by SNFLAF
through its clients will be shared with other recipient organizations and, to the extent possible,
added to the database maintained by Consumer Action. The activities of SNFLAF in its
Consumer Education Project will be supervised by SNFLAF Director Ramon Arias. See
SNFLAF Proposal, attached as Exhibit K to the Sturdevant Declaration.
5.National Consumer Law Center. The National Consumer Law Center is a national
advocacy organization whose mission is to seek justice for low-income Americans struggling
with consumer and energy problems. The Center was founded in 1969 as a support center for
federal legal services organizations. It has since become an independent, non-profit corporation
that continues to provide support to legal services offices, but also performs extensive research
and provides training and advocacy at many levels.
The NCLC will use its grant ofcy pres funds to sponsor a conference and training session
in Northern California in 1993 for private attorneys and legal services advocates on consumer
protection issues. The training will provide seminars and educational materials to attorneys and
other advocates on a variety of consumer issues. The conference will also provide a forum for
attorneys and advocates practicing in the consumer area to share information and to build a
network for future cooperation. It is anticipated that attorneys and advocates from the other
recipient organizations will attend the conference.
As funds allow, the NCLC will also use the cy pres funds to assist in the development of
a national network of attorneys experienced in the area of consumer rights. In addition, the
NCLC will make itself available under the auspices of the Credit and Finance Project II to
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8A list of current Advisory Board members is attached as Exhibit B to the Declaration ofJudith Bell.
attorneys and groups in California for advice, consultation and analysis on consumer rights
issues. See NCLC Proposal, attached as Exhibit L to the Sturdevant Declaration.
D. Project Oversight and Coordination
The California Credit and Finance Project II will be subject to the ultimate oversight and
authority of this Court throughout its duration. In operation, the Project will be monitored by
plaintiffs' counsel and guided by a Project Advisory Board composed of academics, consumer
advocates, private attorneys and other experts in consumer protection law.8 Plaintiffs' counsel
anticipate that the Advisory Board will be composed of those members of the current California
credit and Finance Project Advisory Board who wish to remain, as well as one member
recommended by,each of the recipient organizations (not including the NCLC). The Board will
convene on a quarterly basis, or more often as needed, and will be responsible for considering
and reviewing progress reports of each of the recipient organizations, providing consultation on
legal issues and recurring consumer problems identified by the Project, and providing advice on
how the organizations should proceed in their activities. The Board will be specifically charged
with ensuring that the recipient organizations are communicating and coordinating with each
other in their efforts and meeting the goals of the Project. If the Board feels the coordination is
insufficient, recommendations will be made to the recipient organizations, to plaintiffs' counsel,
or to the Court, as appropriate. The Board will also be responsible for ensuring that funds are
spent by the recipient organizations for purposes consistent with the organizations' proposals and
with the goals of the Credit and Finance Project.
The cy pres funds to be disbursed through the Credit and Finance Project (in the
percentages listed above) will be distributed to the recipient organizations in a lump sum on a
one-time basis. Each recipient organization will be responsible for overseeing its investment and
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expenditure of funds over a three-year period and for ensuring that the funds are spent according
to the goals and activities outlined in the submitted proposals. Before the funds are distributed,
plaintiffs' counsel will prepare a Memorandum of Understanding to be executed by each
organization and approved by the Court, memorializing the organization's agreement to utilize all
funds for the stated purposes, to prepare periodic reports, to participate in Project and Advisory
Board meetings, and to work in a cooperative effort with the other recipient organizations. In
order to relieve defendants of the obligation for continuing interest pending execution of the
Memoranda of Understanding and distribution of all funds, once the Court has approved this
Project, the cy pres funds will immediately be transferred to a new account set up by plaintiffs'
counsel for the Credit and Finance Project II. Ninety-five percent of the funds will be distributed
to the recipient organizations upon execution and judicial approval of the Memoranda of
Understanding; the remaining five percent will remain in the account to compensate plaintiffs'
counsel and Advisory Board members for attorneys' fees, honoraria and costs, and to pay for
duplication of educational materials and other miscellaneous expenses of the Project.
Each of the organizations will prepare an annual written report detailing activities
performed under the Project, accounting for expenditure of Project funds, and planning for future
activities. Plaintiffs' counsel will review the organizations' annual reports and prepare an
additional report for the Court summarizing the Project's activities and evaluating the overall
coordination and effectiveness of activities performed by the recipient organizations under the
auspices of the Project. These reports will be submitted to the Court on an annual basis for each
of the three years, commencing in December of 1993.
III. BENEFIT TO THE PLAINTIFF CLASSES
The purpose of the equitable cypres remedy is to benefit members of a class indirectly
when provision of a direct benefit is impossible. when the proceeds of a damage award,
settlement fund, or penalty cannot be returned directly to individual class members, it is
appropriate for the court to distribute the funds to interested third parties who will advance and
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9Similar programs have been approved in other courts. For example, settlements reached intwo recent federal class action antitrust cases will provide over $3 million for a fellowshipprogram overseen by the National Association for Public Interest Law (NAPIL). The cases areFoldina Carton Anti-Trust Litigation, MDL 250 (N.D. Ill. July 25, 1991) and Ocean ShippingAntitrust Litigation, MDL 395 (S.D.N.Y. July 29, 1991).
promote the interests of the class. See e.g. People v. Parkmerced Co. (1988) 198 Cal.App.3d
683, 693; State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460; People v.
Thomas-Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330, 342, reh'g denied. The
proposed California Credit and Finance Project II will provide a wide range of significant and
long term benefits to the Beasley and Kovitz plaintiff classes, as well as many other consumers
throughout California. The organizations which will receive cypres funds through the Credit and
Finance Project will address issues related to credit card charges and fees, as well as many other
issues affecting consumers' access to and use of credit, banking and financial services. The
recipient organizations will provide services and benefits to consumers of credit and financial
services through a variety of activities, including direct individual service and assistance,
education, research, data collection, legislative and administrative advocacy, and when
appropriate, litigation to enjoin unfair or unlawful practices and to obtain appropriate monetary
relief. In addition, the Project will create a structure to which future cy pres funds in other cases
could be added, thus providing on-going support for consumer protection activities throughout
California.9
IV. REQUEST FOR ADDITIONAL ATTORNEYS' FEES
On August 11, 1992, this Court issued its Order Awarding Attorneys' Fees, Costs, and
Expenses on Appeal to plaintiffs, counsel. That Order awarded fees and costs incurred through
march 31, 1992 for work performed on the appeals in Beasley. In October, the parties reached
agreement as to the additional, and final, fees to be paid by defendants for work performed by
plaintiffs' counsel from April 1, 1992 through August 31, 1992 in preparing and prosecuting the
motion for attorneys' fees. See Sturdevant Declaration, para. 19. Thus, plaintiffs' counsel have
now been compensated for all fee-related work; all additional fees for overseeing the distribution
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of damages will be paid out of the damages and settlement funds.
At this point, plaintiffs' fees, costs and expenses that remain uncompensated are those
incurred from April 1, 1992 to the present for all work related to distribution of the damages and
settlement funds. These fees will be paid out of the Beasley and Kovitz funds (fifty percent from
each fund) before the cy pres residue is distributed. Through October 1, 1992, plaintiffs' fees at
current rates, plus costs and expenses, for distribution of the funds total $52,397.51. See
Sturdevant Declaration, paras. 17-18. A chart summarizing the fees, and contemporaneous
records of all work performed, are attached as Exhibit M to the Sturdevant Declaration, filed
herewith. Plaintiffs' counsel request that this Court approve plaintiffs' fees as reasonable and
order payment to plaintiffs' counsel in the amount of $26,198.76 from the Beasley fund and
$26,198.75 from the Kovitz fund. Any fees incurred after October 31, 1992 will be deemed
related to monitoring the implementation: of the cy pres remedy. When appropriate, plaintiffs'
counsel will request from this Court further compensation from the reserved portion of the fly
pres fund.
V. CONCLUSION
The California Credit and Finance Project II is an integrated, exciting and creative
proposal to build on a prior successful project and to enhance consumer protection efforts on
many levels throughout the state. The cypres funds will allow the recipient organizations to
continue important on-going consumer protection efforts in a time of shrinking budgets, and to
expand their efforts into areas currently under-served, including the provision of direct services
to low-income consumers. In addition, the Project will create a formal structure to facilitate the
communication and coordination among legal services and consumer advocacy organizations that
has often been lacking in the past. Through the sharing of information and coordination of
efforts, the Project will improve consumer protection efforts for all consumers in California and
provide a real and concrete benefit to members of the plaintiff classes. Accordingly, for all the
foregoing reasons, plaintiffs, counsel request that this Court approve distribution of the Beasley
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and Kovitz &y pres funds to the California credit and Finance Project ii.
DATED: November 13, 1992
Respectfully submitted,
Attorneys for Plaintiffs
12.2 Order Granting Cy Pres Remedy
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
BEASLEY, et al.,
Plaintiffs
[vs.]
WELLS FARGO BANK, N.A.,
Defendants
KOVITZ, et al.,
Plaintiffs
[vs.]
CROCKER NATIONAL BANK, N.A., et.al.
Defendants
Nos. 861555 and 868914
(CASES CONSOLIDATED)
ORDER GRANTING PLAINTIFFS' MOTION FOR APPROVAL OF CYPRES REMEDY
The matter came on for hearing before the Honorable Stuart R. Pollak, in Department 8 of
this Court, at 9:00 a.m., on December 11, 1992. Plaintiffs were represented by Patricia
Sturdevant and James C. Sturdevant of Sturdevant & Sturdevant, a professional corporation;
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defendant was represented by Brian P. Brosnahan and Robert Retana of Heller, Ehrman, White &
McAuliffe. The Court, having considered the moving, opposing and reply papers filed by the
parties, HEREBY ORDERS as follows:
Plaintiffs' motion for approval of a cypres remedy is GRANTED.
The Court is provisionally approving distribution of the remaining residue of
$3,307,621.10, plus interest which accrues on that sum while on deposit with the Special Trust
Fund Account of the Superior Court Clerk's Office, as follows:
1. San Francisco Neighborhood Legal Assistance Foundation (SFNLAF) is to receive
$330,000.00, plus accrued interest on that sum;
2. The Volunteer Legal Services Program (VLSP) of the Bar Association of San
Francisco (BASF) is to receive $703,060.01 plus accrued interest on that sum;
3. Consumers Union is to receive $703,060.01 plus accrued interest on that sum;
4. Consumer Action is to receive $703,060.01 plus accrued interest on that sum;
5. Consumer Credit Counseling Services (CCCS) is to receive a sum between
$500,000.00 and $703,060.01, plus accrued interest on the sum awarded.
6. IF CCCS is awarded less than $703,060.01, then VLSP, Consumers Union and
Consumer Action will each be awarded an additional amount equal to one-third of the difference
between the amount actually awarded to CCCS and $703.060.01.
The parties and the recipient organizations named above are to exchange proposed
budgets for the use of the sums provisionally awarded by January 15, 1993. If they deem it
appropriate, the parties and representatives of recipient organizations may meet and confer after
January 15, 1993 to attempt to resolve any disagreements concerning the proposed budgets of
any recipient organization. The parties and the recipient organizations are required to exchange
responses and file and serve the final budgets with the Court by January 29, 1993. A further
hearing date is calendared for February 5, 1993 at 2:00 p.m. in Department 8 for consideration of
these budgets and for further order of the Court.
IT IS HEREBY FURTHER ORDERED that the sum of 5%, or $165,381.05 of the
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remaining residue of $3,307,621.10, plus interest which accrues on that sum, is to be retained and
reserved for further work, including oversight of the implementation of the cypres remedy, to be
performed by plaintiffs' class counsel, Sturdevant & Sturdevant, in connection with the
distribution of the damages and settlement funds in October and November, 1992 and the
determination and effectuation of the cypres remedy. The Court reserves jurisdiction to
distribute any portion of the reserved 5% of the remaining residue, plus accrued interest on that
sum, which
is not awarded to plaintiffs' counsel, Sturdevant & Sturdevant, if any.
SO ORDERED.
DATED:
Judge of the Superior Court
APPROVED AS TO FORM:
Attorneys for Defendant
DATED:
12.3 Further Order Granting Approval ofCy Pres Remedy
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
BEASLEY, et al.,
Plaintiffs
[vs.]
WELLS FARGO BANK, N.A.,
Defendants
KOVITZ, et al.,
Plaintiffs
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[vs.]
CROCKER NATIONAL BANK, N.A., et.al.
Defendants
Nos. 861555 and 868914
(CASES CONSOLIDATED)
[PROPOSED]
FURTHER ORDER GRANTING APPROVAL OF CYPRES REMEDY AND DISTRIBUTION
OF CYPRES FUNDS
Department 8
THE HONORABLE STUART R. POLLAK
[end caption]
This matter is before the Court for further consideration of plaintiff's motion for approval of
a cypres remedy for use of the approximately $3.3 million residue that remains in these consolidated
class actions after direct distribution of refunds to former customers and credits to current
cardholders.
The matter initially came before the Court for hearing on December 11, 1992. Following that
hearing, the Court issued an Order granting approval of the cypres remedy and making preliminary
allocations of funds among five proposed recipient organizations. The Court scheduled the matter
for further hearing; ordered the recipient organizations to submit budgets to the Court further
specifying the intended use of cypres funds; and suggested that the parties and recipient
organizations meet to discuss issues regarding the proposed uses and allocation of funds. The
budgets and other submissions were made to the Court as ordered on January 29, 1993. The parties
then appeared before the Court for further hearing on February 5, 1993, at 2:00 p.m. in Department
8. Patricia Sturdevant and Kim Card appeared on behalf of plaintiffs and the plaintiff classes; Robert
Retana and Brian Brosnahan appeared on behalf of defendants Wells Fargo Bank and Crocker
National Bank. In addition, representatives from each of the recipient organizations attended and
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participated. After full consideration of the parties' written submissions, oral argument, and the
proposals and budgets submitted by each of the recipient organizations, the Court hereby approves
the cypres remedy described herein and orders distribution of the cypres funds as set forth below.
I. BACKGROUND
These consolidated class action lawsuits challenged defendants' unlawful practice of
imposing excessive late and overlimit fees on consumer credit card customers. On February 14,
1989, after a trial on the merits, the jury inBeasley v. Wells Fargo Bankreturned a verdict of over
$5.2 million in favor of the plaintiff class. Following the verdict inBeasley, the parties settled the
companion case ofKovitz v. Crocker National Bankfor more than $3.78 million in damages for the
plaintiff class in that case, contingent upon the successful defense of theBeasley judgment on appeal.
TheBeasley judgment was upheld by the Court of Appeal in a published decision on November 12,
1991. SeeBeasley v. Wells Fargo Bank, N.A. (1991) 235 Cal.App.3d 1383, rev.denied. The
Supreme Court denied review on March 12, 1992. Not long thereafter, with this Court's approval,
the bank began the process of distributing theBeasley damage award and Kovitz settlement fund to
the plaintiff classes by way of direct refunds for late and overlimit charges paid by class members.
Over $4.6 million was distributed to class members through the direct refund process.
Because of the anticipated and inherent difficulty of identifying and locating all class
members, the parties addressed the issue of allocation of any undistributed residual funds in the
Beasley post-trial briefing. On September 13, 1989, the trial judge inBeasley entered an Order
Regarding Expansion of Class and Distribution of Damages Award, which provided that any funds
remaining after the damages award was distributed to the plaintiff class by way of direct refund were
to be apportioned as follows: fifty percent of the residue was to be distributed to Wells Fargo's
existing cardholders through prospective reduction in late and overlimit fees, and fifty percent was
to be distributed as a cypres remedy for the indirect benefit of the class subject to the approval of
the court. In the Settlement Agreement in Kovitz v. Crocker National Bank, the parties agreed that
distribution of the settlement fund and any residue would be accomplished in the same manner as
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10The allocation was modified slightly by the parties' stipulation to take into account thesettlement in Sousa v. Wells Fargo Bank, San Francisco Superior Court No. 919571, whichresulted in the prospective elimination of Wells Fargo's overlimit fee for a period of at least fouryears, commencing in June, 1991. The parties agreed that the percentage of the residue in bothBeasley and Kovitz that would have been used for prospective credits of overlimit fees to currentWells Fargo cardholders would instead be reallocated to the cy pres portion of the residues. SeeStipulation and Order Regarding Distribution of the Residue, filed October 22, 1992.
ordered in theBeasley action.
Following distribution of the damages and settlement funds by direct refunds and credits, the
parties divided the residue that remained from each of the actions as ordered.10 Thereafter
approximately $2.5 (including interest) was distributed through prospective credits, and the
remaining $3.3 million (including interest) was deposited with the Court for the cypres remedy.
II.DESCRIPTION OF THE CY PRES REMEDY
Plaintiffs have proposed a comprehensive, three-year consumer education and advocacy
project modeled after the cypres remedy ordered in Vasquez v. Avco Financial Services, Los
Angeles Superior Court No. NCC11933B. In that unlawful business practices case, approximately
$1.5 million was distributed to Consumers Union for the creation of the Consumer Credit and
Finance Project, a long-term education, advocacy and litigation project that addressed a variety of
credit and finance issues affecting low and middle income consumers in California. Plaintiffs have
proposed a similar project for the cypres funds available from these class actions through which
funds will be distributed to Consumers Union, as well as to other consumer education, advocacy, and
legal services organizations for the provision of services to California consumers on credit and
finance issues. One of the primary goals of the cypres remedy as proposed by plaintiffs, and as
adopted by the Court, is to provide indirect benefits to class members and to enhance consumer
advocacy efforts for all consumers throughout California by providing direct services on credit and
finance issues to low and moderate income consumers, and by facilitating and encouraging
communication and cooperation among organizations that serve consumers at different levels and
in different functions.
The four recipient organizations which plaintiffs recommended are Consumers Union, the
Volunteer Legal Services Program of the Bar Association of San Francisco (VLSP), San Francisco
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Neighborhood Legal Assistance Foundation (SNFLAF), and Consumer Action. Each organization
has submitted a proposal and a budget for use of their share of the funds. Specifically, Consumers
Union proposes to engage in legislative and administrative advocacy, research and policy
development, education, and litigation on consumer credit and finance issues. The VLSP will use
its funds to educate its staff and volunteer attorneys on consumer issues, create a consumer advice
clinic, develop self-help consumer packets, fund a bankruptcy clinic, and provide free legal advice
and referral on credit and finance issues for low-income consumers needing legal assistance.
SNFLAF will use its funds to develop a consumer education project for low-income consumers in
four target categories -- battered women, immigrant families, single-parent families and the disabled.
Consumer Action has proposed use of the cypres funds for statewide identification of common
consumer problems and issues, provision of direct education and advice services to consumers in
several different languages, and legislative and administrative advocacy at the state and local level
on consumer issues. The Court has reviewed the proposals and budgets and approves each of these
organizations as a recipient ofcypres funds for use in the manner set forth in the organizations'
respective proposals.
Defendants proposed as an additional recipient ofcypres funds Consumer Credit Counseling
Services ("CCCS"), a non-profit organization that provides debt counseling services and arranges
managed repayment plans for consumers. Plaintiffs expressed concerns about CCCS as a recipient
ofcypres funds generated in this particular action because CCCS counselors are not trained or
qualified to evaluate the legality or validity of a consumer's debt before arranging a repayment
schedule. Plaintiffs also expressed concern that some local offices of the CCCS organization
allegedly prohibit counselors from discussing bankruptcy with consumers. The Court has taken into
account these concerns, and the response of CCCS, and concludes that CCCS shall be an additional
recipient ofcypres funds, subject to the conditions agreed to by the parties and by CCCS in the
hearings held on this matter. These conditions, which all apply only to the CCCS offices that receive
cypres funds, and only for as long as CCCS receives cypres funds, are as follows:
1. CCCS agrees to make available and accessible in its offices a handout produced by the
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National Consumer Law Center that describes the bankruptcy option and process. It is contemplated
that CCCS will be provided a reasonable supply of such handouts, free of charge, and that the cost
of reproducing additional copies may be borne by CCCS. This handout, which may be modified or
supplemented as CCCS and plaintiffs' counsel deem appropriate, will be distributed to any consumer
that does not appear to have sufficient income or resources to repay outstanding debts. CCCS agrees
that its counselors will advise those consumers about bankruptcy as an alternative to debt repayment,
without representing to the consumer that CCCS has an expertise in bankruptcy or bankruptcy law.
Information provided about bankruptcy must be balanced, including both the advantages and
disadvantages.
2. CCCS agrees to refer consumers to other recipient organizations funded by this Order, or
to other appropriate agencies, district attorneys or legal services offices, whenever the consumer
expresses an opinion or complaint that he or she has been subjected to collection harassment or other
unlawful activity, or whenever CCCS or the consumer suspects that a debt is invalid or illegal.
CCCS agrees to provide clients information about Consumer Action, to make available complaint
forms provided by Consumer Action, and to encourage clients to send copies of their complaint
forms to Consumer Action. CCCS shall not be required to represent consumers in direct challenges
to the practices of creditors, nor be required to assume control of client problems or complaints that
are outside the scope of services provided by CCCS.
3. CCCS agrees to advise consumers that late and overlimit fees may sometimes be unlawful.
CCCS also agrees that it will continue to routinely ask creditors to waive such fees for all consumers
entering into a debt management program.
4. For each office that will receive cypres funds ("Participating CCCS Office"), CCCS
agrees that no more than 40 percent of the members of the Executive Committee of the Board of
Directors of any Participating CCCS office may be representatives of the credit industry. CCCS
shall not be required to change its current definition of those who are considered "representatives of
the credit industry."
The Court finds that distribution of the cypres funds to the five consumer organizations
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listed above will indirectly benefit the plaintiff classes throughout California. It is the hope and the
intent of the parties and the Court that this cypres remedy will encourage cooperation, collaboration,
and communication among the recipient organizations as they address consumer credit and finance
issues affecting consumers throughout the state.
III. ADMINISTRATION OF THE CY PRES REMEDY
The cypres remedy shall be subject to the ultimate oversight and authority of this Court
throughout its duration, and the Court retains jurisdiction for that purpose. The administration of
the cypres project on an on-going basis, including the facilitation of cooperation among recipient
organizations, shall be performed by plaintiffs' counsel. Prior to receiving its cypres funds, each
organization shall be required to execute a Memorandum of Understanding ("MOU"), which will
be filed with the Court, and which shall set forth the organization's proposed use of the funds as
approved by the Court, the organization's commitment to the goals of the cypres remedy, and the
organization's agreement to abide by certain conditions for the receipt of funds. These conditions
shall include: (1) the submission of two semi-annual reports to plaintiffs' counsel, each of which
shall include a description the organization's plans and proposed use of funds for the following six
months and a description of projects and fund expenditures that have been undertaken in the
preceding six-month period, (2) the submission of an annual report to the Court which shall include
a status report, financial report of expenditures, and application for funding and budget for the
following year; (3) an agreement to work cooperatively and to share information with the other
recipient organizations; and (4) a commitment to participate in meetings of the cypres project which
shall be held on a quarterly basis or as plaintiffs' counsel deem appropriate. It shall be sufficient for
CCCS to be represented at such meetings by a representative of the San Francisco office of CCCS
who will act on behalf of other recipient offices, although representatives from other participating
CCCS offices may also attend such meetings in place of or together with the San Francisco
representative.
Once the MOU's have been executed by each organization, plaintiffs' counsel shall distribute
the funds as set forth below. As specified in the Court's previous order approving the cypres
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remedy, five percent of the cypres fund shall be retained and reserved for further work to be
performed by plaintiffs' counsel, including oversight of the implementation of the cypres remedy,
or for other expenses of the cypres project. The Court reserves jurisdiction to distribute any portion
of the reserved 5 percent, plus accrued interest on that sum, upon application by plaintiffs' counsel.
Wells Fargo shall have no further obligation to fund the cypres remedy and shall have no further
obligation for payment of the attorneys' fees and expenses of plaintiffs' counsel.
IV. ALLOCATIONS OF CY PRES FUNDS
The cypres remedy in these actions will be funded over a three-year period. In this Order,
the Court preliminarily approves allocations for the three-year period, but authorizes distribution of
funding for only the first year. That year shall commence on June 1, 1993. In order to receive
funding for subsequent years, each organization shall submit an annual report summarizing its
activities accomplished with the cypres funds, along with an application for release of the next year's
funding, including a proposed budget. To ensure the continuous flow of funds, the annual reports
shall be submitted to plaintiffs' counsel no later than April 1, 1994. Plaintiffs' counsel shall then
prepare a "Status Report Regarding the Operation of the Cy Pres Remedy" summarizing the
respective organizations' annual reports, evaluating the effectiveness of the cypres remedy, and
making recommendations for funding for the following years. The Status Report, annual reports of
each of the organizations, and a proposed order for release of the next year's funds shall be submitted
to the Court by plaintiffs' counsel no later than May 1, 1994.
The Court allocates cypres funds and approves distribution to the recipient organizations in
the amounts specified below.
1. San Francisco Neighborhood Legal Assistance Foundation (SNFLAF). The Court
allocates a total of $330,000 over a three-year period to SNFLAF. The Court approves SNFLAF's
budget as submitted and authorizes the immediate distribution of $110,000 for the first year.
2. Volunteer Legal Services Program of the Bar Association of San Francisco (VLSP). The
Court allocates a minimum of $703,060 over a three-year period to VLSP. The Court approves
VLSP's budget for this amount as submitted and authorizes the immediate distribution of $234,353
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for the first year of the project.
3. Consumers Union. The Court allocates a minimum of $703,000 over a three-year period
to Consumers Union. The Court approves Consumers Union's budget for this amount as submitted
and authorizes the immediate distribution of $234,334 for the first year of the project.
4. Consumer Action. The Court allocates a minimum of $703,000 to Consumer Action over
a three-year period. The Court approves Consumer Action's budget for this amount as submitted,
and authorizes the immediate distribution of $220,400 for the first year of the project.
5. Consumer Credit Counseling Services (CCCS). For the first year, the Court approves
funding for the expansion of CCCS offices in Daly City ($17,900); Fremont ($35,000); Ukiah
($35,000); and Victorville ($55,000). The Court approves the budgets for these office expansions
as submitted by CCCS. With respect to the expansion of offices, the Court allocates funding for only
the first year. Funding for future years shall be dependent upon the Court's evaluation of the CCCS
performance and compliance with the cypres goals in the first year.
In addition, the Court allocates $103,000 to CCCS to be used over a three-year period to
reduce the fees of consumers who are referred from other recipient organizations and who would
otherwise be charged for CCCS services. The Court authorizes distribution of $34,333 for fee
reduction for the first year. These funds shall not be used for low income consumers who would
otherwise receive CCCS debt management services free of charge. Rather, the funds shall be used
to reduce the fees by fifty percent for consumers who would otherwise be charged a fee. For the first
year, the funds shall be used only for consumers who are referred to any CCCS office from another
recipient organization. If the Court finds that such referrals are not occurring, this limitation shall
be subject to reevaluation for subsequent years. The recipient organizations shall cooperatively
devise a plan by which consumers who are referred to CCCS by other recipient organizations shall
receive their fifty-percent fee reduction.
The Court also allocates $100,000 over a three-year period for the development, reproduction
and translation of consumer education materials. The $100,000 shall be divided as follows: $30,000
for the reproduction of existing consumer education materials; $40,000 for the creation of new
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materials; $20,000 for the translation of existing materials into other languages; and $10,000 for
overhead costs related to production of the materials listed above. The Court authorizes the release
of $33,333 of this allocation for the first year of the project, which shall be used for the purposes and
in the proportions set forth above.
The Court finds that some of the projects proposed by CCCS, including the creation of new
resource guides and the translation of existing materials into other languages, may duplicate efforts
already performed by other recipient organizations, including those of Consumer Action. In the
interests of maximizing cooperation among the recipient organizations, and making the most
efficient use of available resources, the Court orders that all expenditures by CCCS in this category,
i.e. funds spent out of the $33,333 allocated for educational materials, shall be subject to prior
written approval by plaintiffs' counsel Sturdevant & Sturdevant except that expenditures for
reproduction of existing materials and for overhead costs in this category shall not be subject to the
prior approval of plaintiffs' counsel. Prior to expending any funds, CCCS shall submit a proposal
to plaintiffs' counsel describing the intended use of funds, which shall include the description of any
new materials that would be produced or translated and a copy of the proposed or existing text of
such materials. Plaintiffs' counsel shall review the proposal in good faith and confer with other
recipient organizations to ensure that the proposed materials would not be duplicative of existing
materials. If, in their discretion, plaintiffs' counsel conclude that the materials would be best
produced as a joint effort by CCCS and another recipient organization, the expenditure may be
approved jointly to CCCS and to any other organization that shall cooperate with CCCS in the
development of educational materials. Each organization will bear its own share of the cost of
producing materials jointly.
The total of funds that shall be immediately released to CCCS for the first year of the cypres
remedy is $210,566.
V. WITHDRAWAL OF FUNDS FROM COURT
Upon entry of this Order, plaintiffs' counsel shall withdraw the cypres funds from the Court's
Special Trust Fund Account, along with all interest that has accrued on the funds since the date of
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deposit on November 25, 1992, and shall deposit said funds in an appropriate interest bearing
account. All interest that accrues on the fund throughout the duration of the cypres project,
including all interest that has accrued on the fund since November 25, 1992, shall accrue to the fund
for distribution in future years. The amounts approved by the Court for the first year of operation
shall be distributed to the recipient organizations by plaintiffs' counsel after an appropriate
Memorandum of Understanding has been executed by the organization and filed with the Court.
SO ORDERED.
DATED:
JUDGE OF THE SUPERIOR COURT
APPROVED AS TO FORM:
Attorneys for Defendants
12.4 Memorandum Executed For Receipt ofCy Pres Funds
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
BEASLEY, et al.,
Plaintiffs
[vs.]
WELLS FARGO BANK, N.A.,
Defendants
KOVITZ, et al.,
Plaintiffs
[vs.]
CROCKER NATIONAL BANK, N.A., et.al.
Defendants
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Nos. 861555 and 868914
(CASES CONSOLIDATED)
MEMORANDUM OF UNDERSTANDING EXECUTED FOR RECEIPT OF CY PRES FUNDS
(CONSUMER ACTION)
1. This Memorandum of Understanding is entered into by and between Consumer Action,
a non-profit membership organization, and counsel for the plaintiff classes in the above-entitled
actions for the purpose of facilitating the distribution ofcypres funds as ordered by the Court. The
cypres remedy ordered by the Court is explained in the Court's Further Order Granting Approval
ofCyPres Remedy and Distribution ofCyPres Funds, filed May 7, 1993, which is attached hereto
as Exhibit A and incorporated herein by this reference.
2. In accepting the cypres funds awarded by the Court in this action, Consumer Action
hereby states its commitment to the goals of the cypres remedy which are to provide indirect
benefits to the class members in these consolidated actions, to enhance consumer education and
advocacy efforts for all consumers throughout California, to provide direct services to low and
moderate income consumers on consumer credit and finance issues, and to facilitate and to
encourage communication and cooperation among the recipient consumer advocacy organizations.
3. The undersigned parties to this Memorandum of Understanding agree that Consumer
Action shall use the cypres funds received by order of the Court in these actions to create and to
finance a statewide Credit and Finance Project. The Project will address the needs of California
consumers, particularly those who are low-income, disabled, limited-English speaking, immigrants,
or seniors, in the areas of consumer credit and finance and shall involve the following activities: a
project to identify common and/or recurring consumer credit and finance problems, including the
creation of a database to maintain and categorize this information; the provision of direct services
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to consumers in the form of advice and referral; the development of educational materials and
workshops; and administrative and legislative advocacy on credit and finance issues. A summary
of the activities to be performed by Consumer Action using the cypres funds is set forth in
Consumer Action's proposal attached hereto as Exhibit B and incorporated herein by this reference
[not reprinted infra]. Consumer Action agrees to use the funds received through the cypres remedy
ordered in this action for the purposes described and in the manner set forth in the proposal and
budget attached hereto as Exhibit B. For the first year of the cypres remedy, Consumer Action shall
receive $220,400.
3. As a condition of receiving the cypres funds awarded by the Court, Consumer Action
hereby agrees that its expenditure of funds, its reports regarding the expenditure of funds, and its
requests for funding in the second and third years of the cypres remedy shall be subject to the
jurisdiction of the San Francisco Superior Court. Consumer Action hereby agrees to submit to the
jurisdiction of the Court and to abide by its orders.
4. As was ordered by the Court, Consumer Action hereby agrees to submit two semi-annual
reports to plaintiffs' counsel, each of which shall include a description of the organization's proposed
use of funds for the following six months and a description of projects and fund expenditures that
have been undertaken in the preceding six-month period. In addition, Consumer Action agrees to
submit an annual report to the Court which shall include a status report, financial report of
expenditures, and application and budget for the following year. Plaintiffs' counsel will establish
reasonable deadlines for the submission of each of these reports, and shall assist Consumer Action
as needed in their preparation.
5. Consumer Action agrees to participate in meetings of the cypres project which shall be
held on a quarterly basis or as plaintiffs' counsel deems appropriate. In support of the goals of the
cypres remedy, Consumer Action also agrees to work cooperatively and to share information with
other recipient organizations.
6. This Memorandum of Understanding is subject to modification by agreement of plaintiffs'
counsel and Consumer Action, subject to Court approval. There shall be no unilateral termination
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or alteration of this Memorandum, except that Consumer Action may terminate the Memorandum
by providing 30 days written notice to plaintiffs' counsel and returning all remaining funds to
plaintiffs' counsel. Plaintiffs' counsel will then seek Court approval for any replacement recipient.
This Memorandum shall automatically terminate upon the full depletion of all funds received and
following the rendering of a final accounting to plaintiffs' counsel.
Dated:
STURDEVANT & STURDEVANTA Professional Corporation
CONSUMER ACTION
a Non-Profit Membership Organization