I have noticed that the settlement administrator, counsel for SLX and class counsel have not yet resolved any of the disputes that have arisen so far regarding my clients' ratings. Instead, my clients get e-mails back from silverstatesettlement@gardencitygroup.com saying only that "we are investigating" or "the investigation is continuing." Many of my clients are concerned that these disputes will not be resolved before the February 13, 2010 deadline. It is now apparent that some of these disputes will not be resolved until after the February 13, 2010 deadline. I discussed this matter yesterday and today with class counsel Andy August and Kevin Rooney. Andy August assured me that the Settlement Administrator, counsel for SLX and Class Counsel are in the process of resolving the disputes that have been submitted regarding the number of certifications and the incorrect assignment to the settlement subclasses. There is a detailed settlement dispute process outlined in the Settlement Agreement. It generally works as follows:
1. Student’s Notice states more certifications than actually received while at Silver State (i.e., includes other certifications obtained before or after attendance at SSH);
2. Student contacts settlementquestions@gmail.com and is directed to follow instructions on the FAQs by submitting appropriate evidence to the Settlement Administrator (with a cover letter signed “under penalty of perjury”);
3. Student sends information and cover letter to the Settlement Administrator at Silverstatesettlement@gardencitygroup.com and sends hard copy to:
Silver State Loan Settlement Administrator
P.O. Box 9462
Dublin, Ohio 43107-4562
Be sure to send a copy to Class Counsel at the settlementquestions@gmail.com
4. Settlement Administrator sends e-mails back to student that "we are investigating" or "the investigation is continuing."
5. The Settlement Administrator then sends your evidence to both the Class Counsel and to SLX’s lawyers.
6. If SLX disagrees with the evidence submitted by the student, then the Class Counsel and SLX’s lawyers “meet and confer” about each student’s challenge. This will be done on an on-going basis. If there is no disagreement, the student is re-classified. If there is a disagreement, the Class Action lawyers will represent your interest before Judge William Cahill who will have the final say.
Many of these disputes may be resolved before the February 13, 2010 deadline, especially if you have submitted your evidence already or do so immediately. Some of these disputes will not be resolved until after the February 13, 2010 deadline.
You will not have to make any payments under the Settlement Agreement until you receive a “Reduced Monthly Repayment Notice” from SLX/AES which should reflect your proper classification by showing the proper amount due (it will not show a change in the number of certifications).
Here is the relevant part of the settlement agreement in its entirety:
"10. Dispute Resolution Procedure. If a Class Member disagrees with the number of FAA certifications, the corresponding percentage of unconditional debt forgiveness and conditional debt forgiveness being provided, or the amount of his/her Debt, the following dispute resolution procedure shall be used:
10.1 The Class Member shall send to the Settlement Administrator a written statement
signed under penalty of perjury setting forth the basis of the Class Member’s dispute and submitting his/her evidence or documentation to support that assertion (including any written statements from witnesses supporting the person’s position, log books, flight records, correspondence with Silver State, SLX, or AES, FAA records regarding the number of FAA Certifications obtained, and any other evidentiary material) (“Disputed Claim”). To be timely,the Class Member must send the Disputed Claim so that it is received by the Settlement Administrator on or before the Disputed Claim Deadline. No Disputed Claims received after the Disputed Claim Deadline shall be considered. No evidence or documentation received after the
Disputed Claim Deadline submitted in support of a Disputed Claim received prior to the Disputed Claim Deadline shall be considered.
10.2 The Settlement Administrator shall provide a copy of each Disputed Claim,
including any evidence or documentation submitted in connection therewith, to Class Counsel and to Counsel for SLX within ten (10) days of its receipt.
10.3 SLX’s counsel and Class Counsel shall meet and confer on the Disputed Claims.
If Class Counsel and SLX’s counsel agree as to the resolution of the Disputed Claims, their agreement shall control.
10.4 If SLX’s counsel and Class Counsel cannot reach agreement on the resolution of
the Disputed Claims, such Disputed Claims shall be submitted to retired California Superior Court Judge William J. Cahill (Ret.) of JAMS for resolution on or before ninety (90) days after the Notice Date [December 30, 2009]. SLX may submit evidence to Judge Cahill regarding any such Disputed Claim(s), with a copy to Class Counsel, by that same date. All Disputed Claims shall be decided by Judge Cahill without a hearing, unless such a hearing is requested by Judge Cahill, in which case, the participants may partic ipate by telephone. The parties shall request that Judge Cahill decide all Disputed Claims within thirty (30) days of their submission. The decision of Judge Cahill shall be final, non-appealable and binding on the Class Member and SLX. Judge Cahill’s fees, if any, shall be split equally between SLX and Class Counsel."
In every case that I have seen in which SLX made an error regarding the FAA certifications received by my clients, SLX has charged former students for certifications that they received before they attended SSH or after SSH filed bankruptcy. This certification information appears in section 7 of the Settlement Notices. It is important that every class member check the Notice carefully to see if he or she has been credited with the proper number of certifications and placed in the proper subclass.
Wednesday, January 27, 2010
Silver State Helicopters / Student Loan Xpress Class Action Settlement Conference Call 2 This Saturday @ 4:00 PM Pacific Time
My last conference call on the SSH/SLX Class Action Settlement was a spirited one, with 135 participants! The vast majority have decided to take my advice and accept the benefits under the proposed class action settlement. Every day since then, I have answered numerous e-mails and spoken to many clients about the proposed settlement agreement. Due to popular demand, I am going to do another conference call this Saturday, January 30 from 4:00 pm to 6:00 pm Pacific Time.
To participate in this conference call, use the Conference Dial-in Number:
(641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
To participate in this conference call, use the Conference Dial-in Number:
(641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Thursday, January 07, 2010
Silver State Helicopters / Student Loan Xpress Class Action Settlement Conference Call This Saturday @ 1:00 PM Pacific Time
I have set up a conference call for all of my SSH clients with questions about the proposed class action settlement for former students of SSH who were still enrolled @ SSH on February 4, 2008 and whose student loans are now owned by SLX. This conference call will take place from 1:00 - 3:00 pm Pacific Time this Saturday, January 9, 2010. To participate in this conference call, use the Conference Dial-in Number: (641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it. Senior Assocate Attorney Georgeann Nicol will be joining me in hosting this conference call.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it. Senior Assocate Attorney Georgeann Nicol will be joining me in hosting this conference call.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Tuesday, January 05, 2010
What Is The Secret Password?
Class Action Counsel has posted a good set of class action frequently asked questions and answers @ http://www.jameshoyer.com/class_settlement.html
These FAQs are updated periodically, and are also set forth @ http://www.pinnaclelawgroup.com/news/silver_state_faqs.php
If you are a class member or potential class member and you want the secret password to access these FAQs, send an e-mail to settlementquestions@gmail.com.
These FAQs are updated periodically, and are also set forth @ http://www.pinnaclelawgroup.com/news/silver_state_faqs.php
If you are a class member or potential class member and you want the secret password to access these FAQs, send an e-mail to settlementquestions@gmail.com.
Monday, January 04, 2010
SSH / Student Loan Xpress Class Action Settlement Notices Have Been Mailed Out
10 Page Class Action Settlement Notices have been mailed out to all eligible class members. If you were a student enrolled at Silver State Helicopters on February 4, 2008 and you received a loan from Student Loan Express, you should receive this notice on or before January 11, 2009. If you have not received it, please send an e-mail to the settlement administrator at silverstatesettlement@gardencitygroup.com. Include your full name, current address, loan number, and social security number and say, "Please e-mail me a copy of my class action settlement notice."
There are 4 versions of the settlement notice. The first version is for students that all parties agree are in the class. The second vesion is for their co-signers. As to these students and their co-signers, as the notice says, "You do not need to take any action at this time in order to receive the benefits available under the settlement."
The third version is for students as to which the parties are uncertain as to whether or not the student was still enrolled at Silver State as of February 4, 2008. The fourth version is for their co-signers. These students and their co-signers must file a proof of claim by February 13, 2010 to receive the benefits under the settlement.
Here is how you can tell if you are required to fill in a claim form:
1. Section 1 of your Notice, "Why did I get this Notice," will say, "The Court sent you this Notice because you are a former student of Silver State, and your student loan is owned by SLX, but the parties have not been able to determine whether you were still enrolled at Silver State on February 4, 2008.
2. Section 13 of your Notice, "What do I have to do to participate in the settlement?," will say, "To qualify for settlement benefits, you or your co-signer must send in a claim form. A claim form is enclosed with this Notice. It must be completed and returned under penalty of perjury so that it is received by the Settlement Administrator by February 13, 2009."
3. A claim form will be attached to the Notice.
It is important that you read the Notice carefully!
The heart of the settlement agreement is a schedule which provides debt forgiveness based on the total number of FAA Certifications Received at Silver State.
0 Certifications = 75% debt forgiveness
1 Certification = 60% debt forgiveness
Most of my clients fit in one of these 2 categories.
2 Certifications = 47.5% debt forgiveness
3 Certifications = 30% debt forgiveness
4 Certifications = 20% debt forgiveness
Additional benefits of the settlement agreement as outlined in the Notice include the following:
Interest Forgiveness
"All interest that would have accrued on your loan between February 4, 2008 until shortly after final approval of the settlement will be forgiven."
Lower Interest Rates
"Interest on your restructured loan will accrue at the lower of either (a) your existing interest rate or (b) an new interest rate that is 3% lower that your existing rate, but that cannot be lower that 6%. Your new interest rate will remain a variable interest rate."
Early Repayment Refund
"If you timely pay off your restructured loan within five years of when the first payment is due, you will receive a refund equal to 2.5% of your original loan amount reduced by the debt forgiveness under the settlement."
Effect On Your Credit Report
"SLX has agreet to request that credit reporting agencies (Equifax, Experian, Innovis and TransUnion) remove any previous reports by SLX or its agents about your loan. But, if you fail to make your lower monthly payments after the settlement is approved or exclude yourself from the settlement, then SLX may make additonal reports."
There are 4 versions of the settlement notice. The first version is for students that all parties agree are in the class. The second vesion is for their co-signers. As to these students and their co-signers, as the notice says, "You do not need to take any action at this time in order to receive the benefits available under the settlement."
The third version is for students as to which the parties are uncertain as to whether or not the student was still enrolled at Silver State as of February 4, 2008. The fourth version is for their co-signers. These students and their co-signers must file a proof of claim by February 13, 2010 to receive the benefits under the settlement.
Here is how you can tell if you are required to fill in a claim form:
1. Section 1 of your Notice, "Why did I get this Notice," will say, "The Court sent you this Notice because you are a former student of Silver State, and your student loan is owned by SLX, but the parties have not been able to determine whether you were still enrolled at Silver State on February 4, 2008.
2. Section 13 of your Notice, "What do I have to do to participate in the settlement?," will say, "To qualify for settlement benefits, you or your co-signer must send in a claim form. A claim form is enclosed with this Notice. It must be completed and returned under penalty of perjury so that it is received by the Settlement Administrator by February 13, 2009."
3. A claim form will be attached to the Notice.
It is important that you read the Notice carefully!
The heart of the settlement agreement is a schedule which provides debt forgiveness based on the total number of FAA Certifications Received at Silver State.
0 Certifications = 75% debt forgiveness
1 Certification = 60% debt forgiveness
Most of my clients fit in one of these 2 categories.
2 Certifications = 47.5% debt forgiveness
3 Certifications = 30% debt forgiveness
4 Certifications = 20% debt forgiveness
Additional benefits of the settlement agreement as outlined in the Notice include the following:
Interest Forgiveness
"All interest that would have accrued on your loan between February 4, 2008 until shortly after final approval of the settlement will be forgiven."
Lower Interest Rates
"Interest on your restructured loan will accrue at the lower of either (a) your existing interest rate or (b) an new interest rate that is 3% lower that your existing rate, but that cannot be lower that 6%. Your new interest rate will remain a variable interest rate."
Early Repayment Refund
"If you timely pay off your restructured loan within five years of when the first payment is due, you will receive a refund equal to 2.5% of your original loan amount reduced by the debt forgiveness under the settlement."
Effect On Your Credit Report
"SLX has agreet to request that credit reporting agencies (Equifax, Experian, Innovis and TransUnion) remove any previous reports by SLX or its agents about your loan. But, if you fail to make your lower monthly payments after the settlement is approved or exclude yourself from the settlement, then SLX may make additonal reports."
Tuesday, December 29, 2009
From Today's Herald -Zeitung Newspaper in New Braunfels, Texas
Settlement offered to Silver State students
By Chris Cobb
The Herald-Zeitung
Published December 29, 2009
Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.
The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.
After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.
An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.
The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.
Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.
“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”
Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.
CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.
A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.
Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.
“The settlement is written so that it applies to students in all states,” Berger said.
The settlement is only for students who were enrolled in Silver State when it went bankrupt.
The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.
“I think it’s the best that can be done under the circumstances,” Berger said.
Silver State operated 34 campuses in 17 states.
It ran the air traffic control tower in New Braunfels, as well as a flight school.
Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.
The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.
“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”
For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back.
“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”
By Chris Cobb
The Herald-Zeitung
Published December 29, 2009
Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.
The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.
After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.
An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.
The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.
Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.
“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”
Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.
CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.
A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.
Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.
“The settlement is written so that it applies to students in all states,” Berger said.
The settlement is only for students who were enrolled in Silver State when it went bankrupt.
The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.
“I think it’s the best that can be done under the circumstances,” Berger said.
Silver State operated 34 campuses in 17 states.
It ran the air traffic control tower in New Braunfels, as well as a flight school.
Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.
The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.
“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”
For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back.
“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”
SLX Class Action Settlement Q and A
Q. When will I receive Notice of the Class Action Settlement?
A. Notices are being mailed out now. They are expected to be sent out by an independent administrator between December 28 and December 30, 2009. If you are my client and you have not received notice of the settlement by January 7, 2009 and you believe that you are a member of the class, you should e-mail me @ michael.berger@bankruptcypower.com and I will follow up for you.
Q. How has Michael Berger and his law firm been involved in the negotiation of the proposed class action settlement with Student Loan Xpress?
A. I have worked closely with class action counsel on this matter throughout the last 18 months. My work began before the first class action lawsuit was filed. I have strategized and consulted extensively with class action counsel and assisted them per their request, in the district court, in the bankruptcy court, and in the protracted negotiations with Student Loan Xpress.
Q. Why was this case settled in the District Court in Tampa, Florida and not in the Nevada Bankruptcy Court?
A. James, Hoyer filed the first Silver State Helicopters / Student Loan Xpress case in the District Court in Tampa, Florida on behalf of a former SSH student representing himself and all SLX/SSH students. Pinnacle Law Group filed a case in the District Court in San Francisco on behalf of all California KeyBank/SLX/SSH students. Thereafter, Class Counsel strategized with each other and with me about which venue would be the most favorable to the students’ legal positions. After thoughtful consideration of all issues and after discussing this at length with each other, we all decided that bankruptcy court was the least desirable forum. There were several reasons for this. First, all of the lawyers were concerned that we would be unable to get the bankruptcy court to exercise jurisdiction over a creditor versus creditor action that did not involve the debtor (SSH). Second, bankruptcy courts are usually unfamiliar with the very complex nuances of class action lawsuits because they very rarely see such cases. Third, we very likely would have been unable to have a jury trial on any of the issues because the ability to have a jury trial in bankruptcy court is very limited. Fourth, based on the state law legal issues in the case, the bankruptcy court would have been a far less appropriate forum to deal with these issues (as distinct from pure questions of bankruptcy law). Finally, and most importantly, we believed that the individual federal district court judges that were assigned to the cases filed by Pinnacle Law Group and the James, Hoyer firms would be more sympathetic to your interests than the bankruptcy court.
Although I initially told you that I would consider filing an adversary proceeding on behalf of my clients in the bankruptcy court, I become convinced over time that this was not the best way to pursue this matter. At the time that I made this proposal, there were no class actions on file in any court with regard to the SSH matter. After many hours of discussions with class action counsel as well as my own extensive legal and factual research about the best place to take your fight to the banks, I became convinced that bankruptcy court was not the best forum. After seeing how things played out, I am now convinced more than ever that I engaged in the correct analysis and made the correct decision.
Q. How did the settlement come about? What was the process?
A. Andrew August and Keven Rooney of Pinnacle Law Group and I began negotiations with SLX's counsel in mid-2008. After numerous telephone calls, e-mails, letters and in person meetings, we were approached by SLX’s counsel who inquired if we were interested in participating in a mediation to seek a negotiated settlement of the case. We agreed and the parties agreed to use Judge William Cahill (Ret.) in San Francisco to facilitate settlement discussions. In September 2008 we had our first mediation session with Judge Cahill. A Class Representative and Dan Reed were present and part of the mediation team. I attended by phone from Los Angeles. Although there was initial agreement on using FAA certifications as a basis for the settlement (largely because the information with the FAA was objectively verifiable) after more than 12 hours, we could not reach any common ground on the amount of debt forgiveness, interest rate reduction or other essential terms and we therefore adjourned the mediation. We then sent SLX a letter stating that we no longer were interested in discussing settlement given its unacceptable and intransigent positions on these crucial issues. In response to this letter, Judge Cahill contacted the parties and persuaded the parties to attend a second mediation session in November 2008. At this session, which also lasted in excess of 12 hours, progress was made but still no agreement was reached. The parties returned in December 2008 for a third session but again, no agreement was reached. Judge Cahill thereafter presented what he thought was a fair settlement for all parties and presented it to the counsel. Only then were the material terms agreed to.
For the next 10 months Class Counsel, myself, Dan Reed and Counsel for SLX negotiated the details of the written settlement agreement and related documents. Thereafter Attorneys General of a Multi-State Task force investigating SSH reviewed the settlement agreement and negotiated additional modifications as well as their own agreement.
Although SLX expressly denies any wrongdoing in the settlement, the amount of debt forgiveness achieved (more than $112 million dollars in principal alone) is to the best of our knowledge unprecedented in the world of student loan modification. While we do not know for certain SLX’s reasoning for agreeing to the terms of this settlement or its agreement with the Attorneys General, it is reasonable to assume SLX considered the factual allegations made in the course of our lawsuit including its failure to conduct adequate due diligence into SLX before making the loans, not ensuring the education and training was being provided before disbursing the loan proceeds to SLX and not adequately monitoring the students’ progress.
Q What role did Michael Berger and/or Dan Reed play in negotiating the terms of the settlement?
A. I played in integral role in our successful battle with the SSH Trustee to obtain a complete copy of the SSH computer system and in negotiating and drafting the terms of the settlement agreement dealing with the bankruptcy issues. I met and negotiated with counsel for SLX both with and without other Plaintiff's counsel. Dan Reed attended the mediation in San Francisco that eventually resulted in the settlement and has assisted Class Counsel in negotiating and drafting the settlement agreement and advising his personal clients on the terms of the settlement.
Q Can you discharge your student loan obligation to Student Loan Xpress by filing bankruptcy?
A. In a word, no. In general, student loans can NOT be discharged in bankruptcy absent a very difficult to make showing of "undue hardship." After extensive research, all Plaintiff's counsel agree that the Student Loan Xpress loans are in fact student loans that are NOT discharged by the mere filing of a bankruptcy. To even attempt to discharge these loans in bankruptcy, the debtor must file a separate Adversary Proceeding (a lawsuit against the lender within the bankruptcy case)and prove that repaying the debt would constitute "undue hardship." An example of undue hardship would be that the debtor is permanently disabled and will never be able to repay the loan. Temporary unemployment or low income is NOT undue hardship.
I recently reviewed a bankruptcy court decision in Texas involving a Silver State Helicopters student who went to the trouble and expense of filing an Adversary Proceeding to try to discharge his SLX loan. The court granted summary judgment against the SSH student and denied his request to discharge the debt to SLX.
While we have succeeded in several instances in winning these cases for students who attended other schools and were unable to work due to permanent physical or mental problems, in each case we charged a fee $10,000.00 in addition to the $2,000.00 fee for the bankruptcy itself. We also paid expert witnesses to document the disability. It was not cheap, easy or quick. These adversary proceedings are separate lawsuits within the bankruptcy case, and require all the work of a separate lawsuit including, but not limited to, the preparation of a summons, notice of status conference and complaint, discovery, including written interrogatories, requests for production of documents, requests for admission and depositions, status conferences, mediations, pre-trial and trial. Numerous motions may be involved as well. In short, don't count on bankruptcy getting you out of your debt to SLX. For a free, expert, personalized analysis as to whether or not you can meet this undue hardship standard, call me.
Q. What has Michael Berger been doing with regards to the SSH bankruptcy cases?
A. I have monitored both SSH bankruptcy cases from the very start. In addition to filing proofs of claim for all of my clients, I have reviewed all of the documents filed in the 2 cases and in the related adversary proceeding cases. To date, more than 1710 documents have been filed in the lead SSH case. I have been in regular contact with counsel for the Trustee and have reviewed all of the Proofs of Claim filed in the 2 cases.
Q. What is my proof of claim in the SSH bankruptcy worth?
A. My best estimate is that each one of the former SSH students proof of claim will be worth somewhere between $0 and $3,000.00. No one else has been willing to provide a dollar estimate. I am in regular contact with Tony Zmaila, the attorney for the Trustee. I review documents filed in the SSH bankruptcy cases every day. Here is where we stand: (a) Most assets of the estate have already been liquidated for the benefit of the secured lender Orix (b)Orix, the secured lender, has received most of its money back, but is still owed several million dollars (c) the bankruptcy estate is currently administratively insolvent, meaning that there is not enough money to pay all of the claims for legal fees, trustees fees, administrative rent, etc. that must be paid before any distribution is made to unsecured creditors; (d) The Trustee and Trustee's counsel have not objected to any of the former student's proof of claims because there is no point in doing so unless there is going to be any money for unsecured creditors; (e)Legal costs continue to rise, with additional recoveries for the estate being uncertain; (f) There is not telling if and when any distribution to creditors will be made; (g) There are more than $450,000,000 in unsecured claims against the SSH estate; If any distribution is made to former SSH students, priority claims will be paid before general unsecured claims. Unlike most of the proofs of claims prepared by other attorneys or by former students on their own, the proofs of claim that I prepared for my clients all included a priority claim for the maximum amount allowed for services paid for but not received: $2,425.00. It is this priority claim that is largely responsible for the high end of the range that I have set forth hereinabove. Priority claims are paid ahead of general unsecured claims.
Q. Which is worth more to me, the discount that the class action settlement gives me on my student loan or my proof of claim?
A. This is an easy question. Based on all of the information that is available to me,the value of the discount on the student loan far exceeds the value of the proof of claim in every case. As an example, if you received no certifications (75% discount) or one flight certification (60% discount) and you owe $70,000.00 to SLX, the savings to you before considering additional discounts for early payments or reduced interest rates is between $42,000 and $52,500.00. The value of your proof of claim is somewhere between $0 and $3,000.00. Giving up your proof of claim for this discount, something that is required under the proposed SLX class action agreement, is a good deal for you and is somthing that I would do myself if I was in your situation.
Q. Will the Bankruptcy of CIT Group have an effect on the proposed settlement?
A. No one knows. My best guess is that it will not have any impact on the proposed settlement.
Q. If SLX files bankruptcy, will that wipe out my debt to SLX?
A. No. The debt would then be payable to the bankruptcy estate of SLX. It is possible that the debt could be sold to a third party that would then try to collect the debt.
Q. Do I have to accept the proposed settlement if I am a class action member?
A. No, you can accept it or opt out of it. I recommend that you accept it, but if you are my client I will do my best for you either way. The problem with opting out is that you are betting that you can do better than all of plaintiffs' counsel and the attorney generals from 12 states have been able to do. Counsel for SLX has specifically stated that they will NOT offer more favorable terms to those that opt out. You will have to face the very real risk of being sued individually and the very real risk of SLX getting a judgment against you for the full amount of principal + attorneys fees and costs, with no discount.
Q. If I opt out of the class action settlment now, can I come back and accept it later?
A. No.
Q. If I am your client in the SSH matter, what is included in your representation of me and what is not included?
A. Included matters include (a) all negotiations with your SSH student loan lenders, regardless of whether it is SLX, KeyBank, Citibank, or as it is in a few cases, Sallie Mae or Deutsche Bank; (b) the filing and defense of your proof of claim in the Bankruptcy Court; (c) the monitoring of the SSH bankruptcy, and, if appropriate, any other action taken in the SSH bankruptcy case; (d) advice regarding the class action cases and my cooperation with class action counsel; (e) my cooperation with all governmental agencies investigation SSH, Airola, Pickett, EOS, and all related entities; (f) my ongoing efforts to get relief for you any way that I can, including political appeals; and, if appropriate, group litigation against KeyBank. For now, I am cooperating with class action counsel in its litigation against KeyBank, but I have reserved the right to file my own separate action if class action counsel is unable to achieve satisfactory results.
Matters that are not included in the $800.00 flat fee that each one of my SSH clients paid me: (a) The filing a personal bankruptcy for the former student (For this service, I charge an additional fee of $2,000.00 + 299.00 filing fee. This service is only available for my California clients);
(b) The filing of an Adversary Proceeding against your student loan lender within a bankruptcy proceeding (This is not recommended absent a showing of undue hardship and is subject to the payment of a $10,000.00 flat fee if I believe that you can in fact satisfy the undue hardship standard); (c) The defense of a lawsuit against you by your student loan lender (this is a real possibility for those who opt out of the class action settlement).
Q. Why should I agree to pay anything at all to SLX?
A. Because of the very real risk that if you turn down this settlement offer, you will may to pay much more later. I know that some of you feel that you should not have to pay any money to SLX. I am very proud and happy to have helped to achieve 100% debt forgiveness for my Citibank clients, and I sincerely wish that I could have done this for my SLX clients too. This simply was not possible in this case, despite my best efforts and the best efforts of class action counsel, other
Plaintiffs' counsel, and the attorney generals of 12 states. Each lender had separate facts. Thousands of documents have been reviewed, but there has been no "smoking gun" that would make it likely in my opinon that we could ever do better than the settlement offer that we now have. This case poses very unique risks for all parties. Many of the legal issues are novel ones that could be decided against you. Indeed, as my KeyBank clients are aware, KeyBank has refused to make any real settlement offer because it believes it will prevail on the legal issues (which are being litigated in the California federal district court and the 9th Circuit Court of Appeals by Pinnacle Law Group). Most importantly, the reality is that even if we prevailed at a trial, I cannot say the outcome would have been better because a judge could conclude that almost all of the students received some tangible or intangible benefit for which they should have to pay money. For all of these reasons, I strongly advise you to participate in the settlement.
Q. Is Michael Berger receiving any fee from SLX in connection with the proposed settlement?
A. No.
Q. How can I contact class action counsel to ask them questions about the settlement agreement?
A. Send your questions to settlementquestions@gmail.com.
Q. Will Michael Berger be attending any of the Town Hall Meetings to Discuss and Explain the Settlement Agreement?
A. Yes, I will be attending the Town Hall Meeting currently scheduled for Sunday, January 10, 2009 at 2:00 pm at the Long Bach Marriot Hotel, 4700 Airport Plaza Drive, Long Beach, CA 90815. I will answer questions at the meeting and will stay as long as needed after the meeting until each and every student attending has my answer to any question that he or she has.
A. Notices are being mailed out now. They are expected to be sent out by an independent administrator between December 28 and December 30, 2009. If you are my client and you have not received notice of the settlement by January 7, 2009 and you believe that you are a member of the class, you should e-mail me @ michael.berger@bankruptcypower.com and I will follow up for you.
Q. How has Michael Berger and his law firm been involved in the negotiation of the proposed class action settlement with Student Loan Xpress?
A. I have worked closely with class action counsel on this matter throughout the last 18 months. My work began before the first class action lawsuit was filed. I have strategized and consulted extensively with class action counsel and assisted them per their request, in the district court, in the bankruptcy court, and in the protracted negotiations with Student Loan Xpress.
Q. Why was this case settled in the District Court in Tampa, Florida and not in the Nevada Bankruptcy Court?
A. James, Hoyer filed the first Silver State Helicopters / Student Loan Xpress case in the District Court in Tampa, Florida on behalf of a former SSH student representing himself and all SLX/SSH students. Pinnacle Law Group filed a case in the District Court in San Francisco on behalf of all California KeyBank/SLX/SSH students. Thereafter, Class Counsel strategized with each other and with me about which venue would be the most favorable to the students’ legal positions. After thoughtful consideration of all issues and after discussing this at length with each other, we all decided that bankruptcy court was the least desirable forum. There were several reasons for this. First, all of the lawyers were concerned that we would be unable to get the bankruptcy court to exercise jurisdiction over a creditor versus creditor action that did not involve the debtor (SSH). Second, bankruptcy courts are usually unfamiliar with the very complex nuances of class action lawsuits because they very rarely see such cases. Third, we very likely would have been unable to have a jury trial on any of the issues because the ability to have a jury trial in bankruptcy court is very limited. Fourth, based on the state law legal issues in the case, the bankruptcy court would have been a far less appropriate forum to deal with these issues (as distinct from pure questions of bankruptcy law). Finally, and most importantly, we believed that the individual federal district court judges that were assigned to the cases filed by Pinnacle Law Group and the James, Hoyer firms would be more sympathetic to your interests than the bankruptcy court.
Although I initially told you that I would consider filing an adversary proceeding on behalf of my clients in the bankruptcy court, I become convinced over time that this was not the best way to pursue this matter. At the time that I made this proposal, there were no class actions on file in any court with regard to the SSH matter. After many hours of discussions with class action counsel as well as my own extensive legal and factual research about the best place to take your fight to the banks, I became convinced that bankruptcy court was not the best forum. After seeing how things played out, I am now convinced more than ever that I engaged in the correct analysis and made the correct decision.
Q. How did the settlement come about? What was the process?
A. Andrew August and Keven Rooney of Pinnacle Law Group and I began negotiations with SLX's counsel in mid-2008. After numerous telephone calls, e-mails, letters and in person meetings, we were approached by SLX’s counsel who inquired if we were interested in participating in a mediation to seek a negotiated settlement of the case. We agreed and the parties agreed to use Judge William Cahill (Ret.) in San Francisco to facilitate settlement discussions. In September 2008 we had our first mediation session with Judge Cahill. A Class Representative and Dan Reed were present and part of the mediation team. I attended by phone from Los Angeles. Although there was initial agreement on using FAA certifications as a basis for the settlement (largely because the information with the FAA was objectively verifiable) after more than 12 hours, we could not reach any common ground on the amount of debt forgiveness, interest rate reduction or other essential terms and we therefore adjourned the mediation. We then sent SLX a letter stating that we no longer were interested in discussing settlement given its unacceptable and intransigent positions on these crucial issues. In response to this letter, Judge Cahill contacted the parties and persuaded the parties to attend a second mediation session in November 2008. At this session, which also lasted in excess of 12 hours, progress was made but still no agreement was reached. The parties returned in December 2008 for a third session but again, no agreement was reached. Judge Cahill thereafter presented what he thought was a fair settlement for all parties and presented it to the counsel. Only then were the material terms agreed to.
For the next 10 months Class Counsel, myself, Dan Reed and Counsel for SLX negotiated the details of the written settlement agreement and related documents. Thereafter Attorneys General of a Multi-State Task force investigating SSH reviewed the settlement agreement and negotiated additional modifications as well as their own agreement.
Although SLX expressly denies any wrongdoing in the settlement, the amount of debt forgiveness achieved (more than $112 million dollars in principal alone) is to the best of our knowledge unprecedented in the world of student loan modification. While we do not know for certain SLX’s reasoning for agreeing to the terms of this settlement or its agreement with the Attorneys General, it is reasonable to assume SLX considered the factual allegations made in the course of our lawsuit including its failure to conduct adequate due diligence into SLX before making the loans, not ensuring the education and training was being provided before disbursing the loan proceeds to SLX and not adequately monitoring the students’ progress.
Q What role did Michael Berger and/or Dan Reed play in negotiating the terms of the settlement?
A. I played in integral role in our successful battle with the SSH Trustee to obtain a complete copy of the SSH computer system and in negotiating and drafting the terms of the settlement agreement dealing with the bankruptcy issues. I met and negotiated with counsel for SLX both with and without other Plaintiff's counsel. Dan Reed attended the mediation in San Francisco that eventually resulted in the settlement and has assisted Class Counsel in negotiating and drafting the settlement agreement and advising his personal clients on the terms of the settlement.
Q Can you discharge your student loan obligation to Student Loan Xpress by filing bankruptcy?
A. In a word, no. In general, student loans can NOT be discharged in bankruptcy absent a very difficult to make showing of "undue hardship." After extensive research, all Plaintiff's counsel agree that the Student Loan Xpress loans are in fact student loans that are NOT discharged by the mere filing of a bankruptcy. To even attempt to discharge these loans in bankruptcy, the debtor must file a separate Adversary Proceeding (a lawsuit against the lender within the bankruptcy case)and prove that repaying the debt would constitute "undue hardship." An example of undue hardship would be that the debtor is permanently disabled and will never be able to repay the loan. Temporary unemployment or low income is NOT undue hardship.
I recently reviewed a bankruptcy court decision in Texas involving a Silver State Helicopters student who went to the trouble and expense of filing an Adversary Proceeding to try to discharge his SLX loan. The court granted summary judgment against the SSH student and denied his request to discharge the debt to SLX.
While we have succeeded in several instances in winning these cases for students who attended other schools and were unable to work due to permanent physical or mental problems, in each case we charged a fee $10,000.00 in addition to the $2,000.00 fee for the bankruptcy itself. We also paid expert witnesses to document the disability. It was not cheap, easy or quick. These adversary proceedings are separate lawsuits within the bankruptcy case, and require all the work of a separate lawsuit including, but not limited to, the preparation of a summons, notice of status conference and complaint, discovery, including written interrogatories, requests for production of documents, requests for admission and depositions, status conferences, mediations, pre-trial and trial. Numerous motions may be involved as well. In short, don't count on bankruptcy getting you out of your debt to SLX. For a free, expert, personalized analysis as to whether or not you can meet this undue hardship standard, call me.
Q. What has Michael Berger been doing with regards to the SSH bankruptcy cases?
A. I have monitored both SSH bankruptcy cases from the very start. In addition to filing proofs of claim for all of my clients, I have reviewed all of the documents filed in the 2 cases and in the related adversary proceeding cases. To date, more than 1710 documents have been filed in the lead SSH case. I have been in regular contact with counsel for the Trustee and have reviewed all of the Proofs of Claim filed in the 2 cases.
Q. What is my proof of claim in the SSH bankruptcy worth?
A. My best estimate is that each one of the former SSH students proof of claim will be worth somewhere between $0 and $3,000.00. No one else has been willing to provide a dollar estimate. I am in regular contact with Tony Zmaila, the attorney for the Trustee. I review documents filed in the SSH bankruptcy cases every day. Here is where we stand: (a) Most assets of the estate have already been liquidated for the benefit of the secured lender Orix (b)Orix, the secured lender, has received most of its money back, but is still owed several million dollars (c) the bankruptcy estate is currently administratively insolvent, meaning that there is not enough money to pay all of the claims for legal fees, trustees fees, administrative rent, etc. that must be paid before any distribution is made to unsecured creditors; (d) The Trustee and Trustee's counsel have not objected to any of the former student's proof of claims because there is no point in doing so unless there is going to be any money for unsecured creditors; (e)Legal costs continue to rise, with additional recoveries for the estate being uncertain; (f) There is not telling if and when any distribution to creditors will be made; (g) There are more than $450,000,000 in unsecured claims against the SSH estate; If any distribution is made to former SSH students, priority claims will be paid before general unsecured claims. Unlike most of the proofs of claims prepared by other attorneys or by former students on their own, the proofs of claim that I prepared for my clients all included a priority claim for the maximum amount allowed for services paid for but not received: $2,425.00. It is this priority claim that is largely responsible for the high end of the range that I have set forth hereinabove. Priority claims are paid ahead of general unsecured claims.
Q. Which is worth more to me, the discount that the class action settlement gives me on my student loan or my proof of claim?
A. This is an easy question. Based on all of the information that is available to me,the value of the discount on the student loan far exceeds the value of the proof of claim in every case. As an example, if you received no certifications (75% discount) or one flight certification (60% discount) and you owe $70,000.00 to SLX, the savings to you before considering additional discounts for early payments or reduced interest rates is between $42,000 and $52,500.00. The value of your proof of claim is somewhere between $0 and $3,000.00. Giving up your proof of claim for this discount, something that is required under the proposed SLX class action agreement, is a good deal for you and is somthing that I would do myself if I was in your situation.
Q. Will the Bankruptcy of CIT Group have an effect on the proposed settlement?
A. No one knows. My best guess is that it will not have any impact on the proposed settlement.
Q. If SLX files bankruptcy, will that wipe out my debt to SLX?
A. No. The debt would then be payable to the bankruptcy estate of SLX. It is possible that the debt could be sold to a third party that would then try to collect the debt.
Q. Do I have to accept the proposed settlement if I am a class action member?
A. No, you can accept it or opt out of it. I recommend that you accept it, but if you are my client I will do my best for you either way. The problem with opting out is that you are betting that you can do better than all of plaintiffs' counsel and the attorney generals from 12 states have been able to do. Counsel for SLX has specifically stated that they will NOT offer more favorable terms to those that opt out. You will have to face the very real risk of being sued individually and the very real risk of SLX getting a judgment against you for the full amount of principal + attorneys fees and costs, with no discount.
Q. If I opt out of the class action settlment now, can I come back and accept it later?
A. No.
Q. If I am your client in the SSH matter, what is included in your representation of me and what is not included?
A. Included matters include (a) all negotiations with your SSH student loan lenders, regardless of whether it is SLX, KeyBank, Citibank, or as it is in a few cases, Sallie Mae or Deutsche Bank; (b) the filing and defense of your proof of claim in the Bankruptcy Court; (c) the monitoring of the SSH bankruptcy, and, if appropriate, any other action taken in the SSH bankruptcy case; (d) advice regarding the class action cases and my cooperation with class action counsel; (e) my cooperation with all governmental agencies investigation SSH, Airola, Pickett, EOS, and all related entities; (f) my ongoing efforts to get relief for you any way that I can, including political appeals; and, if appropriate, group litigation against KeyBank. For now, I am cooperating with class action counsel in its litigation against KeyBank, but I have reserved the right to file my own separate action if class action counsel is unable to achieve satisfactory results.
Matters that are not included in the $800.00 flat fee that each one of my SSH clients paid me: (a) The filing a personal bankruptcy for the former student (For this service, I charge an additional fee of $2,000.00 + 299.00 filing fee. This service is only available for my California clients);
(b) The filing of an Adversary Proceeding against your student loan lender within a bankruptcy proceeding (This is not recommended absent a showing of undue hardship and is subject to the payment of a $10,000.00 flat fee if I believe that you can in fact satisfy the undue hardship standard); (c) The defense of a lawsuit against you by your student loan lender (this is a real possibility for those who opt out of the class action settlement).
Q. Why should I agree to pay anything at all to SLX?
A. Because of the very real risk that if you turn down this settlement offer, you will may to pay much more later. I know that some of you feel that you should not have to pay any money to SLX. I am very proud and happy to have helped to achieve 100% debt forgiveness for my Citibank clients, and I sincerely wish that I could have done this for my SLX clients too. This simply was not possible in this case, despite my best efforts and the best efforts of class action counsel, other
Plaintiffs' counsel, and the attorney generals of 12 states. Each lender had separate facts. Thousands of documents have been reviewed, but there has been no "smoking gun" that would make it likely in my opinon that we could ever do better than the settlement offer that we now have. This case poses very unique risks for all parties. Many of the legal issues are novel ones that could be decided against you. Indeed, as my KeyBank clients are aware, KeyBank has refused to make any real settlement offer because it believes it will prevail on the legal issues (which are being litigated in the California federal district court and the 9th Circuit Court of Appeals by Pinnacle Law Group). Most importantly, the reality is that even if we prevailed at a trial, I cannot say the outcome would have been better because a judge could conclude that almost all of the students received some tangible or intangible benefit for which they should have to pay money. For all of these reasons, I strongly advise you to participate in the settlement.
Q. Is Michael Berger receiving any fee from SLX in connection with the proposed settlement?
A. No.
Q. How can I contact class action counsel to ask them questions about the settlement agreement?
A. Send your questions to settlementquestions@gmail.com.
Q. Will Michael Berger be attending any of the Town Hall Meetings to Discuss and Explain the Settlement Agreement?
A. Yes, I will be attending the Town Hall Meeting currently scheduled for Sunday, January 10, 2009 at 2:00 pm at the Long Bach Marriot Hotel, 4700 Airport Plaza Drive, Long Beach, CA 90815. I will answer questions at the meeting and will stay as long as needed after the meeting until each and every student attending has my answer to any question that he or she has.
Tuesday, November 24, 2009
Questions About The Class Action Settlement
All former students of Silver State Helicopters with questions about the proposed class action settlement with Student Loan Xpress are invited to e-mail their questions to settlementquestions@gmail.com. This is a special e-mail address set up by class action counsel for this purpose. In addition, in person meetings with former SSH students and class action counsel are being set up for January, 2010 for Fort Lauderdale, Jacksonville, Melbourne, Oakland, Long Beach, Las Vegas, Salt Lake City and Poughkeepsie. I will be answering questions and giving my opinions at the Long Beach, CA meeting.
All clients of mine with questions about the proposed settlement are invited to contact me directly. Many of you have all ready done so. Every class member will have a chance to opt out of the proposed settlement agreement. If you do not like the agreement and think that you can do better, you will NOT be forced to accept the proposed settlement. You should wait until you have received all relevant information before you make this decision.
For former SSH students that are not in the class, it is important for you to know that class counsel do NOT represent you. You will not be covered by the class action settlement. This applies also to all class members who reject the proposed settlement. You will want to have the best possible legal representation to help you in resolving your ongoing SSH problems. I represent many students in this category. I am still signing up a limited number of former SSH students, including students that left SSH prior to its bankruptcy filing, students that are currently in bankruptcy, students with Loans from KeyBank, and students that paid off their SLX loans.
All clients of mine with questions about the proposed settlement are invited to contact me directly. Many of you have all ready done so. Every class member will have a chance to opt out of the proposed settlement agreement. If you do not like the agreement and think that you can do better, you will NOT be forced to accept the proposed settlement. You should wait until you have received all relevant information before you make this decision.
For former SSH students that are not in the class, it is important for you to know that class counsel do NOT represent you. You will not be covered by the class action settlement. This applies also to all class members who reject the proposed settlement. You will want to have the best possible legal representation to help you in resolving your ongoing SSH problems. I represent many students in this category. I am still signing up a limited number of former SSH students, including students that left SSH prior to its bankruptcy filing, students that are currently in bankruptcy, students with Loans from KeyBank, and students that paid off their SLX loans.
Thursday, November 19, 2009
Court Grants Preliminary Approval of Class Action Settlement With Student Loan Express
Earlier today, United States District Court Judge Steven D. Merryday signed an Order granting preliminary approval to the proposed class action settlement with Student Loan Xpress. A copy of the docket entry is set forth herein:
The following transaction was entered on 11/19/2009 at 2:04 PM EST and filed on 11/19/2009
Case Name: Holman v. Liberty Bank, N.A.
Case Number: 8:08-cv-305
Filer:
Document Number: 87
Docket Text:
ORDER granting [78], [82], [83]--motions re approval of class action settlement, approval of the manner and form of notice to class members, approval of the claim form, approval and establishment of proposed schedule for final confirmation of settlement, preliminary injunction to preclude parallel action, a conditional certification of the class for settlement purposes, and appointment of lead counsel for the settlement class and class representative; retaining jurisdiction of this matter for all purposes; directing that notice to class members shall be mailed by 12/30/2009; providing that class members file claims or objections by 2/13/2010; providing that filings supporting settlement or responding to objections shall be filed by 3/15/2010; scheduling a fairness hearing for 3/22/2009 at 8:30 a.m. Signed by Judge Steven D. Merryday on 11/19/2009. (BK)
A full copy of the Judge's Order is set forth herein:
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
MICHAEL HOLMAN, et al., on behalf of
themselves and all others similarly
situated,
Plaintiffs,
v. CASE NO.: 8:08-cv-305-T-23MAP
STUDENT LOAN XPRESS, INC.,
Defendant.
__________________________________/
ORDER AND PRELIMINARY INJUNCTION
The parties jointly move for (1) preliminary approval of a class action settlement,
(2) approval of the “manner and form of notice” to class members, (3) approval of the
claim form, and (4) approval and establishment of a proposed schedule for final
confirmation of the class action settlement (Doc. 78). Additionally, the parties move for
(5) a preliminary injunction to preclude any parallel action pending review of the
proposed settlement (Doc. 82), (6) a conditional certification of the class for settlement
purposes, and (7) the appointment of both lead counsel for the settlement class and
class representatives (Doc. 83).
Background
1. General Allegations
The plaintiffs sue, on behalf of themselves and others similarly situated, the
defendant, Student Loan Xpress, Inc., for (1) a violation of the Ohio Retail and
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 1 of 13
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Installment Sales Act, Sections 1317.01-.99, Ohio Revised Code, (2) aiding and
abetting fraud, and (3) negligent misrepresentation (Doc. 77).
The plaintiffs’ claims derive from the defendant’s partnership with Silver State
Helicopters, LLC (“Silver State”), an unaccredited helicopter flight training school. The
plaintiffs allege that Silver State promised each student a flight instructor certification
within eighteen months of the student’s enrollment. Silver State charged a total tuition
of approximately $70,000. The defendant worked with Silver State and solicited a
private loan application from each student in order to facilitate the student’s enrollment
in Silver State. After approving a student’s loan application, the defendant disbursed
the total loan amount to Silver State. However, rather than investing the money in
either equipment or faculty for helicopter flight training, each executive officer of Silver
State misappropriated the money for the officer’s personal use. As a result, Silver
State’s business functioned like a “ponzi scheme”—Silver State educated the school’s
first group of students by recruiting additional students. Silver State perpetrated the
scheme by misrepresenting or concealing (1) “anticipated tuition costs,”
(2) “employment opportunities,” (3) “the time frame for receiving [Federal Aviation
Administration (“FAA”)] ratings;” (4) Silver State’s “capability to provide adequate
equipment, proper training[,] and sufficient maintenance;” and (5) Silver State’s
“intended and actual use of the loan proceeds.” (Doc. 77)
To facilitate Silver State’s scheme, the defendant solicited loan applications
during each Silver State recruiting event. In order to insulate itself from liability, the
defendant purposefully failed to notify each student that the loan agreement was subject
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 2 of 13
1 Notice is required by the Federal Trade Commission’s (“FTC”) “Holder Rule.” See 16 C.F.R. §
433.3.3.
2 Excluded from the class is “(i) any borrower or co[-]signer whose loan has a zero balance as of
the Preliminary Approval Order date; (ii) any borrower or co[-]signer who would have no balance owing on
the loan as of the Preliminary Approval Order Date as a result of the unconditional and conditional debt
forgiveness made available under the settlement; (iii) any borrower or co[-]signer who has a Chapter 7, 11
or[,] 13 case pending as of the Preliminary Approval Order Date, and the corresponding borrow or co[-
]signer or such person; (iv) any borrower or co[-]signer who validly requests exclusion therefrom in
accordance with the procedures ordered by the Court; (v) any borrower or co[-]signer who executed a
release to resolve his/her potential claims against [the defendant] arising out of Silver State on or before
the Preliminary Approval Order Date, and the corresponding borrower or co[-]signer of such person; and
(vi) any borrower or co[-]signer included on a government list of known or suspected terrorists or other
individuals, entities or organizations of concern, including persons appearing on the United States
Department of the Treasury, Office of Foreign Assets Control List of Specially Designated Nationals and
Blocked Persons, and the corresponding borrower or co[-]signer of such person.” (Doc. 78-2, § 1.8)
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to any defense applicable to Silver State for failing to provide the promised educational
service.1 (Doc. 77) Omitting notice from the loan agreement allowed the defendant to
argue that the defendant was not subject to any defense arising from Silver State’s
failure to educate a student. In exchange for the defendant’s facilitating and
disregarding Silver State’s fraudulent scheme, the defendant collected a substantial
profit from the high interest rate on each student loan. On February 4, 2008, Silver
State ceased operating and filed for bankruptcy. When Silver State closed, many
students had obtained loans in order to pay Silver State’s full tuition, but only a small
percentage had received the promised education.
2. The Proposed Class & Subclass
The plaintiffs seek conditional certification of a class for settlement purposes. The
proposed class includes “(a) all persons who obtained a loan originated by Liberty Bank
to finance the payment of tuition to Silver State, whose loan is held by [the defendant]
as of the Preliminary Approval Order Date, and who were enrolled at Silver State as of
February 4, 2008[,] and (b) all persons who co[-]signed such loans.” (Doc. 78-2, § 1.8)2
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 3 of 13
3 “Subclass One” includes each class member that received no FAA certification, “Subclass Two”
includes each class member that received an FAA certification, “Subclass Three” includes each class
member that received two FAA certifications, “Subclass Four” includes each class member that received
three FAA certifications, “Subclass Five” includes each class member that received four FAA certifications,
and “Subclass Six” includes each class member that co-signed a loan. (Doc. 78-2, § 1.62-1.67)
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Pursuant to Rule 23(c)(5), Federal Rules of Civil Procedure, the proposed class is
divided into six subclasses “based on the number of Federal Aviation Administration
(“FAA”) certifications or ratings a student received before Silver State closed.”3
(Doc. 83)
Discussion
1. Conditional Class Certification
“A class may be certified ‘solely for purposes of settlement [if] a settlement is
reached before a litigated determination of the class certification issue.’” Borcea v.
Carnival Corp., 238 F.R.D. 664, 671 (S.D. Fla. 2006) (quoting Woodward v. NOR-AM
Chem. Co., 1996 WL 1063670, *14 (S.D. Ala. 1996)); see also Amchem Products, Inc.
v. Windsor, 521 U.S. 591, 618-20 (1997). However, the requirements of Rule 23,
Federal Rules of Civil Procedure, that serve “to protect absentees by blocking
unwarranted or overbroad class definitions [ ]demand undiluted, even heightened,
attention in the settlement context.” 521 U.S. at 620. The plaintiffs bear the burden of
establishing that each requirement of Rule 23(a) and at least one requirement of Rule
23(b) is satisfied. Rutstein v. Avis Rent-A-Car Sys., 211 F.3d 1228, 1233 (11th
Cir. 2000). Rule 23(a) permits class certification only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3) the claims or
defenses of the representative parties are typical of the claims or defenses of
the class; and (4) the representative parties will fairly and adequately protect
the interests of the class.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 4 of 13
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The numerosity requirement of Rule 23(a) is satisfied by the impracticability of
joinder, which is generally presumed if a putative class amounts to more than forty
individuals. Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546, 1553 (11th Cir. 1986); see
also Jones v. Firestone Tire and Rubber Co., Inc., 977 F.2d 527, 534 (11th Cir. 1992)
(finding that fewer than twenty-one individuals is generally inadequate). Commonality is
satisfied by the existence of “‘at least one issue affecting all or a significant number of
proposed class members.’” Fresco v. Auto Data Direct, Inc., 2007 WL 2330895, *2
(S.D. Fla. 2007) (quoting Fabricant v. Sears Roebuck, 202 F.R.D. 310, 313 (S.D. Fla.
2001)). Typicality is satisfied by showing the existence of “‘a sufficient nexus . . .
between the claims of the named representative and those of the class at large.”
Hines v. Widnall, 334 F.3d 1253, 1256 (11th Cir. 2003); Murray v. Auslander, 244 F.3d
807, 811 (11th Cir. 2001) (finding that “[a] class representative must possess the same
interest and suffer the same injury as the class members in order to be typical under
Rule 23(a)(3).”). Finally, class counsel and the class representatives are adequate
representatives of the class if (1) “‘plaintiffs’ counsel are qualified, experienced, and
generally able to conduct the proposed litigation’” and (2) the plaintiffs lack “‘interests
antagonistic to those of the rest of the class.’” Kirkpatrick v. J.C. Bradford & Co., 827
F.2d 718, 726 (11th Cir. 1987) (quoting Griffin v. Carlin, 755 F.2d 1516, 1532 (11th
Cir. 1985)).
In this action, the proposed settlement class satisfies the requirements of
Rule 23(a). The proposed class includes approximately 2,900 individuals. Each
individual was enrolled at Silver State as of February 4, 2008, when Silver State ceased
operating. The alleged harm to each individual arises from Silver State’s closure, and
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each individual’s promissory note contains the same choice of law provision. The
plaintiffs share the same interest, legal claim, and alleged injury as the proposed class
and subclass. (Doc. 83) Furthermore, each named plaintiff’s interest aligns with the
that of the proposed class and a division of the proposed subclass. Specifically, each
plaintiff (1) was either a student at Silver State when Silver State ceased operating or
co-signed a loan for a student at Silver State and (2) “vigorously pursued relief” in
reaching the settlement agreement on behalf of the entire class. (Doc. 83) The
plaintiffs’ counsel (the proposed class counsel) understands the plaintiffs’ claim,
possesses experience handling consumer and class action litigation, and stands “ready,
willing, and able to devote the resources necessary to litigate this case vigorously.”
(Doc. 83)
Rule 23(b) defines each type of permissible class action. Relevant to this action
is Rule 23(b)(3), which permits class certification upon a finding that “the questions of
law or fact common to class members predominate over any questions affecting only
individual members, and that a class action is superior to other available methods for
fairly and efficiently adjudicating the controversy.” Essentially, the rule requires a
determination of “whether proposed class[] [is] sufficiently cohesive to warrant
adjudication by representation.” 521 U.S. at 623.
In this action, the proposed settlement class is sufficiently cohesive and common
issues of fact and law predominate over any individual issue. Each individual was a
student at Silver State and obtained a loan, which the defendant holds, from Liberty
Bank. Each individual suffered the same alleged injury, in that no individual received a
complete education, at the time that Silver State ceased operating. Each individual
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 6 of 13
4 Contact information for the settlement administrator is provided in the notice to class members.
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seeks relief under the same legal theory and each individual’s promissory note contains
the same choice of law provision. To date, each action filed on behalf of a former Silver
State student is a collective or class action seeking relief for a financial obligation the
student incurred in exchange for a service that Silver State failed to deliver. As a
practical matter, requiring multiple actions by each student or several groups of students
would be financially burdensome and judicially inefficient.
Accordingly, the proposed class is CONDITIONALLY CERTIFIED for settlement
purposes. The settlement class includes “(a) all persons who obtained a loan originated
by Liberty Bank to finance the payment of tuition to Silver State, whose loan is held by
[the defendant] as of the Preliminary Approval Order Date, and who were enrolled at
Silver State as of February 4, 2008[,] and (b) all persons who co[-]signed such loans.”
In the event that the settlement fails to receive final approval, conditional certification is
revoked and the plaintiffs must move for class certification for the purpose of litigation.
Any member may request exclusion from the settlement class by contacting the
settlement administrator.4 The request shall include the member’s (1) full name,
(2) current address, (3) telephone number, (4) SLX loan number, and (4) signed
statement requesting exclusion from the settlement class in this action. Failure to timely
request exclusion from the class will render binding as to each class member any
judgment concerning the proposed settlement in this action.
Any member not requesting exclusion may object in writing to any term of the
proposed settlement or to class certification by contacting the settlement administrator.
An objection shall include the objecting member’s (1) full name, (2) current address,
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 7 of 13
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(3) telephone number, (4) SLX loan number, (5) objection; (6) notice of an intent to
appear that the final fairness hearing, if the member wishes to present the member’s
objection; and (6) any evidence or supporting document for the court’s consideration.
Any objecting member that notifies the settlement administrator of an intent to appear
must include the name, address, and telephone number of the objecting member’s
attorney (if applicable). Failure to notify will preclude, except for good cause shown, the
objecting member from presenting the objection at the final fairness hearing.
2. Appointment of Class Counsel & Class Representatives
Rule 23(g), Federal Rules of Civil Procedure, requires the appointment of class
counsel upon certification of a class. In appointing class counsel, the factors
considered are (1) “the work counsel has done in identifying or investigating potential
claims in the action;” (2) “counsel’s experience in handing class actions, other complex
litigation, and the types of claims asserted in the action;” (3) “counsel’s knowledge of the
applicable law;” and (4) “the resources that counsel will commit to representing the
class.” Considering the plaintiffs’ motion (Doc. 83), counsel’s experience with complex
litigation, counsel’s knowledge of the claim and applicable law, and counsel’s
committing the necessary time and resources to this matter, Christopher Casper of
James, Hoyer, Newcomer & Smiljanich, P.A. and Kevin F. Rooney of the Pinnacle Law
Group, LLP, are appointed as class counsel.
The plaintiffs, Michael Holman, Robert Perrotta, Kevin Wilhemy, Matthew Arnold,
Christopher Korte, and Deborah Pechacek, are appointed to represent the class.
Additionally, Robert Perrotta is appointed to represent “Subclass One,” Michael Holman
is appointed to represent “Subclass Two,” Kevin Wilhemy is appointed to represent
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 8 of 13
5 The defendant’s defenses include, for example, (1) preemption of the plaintiffs’ claims under the
National Bank Act, (2) the lack of a private right of action under the FTC Holder Rule, and (3) “numerous
complex individualized issues of liability, causation[,] and damages” that predominate over issues common
the proposed class. (Doc. 78, pp. 26-28)
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“Subclass Three,” Matthew Arnold is appointed to represent “Subclass Four,”
Christopher Korte is appointed to represent “Subclass Five,” and Deborah Pechacek is
appointed to represent “Subclass Six.”
3. Preliminary Settlement Approval
Rule 23(e), Federal Rules of Civil Procedure, permits approval of a class action
settlement if the settlement is “fair, reasonable, and adequate.” See Strube v. Am.
Equity Inv. Life Ins. Co., 226 F.R.D. 688, 697 (M.D. Fla. 2005) (Fawsett, J.). Approval is
generally a two-step process in which a “preliminary determination on the fairness,
reasonableness, and adequacy of the proposed settlement terms” is reached. See
DAVID F. HERR, ANNOTATED MANUAL FOR COMPLEX LITIGATION § 21.632 (4th ed. 2008).
The factors considered are (1) the influence of fraud or collusion on the parties’
reaching a settlement, (2) “the likelihood of success at trial,” (3) “the range of possible
recovery,” (4) “the complexity, expense[,] and duration of litigation, (5) “the substance
and amount of opposition to the settlement,” and (6) “the stage of proceedings at which
the settlement was achieved.” Bennet v. Behring Corp., 737 F.2d 982, 986 (11th
Cir. 1984).
In this action, no apparent fraud or collusion influenced the parties’ reaching a
settlement. The settlement is the product of both an arm’s length, “protracted and
contentious” negotiation with a mediator and two “mediator’s proposals.” (Doc. 78)
Success at trial is uncertain because the defendant possesses legal and factual
defenses to the plaintiffs’ claims as well as several grounds for challenging class
certification.5 The range of possible recovery under the proposed settlement is
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 9 of 13
6 The parties assert (Doc. 78) that twelve state attorneys general support the settlement. Also
supporting the settlement are two attorneys retained by two groups of Silver State students and various
class members. (Doc. 78, at 32) (Doc. 79).
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substantial and includes (1) conditional and unconditional debt forgiveness based on the
number of FAA certifications that a student received, (2) an early re-payment refund;
(3) a freeze on interest accrual from February 4, 2008, until final settlement approval;
(4) a reduced monthly re-payment rate, (5) amended reports to credit rating agencies;
(6) the payment of any attorneys’ fee, cost, or expense; (7) additional compensation to
each class representative not to exceed $5,000.00 per class representative; and (8) the
payment of any cost of notice to the class or of settlement administration. (Doc. 78-2,
§ 3.3) The combined conditional and unconditional debt forgiveness ranges from
seventy-five percent for a member of Subclass One to twenty percent for a member of
Subclass Five. The total unconditional debt forgiveness amounts to more than
$11,000,000.00 (Doc. 78-2, § 3.3.3) and the total conditional debt forgiveness amounts
to more than $100,000,000.00 (Doc. 78-2, § 3.3.4).
Furthermore, full litigation of this case would be lengthy, expensive, and highly
complex. The aggregate outstanding debt of the settlement class exceeds
$175,000,000.00 and class counsel has already incurred $100,000.00 in expenses. In
light of the high stakes involved, both parties are highly motivated to “aggressively” and
“vigorously” litigate this case. (Doc. 78, at 32) Additionally, substantial support exists
for the settlement,6 and the parties reached a settlement only after extensive
investigation, research, and negotiation.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 10 of 13
7 Shealy v. Student Loan Express, Inc., No. 3:08-cv-03057-JFA (D.S.C. 2008); Hyatt v. Student
Loan Express, Inc., No. C09-1324-TSZ (W.D. Wa. 2009); Kilgore v. KeyBank National Assoc., No. C-08-
02958 (N.D. Cal. 2009); Mason v. KeyBank National Assoc., No. A 565943; Caney v. Airola, ADV 2008-
141 (Feb. 15, 2008) (settled); Elrod v. Airola, No. 08-A-10868-1 (July 25, 2008) (settled).
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Accordingly, the proposed settlement is preliminarily approved as a “fair,
reasonable, and adequate” compromise of the plaintiffs’ claim.
4. Preliminary Injunction
Pursuant to Rule 23(d), Federal Rules of Civil Procedure, and the All-Writs Act,
28 U.S.C. § 1651, the parties move (Doc. 82) for a preliminary injunction to preclude
any parallel or overlapping action pending final approval of the proposed settlement.
The All-Writs Act provides authority “to enjoin a party to litigation before it from
prosecuting an action in contravention of a settlement agreement over which the district
court has retained jurisdiction.” Henson v. Ciba-Geigy Corp., 261 F.3d 1065, 1068
(11th Cir. 2001); Demint v. Nationsbank Corp., 208 F.R.D. 639, 644 n.8 (M.D. Fla.
2002). Accordingly, “[f]ederal courts may invoke the authority conferred by the All-Writs
Act to enjoin parties from separate litigation to protect the integrity of a judgment
entered in a class action and to avoid re[-]litigation of issues . . . .” 208 F.R.D. at 644
n.8. In the context of a conditional class certification and an impending settlement,
“[t]he threat to the federal court’s jurisdiction posed by parallel state actions is
particularly significant . . . . “ In re Diet Drugs, 282 F.3d 220, 236 (3rd Cir. 2002)
(describing complex litigation as “especially vulnerable to parallel state actions that may
‘frustrate the district court’s efforts to craft a settlement in the multi-district litigation
before it’ . . . thereby destroying the ability to achieve the benefits of consolidation.”)
(citation omitted).
In this instance, the defendant faces several actions7 by former Silver State
students and a high probability exists that additional actions will be filed. (Doc. 82)
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Accordingly, a preliminary injunction enjoining any overlapping or parallel action is
necessary to preserve this court’s jurisdiction to administer and enter final judgment on
the proposed settlement agreement.
5. Notice to Class Members
Rule 23(c)(2)(B), Federal Rules of Civil Procedure, requires notice to members
of a class certified under 23(b)(3). Notice must consist of the “best notice that is
practicable under the circumstances.” Furthermore, notice “must clearly and concisely
state in plain, easily understood language:”
(i) the nature of the action;(ii) the definition of the class certified; (iii) the class
claims, issues, or defenses; (iv) that a class member may enter an
appearance through an attorney if the member so desires; (v) that the court
will exclude from the class any member who requests exclusion; (vi) the time
and manner for requesting exclusion; and (vii) the binding effect of a class
judgment on members under Rule 23(c)(3).
In this action, the parties submit the proposed notice material for review and approval.
(Doc. 78-1, Ex. 1-6) The proposed notice and claim form appear to state all of the
required information in a relatively clear and concise manner and otherwise satisfy the
requirements of Rule 23(c). The parties’ proposed method of notice consists of the
settlement administrator’s mailing notice by first class mail to the most current mailing
address of each member of the settlement class. (Doc. 78)
Because the proposed method of notice is reasonable and the notice material
meets the requirements of Rule 23(c), the “manner and form” of notice to class
members is approved.
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Conclusion
Accordingly, the parties motions’ (Docs. 78, 82, & 83) are GRANTED. The
plaintiffs, any class member, and any person acting on behalf of a class member are
ENJOINED from prosecuting, pending this court’s review of the proposed class action
settlement, any claim resolved by or subject to the proposed settlement. The court shall
retain jurisdiction over this matter for all purposes. Furthermore, (1) notice to each class
member shall be mailed no later than December 30, 2009; (2) each class member shall
object to the proposed settlement, object to the class member’s number of FAA
certifications, file a claim, or request exclusion from the settlement no later than
February 13, 2010; (3) any party that wishes to support the settlement or respond to
any objection to the settlement shall file any supporting or responding paper by
March 15, 2010, (4) a final fairness hearing on the proposed settlement is set for
March 22, 2010, at 8:30 a.m..
ORDERED in Tampa, Florida, on November 19, 2009.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 13 of 13
The following transaction was entered on 11/19/2009 at 2:04 PM EST and filed on 11/19/2009
Case Name: Holman v. Liberty Bank, N.A.
Case Number: 8:08-cv-305
Filer:
Document Number: 87
Docket Text:
ORDER granting [78], [82], [83]--motions re approval of class action settlement, approval of the manner and form of notice to class members, approval of the claim form, approval and establishment of proposed schedule for final confirmation of settlement, preliminary injunction to preclude parallel action, a conditional certification of the class for settlement purposes, and appointment of lead counsel for the settlement class and class representative; retaining jurisdiction of this matter for all purposes; directing that notice to class members shall be mailed by 12/30/2009; providing that class members file claims or objections by 2/13/2010; providing that filings supporting settlement or responding to objections shall be filed by 3/15/2010; scheduling a fairness hearing for 3/22/2009 at 8:30 a.m. Signed by Judge Steven D. Merryday on 11/19/2009. (BK)
A full copy of the Judge's Order is set forth herein:
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
MICHAEL HOLMAN, et al., on behalf of
themselves and all others similarly
situated,
Plaintiffs,
v. CASE NO.: 8:08-cv-305-T-23MAP
STUDENT LOAN XPRESS, INC.,
Defendant.
__________________________________/
ORDER AND PRELIMINARY INJUNCTION
The parties jointly move for (1) preliminary approval of a class action settlement,
(2) approval of the “manner and form of notice” to class members, (3) approval of the
claim form, and (4) approval and establishment of a proposed schedule for final
confirmation of the class action settlement (Doc. 78). Additionally, the parties move for
(5) a preliminary injunction to preclude any parallel action pending review of the
proposed settlement (Doc. 82), (6) a conditional certification of the class for settlement
purposes, and (7) the appointment of both lead counsel for the settlement class and
class representatives (Doc. 83).
Background
1. General Allegations
The plaintiffs sue, on behalf of themselves and others similarly situated, the
defendant, Student Loan Xpress, Inc., for (1) a violation of the Ohio Retail and
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 1 of 13
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Installment Sales Act, Sections 1317.01-.99, Ohio Revised Code, (2) aiding and
abetting fraud, and (3) negligent misrepresentation (Doc. 77).
The plaintiffs’ claims derive from the defendant’s partnership with Silver State
Helicopters, LLC (“Silver State”), an unaccredited helicopter flight training school. The
plaintiffs allege that Silver State promised each student a flight instructor certification
within eighteen months of the student’s enrollment. Silver State charged a total tuition
of approximately $70,000. The defendant worked with Silver State and solicited a
private loan application from each student in order to facilitate the student’s enrollment
in Silver State. After approving a student’s loan application, the defendant disbursed
the total loan amount to Silver State. However, rather than investing the money in
either equipment or faculty for helicopter flight training, each executive officer of Silver
State misappropriated the money for the officer’s personal use. As a result, Silver
State’s business functioned like a “ponzi scheme”—Silver State educated the school’s
first group of students by recruiting additional students. Silver State perpetrated the
scheme by misrepresenting or concealing (1) “anticipated tuition costs,”
(2) “employment opportunities,” (3) “the time frame for receiving [Federal Aviation
Administration (“FAA”)] ratings;” (4) Silver State’s “capability to provide adequate
equipment, proper training[,] and sufficient maintenance;” and (5) Silver State’s
“intended and actual use of the loan proceeds.” (Doc. 77)
To facilitate Silver State’s scheme, the defendant solicited loan applications
during each Silver State recruiting event. In order to insulate itself from liability, the
defendant purposefully failed to notify each student that the loan agreement was subject
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 2 of 13
1 Notice is required by the Federal Trade Commission’s (“FTC”) “Holder Rule.” See 16 C.F.R. §
433.3.3.
2 Excluded from the class is “(i) any borrower or co[-]signer whose loan has a zero balance as of
the Preliminary Approval Order date; (ii) any borrower or co[-]signer who would have no balance owing on
the loan as of the Preliminary Approval Order Date as a result of the unconditional and conditional debt
forgiveness made available under the settlement; (iii) any borrower or co[-]signer who has a Chapter 7, 11
or[,] 13 case pending as of the Preliminary Approval Order Date, and the corresponding borrow or co[-
]signer or such person; (iv) any borrower or co[-]signer who validly requests exclusion therefrom in
accordance with the procedures ordered by the Court; (v) any borrower or co[-]signer who executed a
release to resolve his/her potential claims against [the defendant] arising out of Silver State on or before
the Preliminary Approval Order Date, and the corresponding borrower or co[-]signer of such person; and
(vi) any borrower or co[-]signer included on a government list of known or suspected terrorists or other
individuals, entities or organizations of concern, including persons appearing on the United States
Department of the Treasury, Office of Foreign Assets Control List of Specially Designated Nationals and
Blocked Persons, and the corresponding borrower or co[-]signer of such person.” (Doc. 78-2, § 1.8)
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to any defense applicable to Silver State for failing to provide the promised educational
service.1 (Doc. 77) Omitting notice from the loan agreement allowed the defendant to
argue that the defendant was not subject to any defense arising from Silver State’s
failure to educate a student. In exchange for the defendant’s facilitating and
disregarding Silver State’s fraudulent scheme, the defendant collected a substantial
profit from the high interest rate on each student loan. On February 4, 2008, Silver
State ceased operating and filed for bankruptcy. When Silver State closed, many
students had obtained loans in order to pay Silver State’s full tuition, but only a small
percentage had received the promised education.
2. The Proposed Class & Subclass
The plaintiffs seek conditional certification of a class for settlement purposes. The
proposed class includes “(a) all persons who obtained a loan originated by Liberty Bank
to finance the payment of tuition to Silver State, whose loan is held by [the defendant]
as of the Preliminary Approval Order Date, and who were enrolled at Silver State as of
February 4, 2008[,] and (b) all persons who co[-]signed such loans.” (Doc. 78-2, § 1.8)2
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 3 of 13
3 “Subclass One” includes each class member that received no FAA certification, “Subclass Two”
includes each class member that received an FAA certification, “Subclass Three” includes each class
member that received two FAA certifications, “Subclass Four” includes each class member that received
three FAA certifications, “Subclass Five” includes each class member that received four FAA certifications,
and “Subclass Six” includes each class member that co-signed a loan. (Doc. 78-2, § 1.62-1.67)
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Pursuant to Rule 23(c)(5), Federal Rules of Civil Procedure, the proposed class is
divided into six subclasses “based on the number of Federal Aviation Administration
(“FAA”) certifications or ratings a student received before Silver State closed.”3
(Doc. 83)
Discussion
1. Conditional Class Certification
“A class may be certified ‘solely for purposes of settlement [if] a settlement is
reached before a litigated determination of the class certification issue.’” Borcea v.
Carnival Corp., 238 F.R.D. 664, 671 (S.D. Fla. 2006) (quoting Woodward v. NOR-AM
Chem. Co., 1996 WL 1063670, *14 (S.D. Ala. 1996)); see also Amchem Products, Inc.
v. Windsor, 521 U.S. 591, 618-20 (1997). However, the requirements of Rule 23,
Federal Rules of Civil Procedure, that serve “to protect absentees by blocking
unwarranted or overbroad class definitions [ ]demand undiluted, even heightened,
attention in the settlement context.” 521 U.S. at 620. The plaintiffs bear the burden of
establishing that each requirement of Rule 23(a) and at least one requirement of Rule
23(b) is satisfied. Rutstein v. Avis Rent-A-Car Sys., 211 F.3d 1228, 1233 (11th
Cir. 2000). Rule 23(a) permits class certification only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3) the claims or
defenses of the representative parties are typical of the claims or defenses of
the class; and (4) the representative parties will fairly and adequately protect
the interests of the class.
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The numerosity requirement of Rule 23(a) is satisfied by the impracticability of
joinder, which is generally presumed if a putative class amounts to more than forty
individuals. Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546, 1553 (11th Cir. 1986); see
also Jones v. Firestone Tire and Rubber Co., Inc., 977 F.2d 527, 534 (11th Cir. 1992)
(finding that fewer than twenty-one individuals is generally inadequate). Commonality is
satisfied by the existence of “‘at least one issue affecting all or a significant number of
proposed class members.’” Fresco v. Auto Data Direct, Inc., 2007 WL 2330895, *2
(S.D. Fla. 2007) (quoting Fabricant v. Sears Roebuck, 202 F.R.D. 310, 313 (S.D. Fla.
2001)). Typicality is satisfied by showing the existence of “‘a sufficient nexus . . .
between the claims of the named representative and those of the class at large.”
Hines v. Widnall, 334 F.3d 1253, 1256 (11th Cir. 2003); Murray v. Auslander, 244 F.3d
807, 811 (11th Cir. 2001) (finding that “[a] class representative must possess the same
interest and suffer the same injury as the class members in order to be typical under
Rule 23(a)(3).”). Finally, class counsel and the class representatives are adequate
representatives of the class if (1) “‘plaintiffs’ counsel are qualified, experienced, and
generally able to conduct the proposed litigation’” and (2) the plaintiffs lack “‘interests
antagonistic to those of the rest of the class.’” Kirkpatrick v. J.C. Bradford & Co., 827
F.2d 718, 726 (11th Cir. 1987) (quoting Griffin v. Carlin, 755 F.2d 1516, 1532 (11th
Cir. 1985)).
In this action, the proposed settlement class satisfies the requirements of
Rule 23(a). The proposed class includes approximately 2,900 individuals. Each
individual was enrolled at Silver State as of February 4, 2008, when Silver State ceased
operating. The alleged harm to each individual arises from Silver State’s closure, and
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each individual’s promissory note contains the same choice of law provision. The
plaintiffs share the same interest, legal claim, and alleged injury as the proposed class
and subclass. (Doc. 83) Furthermore, each named plaintiff’s interest aligns with the
that of the proposed class and a division of the proposed subclass. Specifically, each
plaintiff (1) was either a student at Silver State when Silver State ceased operating or
co-signed a loan for a student at Silver State and (2) “vigorously pursued relief” in
reaching the settlement agreement on behalf of the entire class. (Doc. 83) The
plaintiffs’ counsel (the proposed class counsel) understands the plaintiffs’ claim,
possesses experience handling consumer and class action litigation, and stands “ready,
willing, and able to devote the resources necessary to litigate this case vigorously.”
(Doc. 83)
Rule 23(b) defines each type of permissible class action. Relevant to this action
is Rule 23(b)(3), which permits class certification upon a finding that “the questions of
law or fact common to class members predominate over any questions affecting only
individual members, and that a class action is superior to other available methods for
fairly and efficiently adjudicating the controversy.” Essentially, the rule requires a
determination of “whether proposed class[] [is] sufficiently cohesive to warrant
adjudication by representation.” 521 U.S. at 623.
In this action, the proposed settlement class is sufficiently cohesive and common
issues of fact and law predominate over any individual issue. Each individual was a
student at Silver State and obtained a loan, which the defendant holds, from Liberty
Bank. Each individual suffered the same alleged injury, in that no individual received a
complete education, at the time that Silver State ceased operating. Each individual
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 6 of 13
4 Contact information for the settlement administrator is provided in the notice to class members.
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seeks relief under the same legal theory and each individual’s promissory note contains
the same choice of law provision. To date, each action filed on behalf of a former Silver
State student is a collective or class action seeking relief for a financial obligation the
student incurred in exchange for a service that Silver State failed to deliver. As a
practical matter, requiring multiple actions by each student or several groups of students
would be financially burdensome and judicially inefficient.
Accordingly, the proposed class is CONDITIONALLY CERTIFIED for settlement
purposes. The settlement class includes “(a) all persons who obtained a loan originated
by Liberty Bank to finance the payment of tuition to Silver State, whose loan is held by
[the defendant] as of the Preliminary Approval Order Date, and who were enrolled at
Silver State as of February 4, 2008[,] and (b) all persons who co[-]signed such loans.”
In the event that the settlement fails to receive final approval, conditional certification is
revoked and the plaintiffs must move for class certification for the purpose of litigation.
Any member may request exclusion from the settlement class by contacting the
settlement administrator.4 The request shall include the member’s (1) full name,
(2) current address, (3) telephone number, (4) SLX loan number, and (4) signed
statement requesting exclusion from the settlement class in this action. Failure to timely
request exclusion from the class will render binding as to each class member any
judgment concerning the proposed settlement in this action.
Any member not requesting exclusion may object in writing to any term of the
proposed settlement or to class certification by contacting the settlement administrator.
An objection shall include the objecting member’s (1) full name, (2) current address,
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 7 of 13
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(3) telephone number, (4) SLX loan number, (5) objection; (6) notice of an intent to
appear that the final fairness hearing, if the member wishes to present the member’s
objection; and (6) any evidence or supporting document for the court’s consideration.
Any objecting member that notifies the settlement administrator of an intent to appear
must include the name, address, and telephone number of the objecting member’s
attorney (if applicable). Failure to notify will preclude, except for good cause shown, the
objecting member from presenting the objection at the final fairness hearing.
2. Appointment of Class Counsel & Class Representatives
Rule 23(g), Federal Rules of Civil Procedure, requires the appointment of class
counsel upon certification of a class. In appointing class counsel, the factors
considered are (1) “the work counsel has done in identifying or investigating potential
claims in the action;” (2) “counsel’s experience in handing class actions, other complex
litigation, and the types of claims asserted in the action;” (3) “counsel’s knowledge of the
applicable law;” and (4) “the resources that counsel will commit to representing the
class.” Considering the plaintiffs’ motion (Doc. 83), counsel’s experience with complex
litigation, counsel’s knowledge of the claim and applicable law, and counsel’s
committing the necessary time and resources to this matter, Christopher Casper of
James, Hoyer, Newcomer & Smiljanich, P.A. and Kevin F. Rooney of the Pinnacle Law
Group, LLP, are appointed as class counsel.
The plaintiffs, Michael Holman, Robert Perrotta, Kevin Wilhemy, Matthew Arnold,
Christopher Korte, and Deborah Pechacek, are appointed to represent the class.
Additionally, Robert Perrotta is appointed to represent “Subclass One,” Michael Holman
is appointed to represent “Subclass Two,” Kevin Wilhemy is appointed to represent
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 8 of 13
5 The defendant’s defenses include, for example, (1) preemption of the plaintiffs’ claims under the
National Bank Act, (2) the lack of a private right of action under the FTC Holder Rule, and (3) “numerous
complex individualized issues of liability, causation[,] and damages” that predominate over issues common
the proposed class. (Doc. 78, pp. 26-28)
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“Subclass Three,” Matthew Arnold is appointed to represent “Subclass Four,”
Christopher Korte is appointed to represent “Subclass Five,” and Deborah Pechacek is
appointed to represent “Subclass Six.”
3. Preliminary Settlement Approval
Rule 23(e), Federal Rules of Civil Procedure, permits approval of a class action
settlement if the settlement is “fair, reasonable, and adequate.” See Strube v. Am.
Equity Inv. Life Ins. Co., 226 F.R.D. 688, 697 (M.D. Fla. 2005) (Fawsett, J.). Approval is
generally a two-step process in which a “preliminary determination on the fairness,
reasonableness, and adequacy of the proposed settlement terms” is reached. See
DAVID F. HERR, ANNOTATED MANUAL FOR COMPLEX LITIGATION § 21.632 (4th ed. 2008).
The factors considered are (1) the influence of fraud or collusion on the parties’
reaching a settlement, (2) “the likelihood of success at trial,” (3) “the range of possible
recovery,” (4) “the complexity, expense[,] and duration of litigation, (5) “the substance
and amount of opposition to the settlement,” and (6) “the stage of proceedings at which
the settlement was achieved.” Bennet v. Behring Corp., 737 F.2d 982, 986 (11th
Cir. 1984).
In this action, no apparent fraud or collusion influenced the parties’ reaching a
settlement. The settlement is the product of both an arm’s length, “protracted and
contentious” negotiation with a mediator and two “mediator’s proposals.” (Doc. 78)
Success at trial is uncertain because the defendant possesses legal and factual
defenses to the plaintiffs’ claims as well as several grounds for challenging class
certification.5 The range of possible recovery under the proposed settlement is
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 9 of 13
6 The parties assert (Doc. 78) that twelve state attorneys general support the settlement. Also
supporting the settlement are two attorneys retained by two groups of Silver State students and various
class members. (Doc. 78, at 32) (Doc. 79).
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substantial and includes (1) conditional and unconditional debt forgiveness based on the
number of FAA certifications that a student received, (2) an early re-payment refund;
(3) a freeze on interest accrual from February 4, 2008, until final settlement approval;
(4) a reduced monthly re-payment rate, (5) amended reports to credit rating agencies;
(6) the payment of any attorneys’ fee, cost, or expense; (7) additional compensation to
each class representative not to exceed $5,000.00 per class representative; and (8) the
payment of any cost of notice to the class or of settlement administration. (Doc. 78-2,
§ 3.3) The combined conditional and unconditional debt forgiveness ranges from
seventy-five percent for a member of Subclass One to twenty percent for a member of
Subclass Five. The total unconditional debt forgiveness amounts to more than
$11,000,000.00 (Doc. 78-2, § 3.3.3) and the total conditional debt forgiveness amounts
to more than $100,000,000.00 (Doc. 78-2, § 3.3.4).
Furthermore, full litigation of this case would be lengthy, expensive, and highly
complex. The aggregate outstanding debt of the settlement class exceeds
$175,000,000.00 and class counsel has already incurred $100,000.00 in expenses. In
light of the high stakes involved, both parties are highly motivated to “aggressively” and
“vigorously” litigate this case. (Doc. 78, at 32) Additionally, substantial support exists
for the settlement,6 and the parties reached a settlement only after extensive
investigation, research, and negotiation.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 10 of 13
7 Shealy v. Student Loan Express, Inc., No. 3:08-cv-03057-JFA (D.S.C. 2008); Hyatt v. Student
Loan Express, Inc., No. C09-1324-TSZ (W.D. Wa. 2009); Kilgore v. KeyBank National Assoc., No. C-08-
02958 (N.D. Cal. 2009); Mason v. KeyBank National Assoc., No. A 565943; Caney v. Airola, ADV 2008-
141 (Feb. 15, 2008) (settled); Elrod v. Airola, No. 08-A-10868-1 (July 25, 2008) (settled).
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Accordingly, the proposed settlement is preliminarily approved as a “fair,
reasonable, and adequate” compromise of the plaintiffs’ claim.
4. Preliminary Injunction
Pursuant to Rule 23(d), Federal Rules of Civil Procedure, and the All-Writs Act,
28 U.S.C. § 1651, the parties move (Doc. 82) for a preliminary injunction to preclude
any parallel or overlapping action pending final approval of the proposed settlement.
The All-Writs Act provides authority “to enjoin a party to litigation before it from
prosecuting an action in contravention of a settlement agreement over which the district
court has retained jurisdiction.” Henson v. Ciba-Geigy Corp., 261 F.3d 1065, 1068
(11th Cir. 2001); Demint v. Nationsbank Corp., 208 F.R.D. 639, 644 n.8 (M.D. Fla.
2002). Accordingly, “[f]ederal courts may invoke the authority conferred by the All-Writs
Act to enjoin parties from separate litigation to protect the integrity of a judgment
entered in a class action and to avoid re[-]litigation of issues . . . .” 208 F.R.D. at 644
n.8. In the context of a conditional class certification and an impending settlement,
“[t]he threat to the federal court’s jurisdiction posed by parallel state actions is
particularly significant . . . . “ In re Diet Drugs, 282 F.3d 220, 236 (3rd Cir. 2002)
(describing complex litigation as “especially vulnerable to parallel state actions that may
‘frustrate the district court’s efforts to craft a settlement in the multi-district litigation
before it’ . . . thereby destroying the ability to achieve the benefits of consolidation.”)
(citation omitted).
In this instance, the defendant faces several actions7 by former Silver State
students and a high probability exists that additional actions will be filed. (Doc. 82)
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 11 of 13
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Accordingly, a preliminary injunction enjoining any overlapping or parallel action is
necessary to preserve this court’s jurisdiction to administer and enter final judgment on
the proposed settlement agreement.
5. Notice to Class Members
Rule 23(c)(2)(B), Federal Rules of Civil Procedure, requires notice to members
of a class certified under 23(b)(3). Notice must consist of the “best notice that is
practicable under the circumstances.” Furthermore, notice “must clearly and concisely
state in plain, easily understood language:”
(i) the nature of the action;(ii) the definition of the class certified; (iii) the class
claims, issues, or defenses; (iv) that a class member may enter an
appearance through an attorney if the member so desires; (v) that the court
will exclude from the class any member who requests exclusion; (vi) the time
and manner for requesting exclusion; and (vii) the binding effect of a class
judgment on members under Rule 23(c)(3).
In this action, the parties submit the proposed notice material for review and approval.
(Doc. 78-1, Ex. 1-6) The proposed notice and claim form appear to state all of the
required information in a relatively clear and concise manner and otherwise satisfy the
requirements of Rule 23(c). The parties’ proposed method of notice consists of the
settlement administrator’s mailing notice by first class mail to the most current mailing
address of each member of the settlement class. (Doc. 78)
Because the proposed method of notice is reasonable and the notice material
meets the requirements of Rule 23(c), the “manner and form” of notice to class
members is approved.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 12 of 13
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Conclusion
Accordingly, the parties motions’ (Docs. 78, 82, & 83) are GRANTED. The
plaintiffs, any class member, and any person acting on behalf of a class member are
ENJOINED from prosecuting, pending this court’s review of the proposed class action
settlement, any claim resolved by or subject to the proposed settlement. The court shall
retain jurisdiction over this matter for all purposes. Furthermore, (1) notice to each class
member shall be mailed no later than December 30, 2009; (2) each class member shall
object to the proposed settlement, object to the class member’s number of FAA
certifications, file a claim, or request exclusion from the settlement no later than
February 13, 2010; (3) any party that wishes to support the settlement or respond to
any objection to the settlement shall file any supporting or responding paper by
March 15, 2010, (4) a final fairness hearing on the proposed settlement is set for
March 22, 2010, at 8:30 a.m..
ORDERED in Tampa, Florida, on November 19, 2009.
Case 8:08-cv-00305-SDM-MAP Document 87 Filed 11/19/2009 Page 13 of 13
All States Covered By Proposed Class Action Settlement With Student Loan Xpress
The proposed class action settlement applies to eligible class member students in all 50 states, regardless of whether or not their State Attorney General is a party to the Assurance of Voluntary Compliance Agreement entered into by Student Loan Xpress and the Attorney Generals for 12 states.
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