Lawyer intercepts settlement check, saves lawsuit over $9.46

Steve Korris Mar. 17, 2005, 12:10am


A class action lawsuit filed against a mortgage company over a $9.46 claim almost settled when the temptation of $25,000 was dangled in front of the plaintiffs.

But before Larry and Brandi Freitag of Troy could snatch the carrot, their own lawyer got to it first so that his case would not die for lack of class representation.

Last year the Freitags sued Option One Mortgage in Madison County claiming the mortgage company improperly charged an extra day’s interest--$9.46--when they paid off a loan.

They wanted to cash the check that was sent by Option One in October to the Lakin Law Firm, but on a motion from Lakin attorney Gary Peel, Circuit Judge Nicholas Byron deposited the check in the courthouse vault on Dec. 3.

Byron later released the check to the Freitags, but as of March 8, they had not signed a release-which would excuse them as class representatives.

As for the $25,000 settlement, the Freitags would only be entitled to a portion. Peel asked Byron to divide it among the Freitags, the Lakin firm, Diab and Bock of Chicago, Freed and Weiss of Chicago, and Campbell and Brinkley of Godfrey.

A cake, plum and duty to class

After Option One maneuvered to settle with plaintiffs out of court, Peel moved on Dec. 20 for an order allowing the Freitags to accept the money, put it in escrow and complete their duties as class representatives.

Defense attorney Ann Hatch of Herzog Crebs in St. Louis objected, stating the Freitags wanted to have their cake and eat it too.

“If plaintiffs accept, they can no longer continue in the case,” she said. “That is the offer plaintiffs must accept or reject.”

At a Jan. 21 hearing Peel argued against dismissing the class action suit.

He quoted a 1978 U. S. appeals court decision, “Roper”: “By the very filing of a class action, a class representative assumes responsibilities to members of the class. They may not terminate their duties by taking satisfaction. A cease fire may not be pressed upon them by paying their claims.”

He also quoted a 2003 U. S. circuit court decision, “McDowell”: “A representative plaintiff in a class action cannot simply agree with settlement that might be advantageous for him personally but not for the other plaintiffs.”

Judge Byron interjected.

“May I...ask what are the damages being claimed by the plaintiffs?” he asked.

“Nine dollars and 46 cents a day, and there was - It is subject to discovery. It is either one day or as much as three days,” Peel answered.

“You mean the claim is …” Byron began.

“Nine dollars and 46 cents,” Peel finished.

“Nine dollars and 46 cents?” Byron repeated.

“Right,” Peel answered.

Byron said the defendant dangled more than a “plum” before the plaintiffs. He asked defense attorney Richard Wohlleber, of Herzog Crebs, if the offer could be construed as picking off a plaintiff.

Picking off a plaintiff

“We want to settle with these plaintiffs and we want their claims released,” Wohlleber said. “We have not denied that. It is obvious by the nature of the offer.”

Wohlleber guessed the Freitags were calling their lawyer every week asking, “Where is my $25,000?”

While Option One said it would not pay every potential class representative $25,000, it would give the plaintiffs 60 days to find a new representative. But, Option One would not agree to allow the Freitags to accept their offer and remain as plaintiffs.

"Counsel is saying well, what we are going to do is, we are going to hold off acceptance of your offer until after these plaintiffs prosecute the class certification motion," Wohlleber said. "And then if we win, they get to take the money. If we lose, you can withdraw it. That is not the offer.”

He said he was not aware of a case anywhere in the country where plaintiffs accepted a settlement offer and proceeded as class representatives.

Byron’s decision

Byron allowed Peel 60 days from the date a release is signed by the Freitags to find new plaintiffs.

Then the matter tied Byron's tongue.

“Sixty days before it is - there is a compelling of - there need not be a compelling - the court would automatically consider dismissing the rest of the class - dismissing the plaintiff’s class - the plaintiff’s claim - with prejudice but not - but dismissing the class claims without prejudice - if that makes any sense,” he said.

Hatch sent Peel a release Jan. 28, but Peel told her his clients would accept if they could proceed with class certification.

In a Feb. 10 e-mail Peel wrote, “Your settlement offer was NOT made on condition that class certification prayer for relief be abandoned. In fact, the offer had no conditions attached.”

Option One moved to compel execution of a release. Byron granted the motion Feb. 25. He declared the claims settled. He ordered Option One to simplify the release.

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