chapter 12 cy pres remedy pl94ch12

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Chapter 12 Cy Pres Remedy

12.1 Memorandum In Support of Approval ofCy Pres Remedy

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO

BEASLEY, et al.,Plaintiffs

[vs.]

WELLS FARGO BANK, N.A.,Defendants

KOVITZ, et al.,Plaintiffs

[vs.]CROCKER NATIONAL BANK, N.A., et.al.

DefendantsNos. 861555 and 868914(CASES CONSOLIDATED)PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OFMOTION FOR APPROVAL OF CYPRES REMEDY AND FOR AN ADDITIONALAWARD OF ATTORNEYS' FEES, COSTS AND EXPENSES

HEARING:Date: December 3, 1992Time: 2:00 p.m.

TABLE OF CONTENTS

I. INTRODUCTION AND BACKGROUNDII. DESCRIPTION OF THE PROJECT

A. The ConceptB. Project Goals and Services Provided

1. Identification of Consumer Problems2. Direct Service to Consumers3. Preventative Education4. Issue Screening5. Administrative Advocacy6. Legislative Advocacy7. Litigation

C. The Recipient Organizations and Proposed Activities1. Consumers Union2. Volunteer Legal Services Program (VLSP)3. Consumer Action4. San Francisco Neighborhood Legal Assistance

Foundation (SNFLAF)5. National Consumer Law Center

D. Project Oversight and CoordinationIII. BENEFIT TO THE PLAINTIFF CLASSES


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1These estimates were supplied by defendants and are set forth in the Declaration of SharonBender, Exhibit D to the Declaration of Patricia Sturdevant, filed herewith [not reprinted infra].

IV. REQUEST FOR ADDITIONAL ATTORNEYS' FEESV. CONCLUSION

TABLE OF AUTHORITIES

CASES:

Beasley v. Wells Fargo Bank. N.A. (1991) 235 Cal.App.3d 1383Folding Carton Anti-Trust Litigation, MDL 250 (N.D. Ill. July 25, 1991)Ocean Shipping Antitrust Litigation, MDL 395 (S.D.N.Y. July 29, 1991)People v. Parlanerced Co., (1988) 198 Cal.App.3d 683People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330, reh'g deniedState of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460

STATUTES:Civil Code Section 1801

I. INTRODUCTION AND BACKGROUND

These consolidated class action lawsuits challenged defendants' unlawful practice of

imposing excessive and punitive late and over limit fees on consumer credit card customers. On

February 14, 1989, after a trial on the merits, the jury in Beasley v. Wells Fargo Bank returned a

verdict of over $5.2 million in favor of the plaintiff class. Following the verdict in Beasley, the

parties settled the companion case of Kovitz v. Crocker National Bank for over $3.78 million in

damages for the plaintiff class, contingent upon the successful defense of the Beasley judgment

on appeal. The Beasley judgment was upheld by the Court of Appeal in a published decision on

November 12, 1991. See Beasley v. Wells Fargo Bank, N.A. (1991) 235 Cal.App.3d 1383. The

Supreme Court denied review on March 12, 1992. Not long thereafter, with this Court's

approval, the bank began the process of distributing the Beasley and Kovitz funds to the plaintiff

classes by way of direct refunds. As of September 8, 1992, approximately $4.4 million had been

distributed in refunds to members of the Beasley plaintiff class; approximately $1.6 million had

been distributed to members of the Kovitz plaintiff class.1

In 1989, as part of the post-trial briefing in Beasley, the parties addressed the issue of the

allocation of any residue remaining in the damages fund after distribution to class members.


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2See Plaintiffs' Opening and Reply memoranda of Points and Authorities in Support of TheirProposal for a Distribution of the Damages Verdict to Class Members, filed with the Court onJune 23, 1989, and June 29, 1989, respectively.

3See Wells Fargo Bank, N.A.'s Opening and Reply Memoranda of Points and Authorities ReDistribution Issues, filed with the Court on June 23, 1989, and June 30, 1989, respectively.

Plaintiffs proposed that any residue be used to create a cypres remedy, through which the funds

would be awarded to a non-profit consumer protection organization, recommended by plaintiffs'

counsel and approved by the Court, for the indirect benefit of the plaintiff class.2 Defendants

proposed that the entire damages fund be distributed by way of prospective credits to current

cardholders for future late and overlimit charges, or in the alternative, that any residue remaining

after distribution by direct refund be allocated to prospective credits.3 After a full hearing on the

matter, Judge Dossee entered his ruling on September 13, 1989.

That Order provides that any funds remaining after the damages award is distributed to

the plaintiff class by way of direct refund be apportioned as follows: fifty percent of the residue is

to be distributed to Wells Fargo's existing cardholders through prospective reduction in late and

overlimit fees, and fifty percent is to be distributed as a cypres remedy for the indirect benefit of

the class subject to the approval of the court. See Order Regarding Expansion of Class and

Distribution of Damages Award, September 13, 1989, pp. 4-5, attached as Exhibit A to the

Sturdevant Declaration. In the Settlement Agreement in Kovitz v. Crocker National Bank, the

parties agreed that distribution of the settlement fund in that case would be accomplished in the

same manner as ordered by Judge Dossee in the Beasley action, and that any residue in the fund

would be distributed in like manner (fifty percent by way of prospective credits and fifty percent

by way of a cy pres remedy). See Kovitz Judgment and Settlement Agreement, p. 12, attached as

Exhibit B to the Sturdevant Declaration, filed herewith. The Court in Beasley reserved

jurisdiction, pending all appeals and determination of the actual amount of the residue, to

determine the particular use of the cypres fund.

The distribution of the damages award in Beasley and of the settlement fund in Kovitz by

way of direct refund has now largely been accomplished. According to estimates provided by


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4As part of the settlement in Sousa v. Wells Fargo Bank, San Francisco Superior Court No.

919571, a class action lawsuit seeking to permanently enjoin Wells Fargo's practice of imposingexcessive late and overlimit fees on its credit card customers, Wells Fargo agreed to theprospective elimination of its overlimit fee for a period of at least four years, commencing inJune, 1991. As a result, the parties agreed that the percentage of the residues in both Beasley andKovitz that would have been used for prospective credits of overlimit fees to current Wells Fargocardholders would instead be reallocated to the cy pres portion of the residues. Accordingly,because approximately 19.99 percent of the damage award in Beasley was attributable tooverlimit charges, 19.99 percent of the Beasley residue allocated to prospective credits will bereallocated to the cy pres remedy. Similarly, because approximately 10.80 percent of thesettlement fund in Kovitz was .attributable to overlimit fees, 10.80 percent of the Kovitz residueallocated to prospective credits will be reallocated to the cy pres remedy. This agreement is setforth in the Stipulation and Order Regarding Distribution of the Residue, entered by the Court onOctober 22, 1992, a copy of which is attached as Exhibit C to the Sturdevant Declaration. A chartsetting forth estimated amounts remaining in the residue and available for the cy pres remedy isprovided as Exhibit A to this motion. The chart is based on estimates provided by defendants asset forth in the Declaration of Sharon Bender, filed with this Court on October 22, 1992 andattached as Exhibit D to the Sturdevant Declaration.

5A chart showing estimated amounts remaining in the residue is attached to this motion asExhibit A [not reprinted infra].

counsel for defendants, after all appropriate deductions have been made, there remains

approximately $1.8 million in the Beasley damages fund and $2.4 million in the Kovitz

settlement fund (exclusive of interest accruing on those sums since 1989). Fifty percent of this

total amount of $4.2 million (adjusted in accord with the parties' agreement following the

settlement in Sousa v. Wells Fargo Bank) will be distributed by Wells Fargo through prospective

credits to existing cardholders.4 The remaining fifty percent, amounting to approximately $3.3

million, including accrued interest, is available for the cypres remedy.5 Plaintiffs' counsel have

devoted substantial time and effort to considering, the best cy pres remedy for the benefit of the

plaintiff classes, drawing on their experience in overseeing a similar cy pres remedy over the past

eight years. They now submit for this Court's approval a comprehensive plan for implementation

of that remedy through the California. Credit and Finance Project II, which builds and expands

upon an existing, ongoing cy pres project.


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6The Vasquez action challenged Avco's unlawful practices inthe "flipping" of retail installment contracts into loans with higher interest rates and in thesale of credit insurance. See Sturdevant Declaration, filed herewith, at para. 8.

II. DESCRIPTION OF THE PROJECT

A. The Concept

Plaintiffs propose a comprehensive, long-term consumer education and advocacy project

modeled after and improving upon the highly successful cypres remedy ordered in Vasquez v.

Avco Financial Services, Los Angeles Superior Court No. NCC11933B. In 1984, plaintiffs'

counsel obtained a judgment and restitution order against Avco Financial Services in a statewide

private attorney general action alleging violations of consumer protection statutes.6 After all

appropriate refunds had been distributed to affected Avco customers, more than $1.5 million

remained in the restitution fund. Upon- motion of plaintiffs' counsel, the court approved

distribution of this money as a cypres remedy to the West Coast Regional Office of Consumers

union for the creation of a "California Credit and Finance Project" to benefit the plaintiffs and

other affected members of the general public. See Sturdevant Declaration, para. 8.

Over the past eight years, Consumers Union has used the Vasquez cypres funds in the

California Credit and Finance Project to support research, legislative and administrative

advocacy, litigation, and educational activities on behalf of low and moderate income California

consumers in the areas of banking, credit, insurance, and other finance issues. Through the

Project, Consumers Union has sponsored a number of legislative proposals on consumer finance

issues and has opposed anti-consumer legislation. For example, Consumers -Union sponsored

state legislation to increase disclosure to Consumers about adjustable rate mortgages, opposed

legislation to increase foreclosure fees, negotiated with the sponsors of legislation to revise the

articles of the Uniform Commercial Code governing checking accounts, and opposed

deregulation of retail credit interest rates. The latter activity alone resulted in $100 million in

benefits to California consumers through postponing for two years the elimination of the interest

rate ceiling in the Unruh Retail Installment Sales Act, Civil Code SS1801, et seq. Two other


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notable accomplishments of the Project include the successful sponsoring of legislation that

re-regulated credit insurance and successfully negotiating with California banks to offer a basic

checking account to low-income consumers.

The Project has also supported extensive public education efforts, including the issuance

of reports on a variety of consumer finance issues, and litigation challenging various unlawful

and unfair business practices affecting consumers. In litigation activities, Project staff

represented Consumers Union as an organizational plaintiff in Fallat, et al. v. Central Bank, San

Francisco Superior Court Case No. 865592, a class action and private attorney general action

challenging numerous unfair practices in the financing of automobile insurance premiums,

represented bank customers in a class action challenging charges imposed when customers

exercise their right to stop payment on checks, and filed amicus briefs in the California Supreme

Court in support of Proposition 103. In their research and publication efforts, Consumers Union

staff supported by the Project prepared a self-help manual for senior citizens facing problems

with medigap insurance, completed surveys regarding interest rates on unsecured personal loans,

conducted weekly radio shows, and negotiated with banks under the Community Reinvestment

Act to secure commitments for lending in low-income communities.

Just recently, the last of the funds from the original Vasquez award were expended by the

Project. Because the Project has been supplemented by several subsequent cy pres awards and by

awards of attorneys' fees to Project staff, however, the Credit and Finance Project is active and

ongoing. The Project currently provides funding for three full-time staff attorneys who work on

issues related to credit, finance and insurance. The Project is administered by Project Director

Judith Bell and guided by a 12-member advisory board composed of private attorneys, legal

services attorneys, academics, and governmental employees, all of whom are specialists in

consumer law. See Declaration of Judith Bell and attached exhibits, filed herewith.

Using the cy pres funds available in these cases, plaintiffs propose the creation of the

California Credit and Finance Project II. This Project will be a comprehensive, multi-faceted

consumer education and advocacy effort that expands and builds upon the proven track record of


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the first Credit and Finance Project by providing additional funding and by incorporating and

coordinating the resources and expertise of additional consumer advocacy and legal services

organizations.

One of the primary goals of this Project is to enhance consumer advocacy efforts

throughout California by providing direct services to low and moderate income persons and by

facilitating and encouraging communication and cooperation among organizations that serve

consumers at different levels and in different functions. To this end, plaintiffs' counsel propose

that the available cy pres II funds be divided among five consumer advocacy organizations:

Consumers Union, the Volunteer Legal Services Program of the Bar Association of San

Francisco (VLSP), San Francisco Neighborhood Legal Assistance Foundation (SNFLAF),

Consumer Action, and the National Consumer Law Center (NCLC). These organizations will use

the cy pres funds over a three-year period in a cooperative effort to provide a broad range of

direct services, education, and advocacy for California consumers on a variety of banking, credit

and finance issues. Each of the organizations has been consulted extensively in the development

of this proposal, and each has prepared its own outline of activities that will be performed using

the cy pres funds. See Proposals of each proposed recipient attached as Exhibits H - L to the

Sturdevant Declaration [not reprinted infra]. These activities will be monitored and coordinated

throughout the duration of the Project by plaintiffs, counsel and by the California Credit and

Finance Project Advisory Board composed of experienced consumer protection advocates.

B. Project Goals and Services Provided

The California Credit and Finance Project II has as its primary goal the protection of

consumers in the areas of credit, banking, and financial services by building and expanding upon

the first Credit and Finance Project. Although the first Credit and Finance Project has been

enormously successful, plaintiffs perceive two areas that could be improved. First, there is a need

for the provision of more direct services to individual consumers with credit and finance

problems. Second, there is a need to obtain greater input from consumers at the grass roots level

and to screen this information for common issues and problems. The Credit and Finance Project


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II is designed to redress deficiencies of the prior Project in these two areas and to accomplish its

overall goal of consumer protection in the areas of credit and finance. It would do so by creating

a structure to coordinate efforts among established consumer advocacy organizations and legal

services providers and by providing funds to these organizations to permit them to implement

projects and provide consumer services in the areas set forth below.

1.Identification of Consumer Problems. One of the primary needs perceived by

consumer advocates and legal services providers is a comprehensive system for identifying

common issues faced by consumers at the grass roots level and sharing that information. The

Project will create a network to identify problems relating to credit and finance faced by

consumers statewide. This will include creating a database of consumer complaints categorized

by topic and perpetrator and sharing this information among all recipients for use in advocacy

and education projects.

2.Direct Service to Consumers. Primarily through the resources of the VLSP and

SNFLAF, the Project will provide direct services to individual consumers in the relevant subject

areas. The available services will include increased complaint handling capacity, self-help

advice, education, and referral for further representation, where appropriate.

3. Preventative Education. Drawing primarily on the experience and expertise of

Consumers Union and Consumer Action, the Project will provide preventative education for

consumers in the areas of credit, banking and finance. This educational component will include

the use of the media, multi-lingual pamphlets and brochures on legal rights and self-help

remedies, outreach to community-based organizations, and training on legislative and

administrative.advocacy for consumer advocates and lay people.

4. Issue Screening. Through the Advisory Board and the consumer complaint database,

the Project will provide a mechanism for the screening of common and significant issues facing

consumers and create a forum for the different recipient organizations to develop cooperative

strategies for resolving those issues.

5.Administrative Advocacy. Where appropriate, the recipient organizations will engage


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Total: 95% (approx. $3.1 million)

The remaining five percent (approximately $165,000) will be placed in reserve in a

special client trust fund to compensate plaintiffs' counsel for attorneys' fees incurred in

monitoring the Project, provide honoraria for members of the Project's Advisory Board, and

provide funding for duplication of educational materials and other miscellaneous expenses of the

Project. Each of the recipient organizations has been consulted at length in the development of

this proposal and each has drafted its own proposal for use of the funds. See Sturdevant

Declaration, Exhibits H through L [not reprinted infra]. A summary of the proposed activities to

be undertaken by each organization is provided below.

1. Consumers Union. Consumers Union is a nationwide, non-profit, membership

organization best known for its publication of the well-known magazine. The West Coast

Regional Office of Consumers Union has engaged in education, legislative and

administrative advocacy, and litigation on behalf of consumers for over 17 years. Consumers

Union has extensive experience in the areas of consumer credit, banking and finance, and, for the

past eight years, has done extensive work in these areas through the initial California Credit and

Finance Project. See Declaration of Judith Bell, filed herewith. Consumers Union's share of the

cy pres funds awarded in these actions will be added to its existing Credit and Finance Project.

This Court will then assume jurisdiction over all funds in the new Credit and Finance Project II.

Drawing on its experience in the first Credit and Finance. Project, and its expertise in

legislative and administrative advocacy and litigation, Consumers Union will use its share of the

cypres funds to perform in the following activities: (1) legislative advocacy, including promoting

pro-consumer legislation and opposing legislation that would reduce the rights of consumers of

banking or credit services; (2) administrative advocacy, including the presentation of

administrative complaints on behalf of consumers, intervention in administrative proceedings,

and review of administrative regulations of agencies that govern state and federally-chartered

banks, savings and loan associations, credit unions, consumer finance lenders, and other financial


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services institutions; (3) litigation and amicus curiae representation when appropriate to enjoin an

unfair practice or to advance the law protecting consumers of financial services; (4) education for

consumers about the financial services marketplace and their rights and responsibilities; (5)

research to evaluate the effect of actual and proposed changes in the law and regulations affecting

consumers of financial services; and (6) negotiation with banks and savings and loan associations

to improve the array of products and financial services available to low and moderate income

consumers, in California, including negotiations pursued under the federal Community

Reinvestment Act. The activities of Consumers union will be supervised by Judith Bell, who has

served as the Project Director of the first Credit and Finance Project for the past 3 years. See

Consumers Union Proposal for Use of fly Pres Funds, Exhibit H to the Sturdevant Declaration.

2. Volunteer Legal Services Program (VLSP). The Volunteer Legal Services Program is a

project of the Bar Association of San Francisco. Using the resources of the Bar and volunteer

attorneys, VLSP provides a variety of free legal services to indigent and low-income clients,

including advice, screening, and referral. Although the VLSP has had only limited experience in

the areas of consumer credit and finance, it is uniquely positioned to fill the current void in the

provision of direct services to consumers on credit and finance issues. Because of the severe

cutbacks in funding for legal services in the 1980.'s, most legal services organizations have been

forced to curtail substantially, if not eliminate, their legal advice and representation in the areas

of consumer credit and finance. In order to address this void, plaintiffs propose that

approximately one-third of the cypres funds be awarded to VLSP. Using the funds provided

through the Credit and Finance Project, the VLSP proposes to add new services to its existing

structure and to educate its staff and volunteer attorneys to provide the following direct services

to consumers: (1) information and referral provided by VLSP staff specially-trained in consumer

protection issues; (2) a new monthly Consumer Advice Clinic staffed by a trained VLSP staff

attorney and expert volunteer attorneys through which consumers will be given a free, 20-minute

legal consultation, educational materials, and any appropriate referral information; (3) consumer

self-help packets, developed and distributed by expert volunteer attorneys to help consumers


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handle common problems on a pro se basis; (4) a bankruptcy clinic to provide free consultation

and information for those considering filing for bankruptcy; (5) a consumer advocacy referral

panel through which clients requiring direct representation will be referred to private attorneys

with experience and expertise in consumer protection law; (6) homeless advocacy services

through which volunteer and staff attorneys representing homeless individuals will be trained to

identify issues related to credit and finance and to provide the appropriate advice or referral; and

(7) provision of training and materials for volunteer attorneys serving on other VLSP panels to

help attorneys recognize consumer-related issues in the context of other litigation or service

provision. Information about consumer problems obtained by VLSP will be shared with the

other organizations and added to the database maintained by Consumer Action. The activities of

the VLSP in the Credit and Finance Project will be supervised by Director Tanya Nieman. See

VLSP Proposal, attached as Exhibit I to the Sturdevant Declaration. 3. Consumer Action.

Consumer Action is a statewide non-profit consumer education and advocacy organization. The

organization works with an extensive network of social service and community based

organizations (CBO's) and annually distributes over one million pieces of literature in eight

languages to California consumers. Consumer Action also performs research on consumer

issues, including an annual survey concerning the fees and charges assessed on bank credit card

accounts, works extensively with the media, and performs legislative and administrative

advocacy.

For its role in the Credit and Finance Project, Consumer Action has proposed activities in

three areas: identification of consumer problems and issue screening, direct services, and

legislative and administrative advocacy. In order to identify common consumer problems in the

credit, banking and finance areas and screen important issues, Consumer Action, will utilize its

network of more than 1000 CBO's to obtain information about problems faced by consumers in

the community. Consumer Action will also publish information pamphlets and flyers and use the

media to invite consumers to telephone or write in about their banking, credit, or finance

complaints. In order to use and to share this .information, to identify patterns and screen for


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7Plaintiffs' counsel expect to be able to persuade one of the 'Big Six' accounting andconsulting firms (either Price Waterhouse or Deloitte & Touche) to offer its services pro bono forthe design of this computer database for screening and tracking consumer complaints.

common issues, the information gathered from CBO's and consumer complaints will be entered

into a computer database categorized by consumer, type of complaint, offending institution,

community, etc.7 All recipient organizations will be encouraged to contribute information to the

database. The data about consumers and their complaints will be available to all participating

organizations to support education, legislative and administrative advocacy and litigation

activities.

Consumer Action will also provide direct services to consumers in the form of telephone

advice and referral, follow-up written information related to the consumer's complaint or

question, and multi-lingual publications containing information about how consumers can best

shop for and use credit and other financial services. As a way to disseminate information within

communities, Consumer Action proposes to develop and offer training sessions on credit and

finance issues for the staff of community-based organizations and lay members of the

community. The presentations will be made in Cambodian, Chinese, English or Spanish,

depending upon the needs of the community.

In the area of legislative and administrative advocacy, Consumer Action will use its

database of consumer complaints to identify state or local agencies that are failing to respond

properly to consumer complaints, in particular agencies that do not or cannot address the

complaints of limited-English speaking consumers. These agencies will be targeted for advocacy

activities. Working closely with Consumers Union, Consumer Action will monitor legislative

activity affecting consumers in the credit and finance area. This information will be provided to

an "advocacy network" of community-based organizations interested in participating in

legislative advocacy. The cy pres funds will also be used to distribute an advocacy alert

newsletter to CBO's and to provide education and technical assistance to CBO's interested in

joining the legislative process. The activities of Consumer Action will be supervised by Director


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Ken McEldowney. Consumer Action's Proposal for the Credit and Finance Project, attached as

Exhibit J to the Sturdevant Declaration.

4. San Francisco Neighborhood Legal Assistance Foundation (SNFLAF). Founded in

1966, SNFLAF is the largest provider of free legal services to the poor in San Francisco. In 1991,

SFNLAF served over 12,000 clients in 16,000 different cases. Because of limited resources,

SNFLAF focuses on three priority areas addressing the clients' most immediate and basic needs

housing, public benefits, and ,domestic violence. Although a lack of adequate resources prevents

SNFLAF from being able to focus on consumer issues, the staff often become aware of consumer

problems as they address their clients' needs in the priority areas. An award of funds from the

Credit and Finance Project II will enable SNFLAF to develop a "Consumer Education Project"

through which SNFLAF will provide consumer education and advice on how clients may achieve

financial independence and stability and protect the receipt of government benefits. The purpose.

of the Consumer Education Project will be to help clients avoid legal problems before they arise

and to help clients deal effectively with their financial affairs so they avoid unnecessary fees,

charges, or interest.

SNFLAF will target four client groups in its Consumer Education Project: battered

women, immigrant families, single- parent families, and the disabled. For battered women,

SNFLAF Will develop materials and provide advice on how women can establish financial

independence, including advice on how to obtain credit or open a checking account in their own

names and how to limit potential liability for an abusive partner's debts. For immigrant families

who often lack rudimentary knowledge of financial institutions and their practices, SNFLAF will

provide materials and advice on banking and credit services and the advantages of using them,

and on the connection between financial institutions and government entities such as the Internal

Revenue Service and the Immigration and Naturalization Service. These services will be

provided in languages other than English according to the needs of the client communities.

For single-parent families receiving public benefits (primarily AFDC), SNFLAF will

provide information and advice on how they can maintain their financial eligibility for assistance,


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how they can utilize banking services with their limited income, and what they can do when they

are discriminated against by financial institutions because of the source of their income. For the

elderly and disabled, SNFLAF will provide information and advice on money management and

ways to take advantage of any benefits for the elderly offered by financial institutions. In

addition to the services listed above, SNFLAF will also expand its voice mail system to create a

self-help menu for consumer problems. The service will be multi-lingual and available 24 hours

a day. Information about common consumer complaints and problems obtained by SNFLAF

through its clients will be shared with other recipient organizations and, to the extent possible,

added to the database maintained by Consumer Action. The activities of SNFLAF in its

Consumer Education Project will be supervised by SNFLAF Director Ramon Arias. See

SNFLAF Proposal, attached as Exhibit K to the Sturdevant Declaration.

5.National Consumer Law Center. The National Consumer Law Center is a national

advocacy organization whose mission is to seek justice for low-income Americans struggling

with consumer and energy problems. The Center was founded in 1969 as a support center for

federal legal services organizations. It has since become an independent, non-profit corporation

that continues to provide support to legal services offices, but also performs extensive research

and provides training and advocacy at many levels.

The NCLC will use its grant ofcy pres funds to sponsor a conference and training session

in Northern California in 1993 for private attorneys and legal services advocates on consumer

protection issues. The training will provide seminars and educational materials to attorneys and

other advocates on a variety of consumer issues. The conference will also provide a forum for

attorneys and advocates practicing in the consumer area to share information and to build a

network for future cooperation. It is anticipated that attorneys and advocates from the other

recipient organizations will attend the conference.

As funds allow, the NCLC will also use the cy pres funds to assist in the development of

a national network of attorneys experienced in the area of consumer rights. In addition, the

NCLC will make itself available under the auspices of the Credit and Finance Project II to


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8A list of current Advisory Board members is attached as Exhibit B to the Declaration ofJudith Bell.

attorneys and groups in California for advice, consultation and analysis on consumer rights

issues. See NCLC Proposal, attached as Exhibit L to the Sturdevant Declaration.

D. Project Oversight and Coordination

The California Credit and Finance Project II will be subject to the ultimate oversight and

authority of this Court throughout its duration. In operation, the Project will be monitored by

plaintiffs' counsel and guided by a Project Advisory Board composed of academics, consumer

advocates, private attorneys and other experts in consumer protection law.8 Plaintiffs' counsel

anticipate that the Advisory Board will be composed of those members of the current California

credit and Finance Project Advisory Board who wish to remain, as well as one member

recommended by,each of the recipient organizations (not including the NCLC). The Board will

convene on a quarterly basis, or more often as needed, and will be responsible for considering

and reviewing progress reports of each of the recipient organizations, providing consultation on

legal issues and recurring consumer problems identified by the Project, and providing advice on

how the organizations should proceed in their activities. The Board will be specifically charged

with ensuring that the recipient organizations are communicating and coordinating with each

other in their efforts and meeting the goals of the Project. If the Board feels the coordination is

insufficient, recommendations will be made to the recipient organizations, to plaintiffs' counsel,

or to the Court, as appropriate. The Board will also be responsible for ensuring that funds are

spent by the recipient organizations for purposes consistent with the organizations' proposals and

with the goals of the Credit and Finance Project.

The cy pres funds to be disbursed through the Credit and Finance Project (in the

percentages listed above) will be distributed to the recipient organizations in a lump sum on a

one-time basis. Each recipient organization will be responsible for overseeing its investment and


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expenditure of funds over a three-year period and for ensuring that the funds are spent according

to the goals and activities outlined in the submitted proposals. Before the funds are distributed,

plaintiffs' counsel will prepare a Memorandum of Understanding to be executed by each

organization and approved by the Court, memorializing the organization's agreement to utilize all

funds for the stated purposes, to prepare periodic reports, to participate in Project and Advisory

Board meetings, and to work in a cooperative effort with the other recipient organizations. In

order to relieve defendants of the obligation for continuing interest pending execution of the

Memoranda of Understanding and distribution of all funds, once the Court has approved this

Project, the cy pres funds will immediately be transferred to a new account set up by plaintiffs'

counsel for the Credit and Finance Project II. Ninety-five percent of the funds will be distributed

to the recipient organizations upon execution and judicial approval of the Memoranda of

Understanding; the remaining five percent will remain in the account to compensate plaintiffs'

counsel and Advisory Board members for attorneys' fees, honoraria and costs, and to pay for

duplication of educational materials and other miscellaneous expenses of the Project.

Each of the organizations will prepare an annual written report detailing activities

performed under the Project, accounting for expenditure of Project funds, and planning for future

activities. Plaintiffs' counsel will review the organizations' annual reports and prepare an

additional report for the Court summarizing the Project's activities and evaluating the overall

coordination and effectiveness of activities performed by the recipient organizations under the

auspices of the Project. These reports will be submitted to the Court on an annual basis for each

of the three years, commencing in December of 1993.

III. BENEFIT TO THE PLAINTIFF CLASSES

The purpose of the equitable cypres remedy is to benefit members of a class indirectly

when provision of a direct benefit is impossible. when the proceeds of a damage award,

settlement fund, or penalty cannot be returned directly to individual class members, it is

appropriate for the court to distribute the funds to interested third parties who will advance and


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9Similar programs have been approved in other courts. For example, settlements reached intwo recent federal class action antitrust cases will provide over $3 million for a fellowshipprogram overseen by the National Association for Public Interest Law (NAPIL). The cases areFoldina Carton Anti-Trust Litigation, MDL 250 (N.D. Ill. July 25, 1991) and Ocean ShippingAntitrust Litigation, MDL 395 (S.D.N.Y. July 29, 1991).

promote the interests of the class. See e.g. People v. Parkmerced Co. (1988) 198 Cal.App.3d

683, 693; State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460; People v.

Thomas-Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330, 342, reh'g denied. The

proposed California Credit and Finance Project II will provide a wide range of significant and

long term benefits to the Beasley and Kovitz plaintiff classes, as well as many other consumers

throughout California. The organizations which will receive cypres funds through the Credit and

Finance Project will address issues related to credit card charges and fees, as well as many other

issues affecting consumers' access to and use of credit, banking and financial services. The

recipient organizations will provide services and benefits to consumers of credit and financial

services through a variety of activities, including direct individual service and assistance,

education, research, data collection, legislative and administrative advocacy, and when

appropriate, litigation to enjoin unfair or unlawful practices and to obtain appropriate monetary

relief. In addition, the Project will create a structure to which future cy pres funds in other cases

could be added, thus providing on-going support for consumer protection activities throughout

California.9

IV. REQUEST FOR ADDITIONAL ATTORNEYS' FEES

On August 11, 1992, this Court issued its Order Awarding Attorneys' Fees, Costs, and

Expenses on Appeal to plaintiffs, counsel. That Order awarded fees and costs incurred through

march 31, 1992 for work performed on the appeals in Beasley. In October, the parties reached

agreement as to the additional, and final, fees to be paid by defendants for work performed by

plaintiffs' counsel from April 1, 1992 through August 31, 1992 in preparing and prosecuting the

motion for attorneys' fees. See Sturdevant Declaration, para. 19. Thus, plaintiffs' counsel have

now been compensated for all fee-related work; all additional fees for overseeing the distribution


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of damages will be paid out of the damages and settlement funds.

At this point, plaintiffs' fees, costs and expenses that remain uncompensated are those

incurred from April 1, 1992 to the present for all work related to distribution of the damages and

settlement funds. These fees will be paid out of the Beasley and Kovitz funds (fifty percent from

each fund) before the cy pres residue is distributed. Through October 1, 1992, plaintiffs' fees at

current rates, plus costs and expenses, for distribution of the funds total $52,397.51. See

Sturdevant Declaration, paras. 17-18. A chart summarizing the fees, and contemporaneous

records of all work performed, are attached as Exhibit M to the Sturdevant Declaration, filed

herewith. Plaintiffs' counsel request that this Court approve plaintiffs' fees as reasonable and

order payment to plaintiffs' counsel in the amount of $26,198.76 from the Beasley fund and

$26,198.75 from the Kovitz fund. Any fees incurred after October 31, 1992 will be deemed

related to monitoring the implementation: of the cy pres remedy. When appropriate, plaintiffs'

counsel will request from this Court further compensation from the reserved portion of the fly

pres fund.

V. CONCLUSION

The California Credit and Finance Project II is an integrated, exciting and creative

proposal to build on a prior successful project and to enhance consumer protection efforts on

many levels throughout the state. The cypres funds will allow the recipient organizations to

continue important on-going consumer protection efforts in a time of shrinking budgets, and to

expand their efforts into areas currently under-served, including the provision of direct services

to low-income consumers. In addition, the Project will create a formal structure to facilitate the

communication and coordination among legal services and consumer advocacy organizations that

has often been lacking in the past. Through the sharing of information and coordination of

efforts, the Project will improve consumer protection efforts for all consumers in California and

provide a real and concrete benefit to members of the plaintiff classes. Accordingly, for all the

foregoing reasons, plaintiffs, counsel request that this Court approve distribution of the Beasley


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and Kovitz &y pres funds to the California credit and Finance Project ii.

DATED: November 13, 1992

Respectfully submitted,

Attorneys for Plaintiffs

12.2 Order Granting Cy Pres Remedy



BEASLEY, et al.,

Plaintiffs

[vs.]

WELLS FARGO BANK, N.A.,

Defendants

KOVITZ, et al.,

Plaintiffs

[vs.]

CROCKER NATIONAL BANK, N.A., et.al.

Defendants

Nos. 861555 and 868914

(CASES CONSOLIDATED)

ORDER GRANTING PLAINTIFFS' MOTION FOR APPROVAL OF CYPRES REMEDY

The matter came on for hearing before the Honorable Stuart R. Pollak, in Department 8 of

this Court, at 9:00 a.m., on December 11, 1992. Plaintiffs were represented by Patricia

Sturdevant and James C. Sturdevant of Sturdevant & Sturdevant, a professional corporation;


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defendant was represented by Brian P. Brosnahan and Robert Retana of Heller, Ehrman, White &

McAuliffe. The Court, having considered the moving, opposing and reply papers filed by the

parties, HEREBY ORDERS as follows:

Plaintiffs' motion for approval of a cypres remedy is GRANTED.

The Court is provisionally approving distribution of the remaining residue of

$3,307,621.10, plus interest which accrues on that sum while on deposit with the Special Trust

Fund Account of the Superior Court Clerk's Office, as follows:

1. San Francisco Neighborhood Legal Assistance Foundation (SFNLAF) is to receive

$330,000.00, plus accrued interest on that sum;

2. The Volunteer Legal Services Program (VLSP) of the Bar Association of San

Francisco (BASF) is to receive $703,060.01 plus accrued interest on that sum;

3. Consumers Union is to receive $703,060.01 plus accrued interest on that sum;

4. Consumer Action is to receive $703,060.01 plus accrued interest on that sum;

5. Consumer Credit Counseling Services (CCCS) is to receive a sum between

$500,000.00 and $703,060.01, plus accrued interest on the sum awarded.

6. IF CCCS is awarded less than $703,060.01, then VLSP, Consumers Union and

Consumer Action will each be awarded an additional amount equal to one-third of the difference

between the amount actually awarded to CCCS and $703.060.01.

The parties and the recipient organizations named above are to exchange proposed

budgets for the use of the sums provisionally awarded by January 15, 1993. If they deem it

appropriate, the parties and representatives of recipient organizations may meet and confer after

January 15, 1993 to attempt to resolve any disagreements concerning the proposed budgets of

any recipient organization. The parties and the recipient organizations are required to exchange

responses and file and serve the final budgets with the Court by January 29, 1993. A further

hearing date is calendared for February 5, 1993 at 2:00 p.m. in Department 8 for consideration of

these budgets and for further order of the Court.

IT IS HEREBY FURTHER ORDERED that the sum of 5%, or $165,381.05 of the


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remaining residue of $3,307,621.10, plus interest which accrues on that sum, is to be retained and

reserved for further work, including oversight of the implementation of the cypres remedy, to be

performed by plaintiffs' class counsel, Sturdevant & Sturdevant, in connection with the

distribution of the damages and settlement funds in October and November, 1992 and the

determination and effectuation of the cypres remedy. The Court reserves jurisdiction to

distribute any portion of the reserved 5% of the remaining residue, plus accrued interest on that

sum, which

is not awarded to plaintiffs' counsel, Sturdevant & Sturdevant, if any.

SO ORDERED.

DATED:

Judge of the Superior Court

APPROVED AS TO FORM:

Attorneys for Defendant

DATED:

12.3 Further Order Granting Approval ofCy Pres Remedy



BEASLEY, et al.,

Plaintiffs

[vs.]


Defendants

KOVITZ, et al.,

Plaintiffs


23/35

[vs.]


Defendants

Nos. 861555 and 868914


[PROPOSED]

FURTHER ORDER GRANTING APPROVAL OF CYPRES REMEDY AND DISTRIBUTION

OF CYPRES FUNDS

Department 8

THE HONORABLE STUART R. POLLAK

[end caption]

This matter is before the Court for further consideration of plaintiff's motion for approval of

a cypres remedy for use of the approximately $3.3 million residue that remains in these consolidated

class actions after direct distribution of refunds to former customers and credits to current

cardholders.

The matter initially came before the Court for hearing on December 11, 1992. Following that

hearing, the Court issued an Order granting approval of the cypres remedy and making preliminary

allocations of funds among five proposed recipient organizations. The Court scheduled the matter

for further hearing; ordered the recipient organizations to submit budgets to the Court further

specifying the intended use of cypres funds; and suggested that the parties and recipient

organizations meet to discuss issues regarding the proposed uses and allocation of funds. The

budgets and other submissions were made to the Court as ordered on January 29, 1993. The parties

then appeared before the Court for further hearing on February 5, 1993, at 2:00 p.m. in Department

8. Patricia Sturdevant and Kim Card appeared on behalf of plaintiffs and the plaintiff classes; Robert

Retana and Brian Brosnahan appeared on behalf of defendants Wells Fargo Bank and Crocker

National Bank. In addition, representatives from each of the recipient organizations attended and


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participated. After full consideration of the parties' written submissions, oral argument, and the

proposals and budgets submitted by each of the recipient organizations, the Court hereby approves

the cypres remedy described herein and orders distribution of the cypres funds as set forth below.

I. BACKGROUND

These consolidated class action lawsuits challenged defendants' unlawful practice of

imposing excessive late and overlimit fees on consumer credit card customers. On February 14,

1989, after a trial on the merits, the jury inBeasley v. Wells Fargo Bankreturned a verdict of over

$5.2 million in favor of the plaintiff class. Following the verdict inBeasley, the parties settled the

companion case ofKovitz v. Crocker National Bankfor more than $3.78 million in damages for the

plaintiff class in that case, contingent upon the successful defense of theBeasley judgment on appeal.

TheBeasley judgment was upheld by the Court of Appeal in a published decision on November 12,

1991. SeeBeasley v. Wells Fargo Bank, N.A. (1991) 235 Cal.App.3d 1383, rev.denied. The

Supreme Court denied review on March 12, 1992. Not long thereafter, with this Court's approval,

the bank began the process of distributing theBeasley damage award and Kovitz settlement fund to

the plaintiff classes by way of direct refunds for late and overlimit charges paid by class members.

Over $4.6 million was distributed to class members through the direct refund process.

Because of the anticipated and inherent difficulty of identifying and locating all class

members, the parties addressed the issue of allocation of any undistributed residual funds in the

Beasley post-trial briefing. On September 13, 1989, the trial judge inBeasley entered an Order

Regarding Expansion of Class and Distribution of Damages Award, which provided that any funds

remaining after the damages award was distributed to the plaintiff class by way of direct refund were

to be apportioned as follows: fifty percent of the residue was to be distributed to Wells Fargo's

existing cardholders through prospective reduction in late and overlimit fees, and fifty percent was

to be distributed as a cypres remedy for the indirect benefit of the class subject to the approval of

the court. In the Settlement Agreement in Kovitz v. Crocker National Bank, the parties agreed that

distribution of the settlement fund and any residue would be accomplished in the same manner as


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10The allocation was modified slightly by the parties' stipulation to take into account thesettlement in Sousa v. Wells Fargo Bank, San Francisco Superior Court No. 919571, whichresulted in the prospective elimination of Wells Fargo's overlimit fee for a period of at least fouryears, commencing in June, 1991. The parties agreed that the percentage of the residue in bothBeasley and Kovitz that would have been used for prospective credits of overlimit fees to currentWells Fargo cardholders would instead be reallocated to the cy pres portion of the residues. SeeStipulation and Order Regarding Distribution of the Residue, filed October 22, 1992.

ordered in theBeasley action.

Following distribution of the damages and settlement funds by direct refunds and credits, the

parties divided the residue that remained from each of the actions as ordered.10 Thereafter

approximately $2.5 (including interest) was distributed through prospective credits, and the

remaining $3.3 million (including interest) was deposited with the Court for the cypres remedy.

II.DESCRIPTION OF THE CY PRES REMEDY

Plaintiffs have proposed a comprehensive, three-year consumer education and advocacy

project modeled after the cypres remedy ordered in Vasquez v. Avco Financial Services, Los

Angeles Superior Court No. NCC11933B. In that unlawful business practices case, approximately

$1.5 million was distributed to Consumers Union for the creation of the Consumer Credit and

Finance Project, a long-term education, advocacy and litigation project that addressed a variety of

credit and finance issues affecting low and middle income consumers in California. Plaintiffs have

proposed a similar project for the cypres funds available from these class actions through which

funds will be distributed to Consumers Union, as well as to other consumer education, advocacy, and

legal services organizations for the provision of services to California consumers on credit and

finance issues. One of the primary goals of the cypres remedy as proposed by plaintiffs, and as

adopted by the Court, is to provide indirect benefits to class members and to enhance consumer

advocacy efforts for all consumers throughout California by providing direct services on credit and

finance issues to low and moderate income consumers, and by facilitating and encouraging

communication and cooperation among organizations that serve consumers at different levels and

in different functions.

The four recipient organizations which plaintiffs recommended are Consumers Union, the

Volunteer Legal Services Program of the Bar Association of San Francisco (VLSP), San Francisco


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Neighborhood Legal Assistance Foundation (SNFLAF), and Consumer Action. Each organization

has submitted a proposal and a budget for use of their share of the funds. Specifically, Consumers

Union proposes to engage in legislative and administrative advocacy, research and policy

development, education, and litigation on consumer credit and finance issues. The VLSP will use

its funds to educate its staff and volunteer attorneys on consumer issues, create a consumer advice

clinic, develop self-help consumer packets, fund a bankruptcy clinic, and provide free legal advice

and referral on credit and finance issues for low-income consumers needing legal assistance.

SNFLAF will use its funds to develop a consumer education project for low-income consumers in

four target categories -- battered women, immigrant families, single-parent families and the disabled.

Consumer Action has proposed use of the cypres funds for statewide identification of common

consumer problems and issues, provision of direct education and advice services to consumers in

several different languages, and legislative and administrative advocacy at the state and local level

on consumer issues. The Court has reviewed the proposals and budgets and approves each of these

organizations as a recipient ofcypres funds for use in the manner set forth in the organizations'

respective proposals.

Defendants proposed as an additional recipient ofcypres funds Consumer Credit Counseling

Services ("CCCS"), a non-profit organization that provides debt counseling services and arranges

managed repayment plans for consumers. Plaintiffs expressed concerns about CCCS as a recipient

ofcypres funds generated in this particular action because CCCS counselors are not trained or

qualified to evaluate the legality or validity of a consumer's debt before arranging a repayment

schedule. Plaintiffs also expressed concern that some local offices of the CCCS organization

allegedly prohibit counselors from discussing bankruptcy with consumers. The Court has taken into

account these concerns, and the response of CCCS, and concludes that CCCS shall be an additional

recipient ofcypres funds, subject to the conditions agreed to by the parties and by CCCS in the

hearings held on this matter. These conditions, which all apply only to the CCCS offices that receive

cypres funds, and only for as long as CCCS receives cypres funds, are as follows:

1. CCCS agrees to make available and accessible in its offices a handout produced by the


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National Consumer Law Center that describes the bankruptcy option and process. It is contemplated

that CCCS will be provided a reasonable supply of such handouts, free of charge, and that the cost

of reproducing additional copies may be borne by CCCS. This handout, which may be modified or

supplemented as CCCS and plaintiffs' counsel deem appropriate, will be distributed to any consumer

that does not appear to have sufficient income or resources to repay outstanding debts. CCCS agrees

that its counselors will advise those consumers about bankruptcy as an alternative to debt repayment,

without representing to the consumer that CCCS has an expertise in bankruptcy or bankruptcy law.

Information provided about bankruptcy must be balanced, including both the advantages and

disadvantages.

2. CCCS agrees to refer consumers to other recipient organizations funded by this Order, or

to other appropriate agencies, district attorneys or legal services offices, whenever the consumer

expresses an opinion or complaint that he or she has been subjected to collection harassment or other

unlawful activity, or whenever CCCS or the consumer suspects that a debt is invalid or illegal.

CCCS agrees to provide clients information about Consumer Action, to make available complaint

forms provided by Consumer Action, and to encourage clients to send copies of their complaint

forms to Consumer Action. CCCS shall not be required to represent consumers in direct challenges

to the practices of creditors, nor be required to assume control of client problems or complaints that

are outside the scope of services provided by CCCS.

3. CCCS agrees to advise consumers that late and overlimit fees may sometimes be unlawful.

CCCS also agrees that it will continue to routinely ask creditors to waive such fees for all consumers

entering into a debt management program.

4. For each office that will receive cypres funds ("Participating CCCS Office"), CCCS

agrees that no more than 40 percent of the members of the Executive Committee of the Board of

Directors of any Participating CCCS office may be representatives of the credit industry. CCCS

shall not be required to change its current definition of those who are considered "representatives of

the credit industry."

The Court finds that distribution of the cypres funds to the five consumer organizations


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listed above will indirectly benefit the plaintiff classes throughout California. It is the hope and the

intent of the parties and the Court that this cypres remedy will encourage cooperation, collaboration,

and communication among the recipient organizations as they address consumer credit and finance

issues affecting consumers throughout the state.

III. ADMINISTRATION OF THE CY PRES REMEDY

The cypres remedy shall be subject to the ultimate oversight and authority of this Court

throughout its duration, and the Court retains jurisdiction for that purpose. The administration of

the cypres project on an on-going basis, including the facilitation of cooperation among recipient

organizations, shall be performed by plaintiffs' counsel. Prior to receiving its cypres funds, each

organization shall be required to execute a Memorandum of Understanding ("MOU"), which will

be filed with the Court, and which shall set forth the organization's proposed use of the funds as

approved by the Court, the organization's commitment to the goals of the cypres remedy, and the

organization's agreement to abide by certain conditions for the receipt of funds. These conditions

shall include: (1) the submission of two semi-annual reports to plaintiffs' counsel, each of which

shall include a description the organization's plans and proposed use of funds for the following six

months and a description of projects and fund expenditures that have been undertaken in the

preceding six-month period, (2) the submission of an annual report to the Court which shall include

a status report, financial report of expenditures, and application for funding and budget for the

following year; (3) an agreement to work cooperatively and to share information with the other

recipient organizations; and (4) a commitment to participate in meetings of the cypres project which

shall be held on a quarterly basis or as plaintiffs' counsel deem appropriate. It shall be sufficient for

CCCS to be represented at such meetings by a representative of the San Francisco office of CCCS

who will act on behalf of other recipient offices, although representatives from other participating

CCCS offices may also attend such meetings in place of or together with the San Francisco

representative.

Once the MOU's have been executed by each organization, plaintiffs' counsel shall distribute

the funds as set forth below. As specified in the Court's previous order approving the cypres


29/35

remedy, five percent of the cypres fund shall be retained and reserved for further work to be

performed by plaintiffs' counsel, including oversight of the implementation of the cypres remedy,

or for other expenses of the cypres project. The Court reserves jurisdiction to distribute any portion

of the reserved 5 percent, plus accrued interest on that sum, upon application by plaintiffs' counsel.

Wells Fargo shall have no further obligation to fund the cypres remedy and shall have no further

obligation for payment of the attorneys' fees and expenses of plaintiffs' counsel.

IV. ALLOCATIONS OF CY PRES FUNDS

The cypres remedy in these actions will be funded over a three-year period. In this Order,

the Court preliminarily approves allocations for the three-year period, but authorizes distribution of

funding for only the first year. That year shall commence on June 1, 1993. In order to receive

funding for subsequent years, each organization shall submit an annual report summarizing its

activities accomplished with the cypres funds, along with an application for release of the next year's

funding, including a proposed budget. To ensure the continuous flow of funds, the annual reports

shall be submitted to plaintiffs' counsel no later than April 1, 1994. Plaintiffs' counsel shall then

prepare a "Status Report Regarding the Operation of the Cy Pres Remedy" summarizing the

respective organizations' annual reports, evaluating the effectiveness of the cypres remedy, and

making recommendations for funding for the following years. The Status Report, annual reports of

each of the organizations, and a proposed order for release of the next year's funds shall be submitted

to the Court by plaintiffs' counsel no later than May 1, 1994.

The Court allocates cypres funds and approves distribution to the recipient organizations in

the amounts specified below.

1. San Francisco Neighborhood Legal Assistance Foundation (SNFLAF). The Court

allocates a total of $330,000 over a three-year period to SNFLAF. The Court approves SNFLAF's

budget as submitted and authorizes the immediate distribution of $110,000 for the first year.

2. Volunteer Legal Services Program of the Bar Association of San Francisco (VLSP). The

Court allocates a minimum of $703,060 over a three-year period to VLSP. The Court approves

VLSP's budget for this amount as submitted and authorizes the immediate distribution of $234,353


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for the first year of the project.

3. Consumers Union. The Court allocates a minimum of $703,000 over a three-year period

to Consumers Union. The Court approves Consumers Union's budget for this amount as submitted

and authorizes the immediate distribution of $234,334 for the first year of the project.

4. Consumer Action. The Court allocates a minimum of $703,000 to Consumer Action over

a three-year period. The Court approves Consumer Action's budget for this amount as submitted,

and authorizes the immediate distribution of $220,400 for the first year of the project.

5. Consumer Credit Counseling Services (CCCS). For the first year, the Court approves

funding for the expansion of CCCS offices in Daly City ($17,900); Fremont ($35,000); Ukiah

($35,000); and Victorville ($55,000). The Court approves the budgets for these office expansions

as submitted by CCCS. With respect to the expansion of offices, the Court allocates funding for only

the first year. Funding for future years shall be dependent upon the Court's evaluation of the CCCS

performance and compliance with the cypres goals in the first year.

In addition, the Court allocates $103,000 to CCCS to be used over a three-year period to

reduce the fees of consumers who are referred from other recipient organizations and who would

otherwise be charged for CCCS services. The Court authorizes distribution of $34,333 for fee

reduction for the first year. These funds shall not be used for low income consumers who would

otherwise receive CCCS debt management services free of charge. Rather, the funds shall be used

to reduce the fees by fifty percent for consumers who would otherwise be charged a fee. For the first

year, the funds shall be used only for consumers who are referred to any CCCS office from another

recipient organization. If the Court finds that such referrals are not occurring, this limitation shall

be subject to reevaluation for subsequent years. The recipient organizations shall cooperatively

devise a plan by which consumers who are referred to CCCS by other recipient organizations shall

receive their fifty-percent fee reduction.

The Court also allocates $100,000 over a three-year period for the development, reproduction

and translation of consumer education materials. The $100,000 shall be divided as follows: $30,000

for the reproduction of existing consumer education materials; $40,000 for the creation of new


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materials; $20,000 for the translation of existing materials into other languages; and $10,000 for

overhead costs related to production of the materials listed above. The Court authorizes the release

of $33,333 of this allocation for the first year of the project, which shall be used for the purposes and

in the proportions set forth above.

The Court finds that some of the projects proposed by CCCS, including the creation of new

resource guides and the translation of existing materials into other languages, may duplicate efforts

already performed by other recipient organizations, including those of Consumer Action. In the

interests of maximizing cooperation among the recipient organizations, and making the most

efficient use of available resources, the Court orders that all expenditures by CCCS in this category,

i.e. funds spent out of the $33,333 allocated for educational materials, shall be subject to prior

written approval by plaintiffs' counsel Sturdevant & Sturdevant except that expenditures for

reproduction of existing materials and for overhead costs in this category shall not be subject to the

prior approval of plaintiffs' counsel. Prior to expending any funds, CCCS shall submit a proposal

to plaintiffs' counsel describing the intended use of funds, which shall include the description of any

new materials that would be produced or translated and a copy of the proposed or existing text of

such materials. Plaintiffs' counsel shall review the proposal in good faith and confer with other

recipient organizations to ensure that the proposed materials would not be duplicative of existing

materials. If, in their discretion, plaintiffs' counsel conclude that the materials would be best

produced as a joint effort by CCCS and another recipient organization, the expenditure may be

approved jointly to CCCS and to any other organization that shall cooperate with CCCS in the

development of educational materials. Each organization will bear its own share of the cost of

producing materials jointly.

The total of funds that shall be immediately released to CCCS for the first year of the cypres

remedy is $210,566.

V. WITHDRAWAL OF FUNDS FROM COURT

Upon entry of this Order, plaintiffs' counsel shall withdraw the cypres funds from the Court's

Special Trust Fund Account, along with all interest that has accrued on the funds since the date of


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deposit on November 25, 1992, and shall deposit said funds in an appropriate interest bearing

account. All interest that accrues on the fund throughout the duration of the cypres project,

including all interest that has accrued on the fund since November 25, 1992, shall accrue to the fund

for distribution in future years. The amounts approved by the Court for the first year of operation

shall be distributed to the recipient organizations by plaintiffs' counsel after an appropriate

Memorandum of Understanding has been executed by the organization and filed with the Court.

SO ORDERED.

DATED:

JUDGE OF THE SUPERIOR COURT

APPROVED AS TO FORM:

Attorneys for Defendants

12.4 Memorandum Executed For Receipt ofCy Pres Funds



BEASLEY, et al.,

Plaintiffs

[vs.]


Defendants

KOVITZ, et al.,

Plaintiffs

[vs.]


Defendants


33/35

Nos. 861555 and 868914


MEMORANDUM OF UNDERSTANDING EXECUTED FOR RECEIPT OF CY PRES FUNDS

(CONSUMER ACTION)

1. This Memorandum of Understanding is entered into by and between Consumer Action,

a non-profit membership organization, and counsel for the plaintiff classes in the above-entitled

actions for the purpose of facilitating the distribution ofcypres funds as ordered by the Court. The

cypres remedy ordered by the Court is explained in the Court's Further Order Granting Approval

ofCyPres Remedy and Distribution ofCyPres Funds, filed May 7, 1993, which is attached hereto

as Exhibit A and incorporated herein by this reference.

2. In accepting the cypres funds awarded by the Court in this action, Consumer Action

hereby states its commitment to the goals of the cypres remedy which are to provide indirect

benefits to the class members in these consolidated actions, to enhance consumer education and

advocacy efforts for all consumers throughout California, to provide direct services to low and

moderate income consumers on consumer credit and finance issues, and to facilitate and to

encourage communication and cooperation among the recipient consumer advocacy organizations.

3. The undersigned parties to this Memorandum of Understanding agree that Consumer

Action shall use the cypres funds received by order of the Court in these actions to create and to

finance a statewide Credit and Finance Project. The Project will address the needs of California

consumers, particularly those who are low-income, disabled, limited-English speaking, immigrants,

or seniors, in the areas of consumer credit and finance and shall involve the following activities: a

project to identify common and/or recurring consumer credit and finance problems, including the

creation of a database to maintain and categorize this information; the provision of direct services


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to consumers in the form of advice and referral; the development of educational materials and

workshops; and administrative and legislative advocacy on credit and finance issues. A summary

of the activities to be performed by Consumer Action using the cypres funds is set forth in

Consumer Action's proposal attached hereto as Exhibit B and incorporated herein by this reference

[not reprinted infra]. Consumer Action agrees to use the funds received through the cypres remedy

ordered in this action for the purposes described and in the manner set forth in the proposal and

budget attached hereto as Exhibit B. For the first year of the cypres remedy, Consumer Action shall

receive $220,400.

3. As a condition of receiving the cypres funds awarded by the Court, Consumer Action

hereby agrees that its expenditure of funds, its reports regarding the expenditure of funds, and its

requests for funding in the second and third years of the cypres remedy shall be subject to the

jurisdiction of the San Francisco Superior Court. Consumer Action hereby agrees to submit to the

jurisdiction of the Court and to abide by its orders.

4. As was ordered by the Court, Consumer Action hereby agrees to submit two semi-annual

reports to plaintiffs' counsel, each of which shall include a description of the organization's proposed

use of funds for the following six months and a description of projects and fund expenditures that

have been undertaken in the preceding six-month period. In addition, Consumer Action agrees to

submit an annual report to the Court which shall include a status report, financial report of

expenditures, and application and budget for the following year. Plaintiffs' counsel will establish

reasonable deadlines for the submission of each of these reports, and shall assist Consumer Action

as needed in their preparation.

5. Consumer Action agrees to participate in meetings of the cypres project which shall be

held on a quarterly basis or as plaintiffs' counsel deems appropriate. In support of the goals of the

cypres remedy, Consumer Action also agrees to work cooperatively and to share information with

other recipient organizations.

6. This Memorandum of Understanding is subject to modification by agreement of plaintiffs'

counsel and Consumer Action, subject to Court approval. There shall be no unilateral termination


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or alteration of this Memorandum, except that Consumer Action may terminate the Memorandum

by providing 30 days written notice to plaintiffs' counsel and returning all remaining funds to

plaintiffs' counsel. Plaintiffs' counsel will then seek Court approval for any replacement recipient.

This Memorandum shall automatically terminate upon the full depletion of all funds received and

following the rendering of a final accounting to plaintiffs' counsel.

Dated:

STURDEVANT & STURDEVANTA Professional Corporation

CONSUMER ACTION

a Non-Profit Membership Organization

chapter 12 cy pres remedy pl94ch12

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