Chapter 4

4.1

Lender Liability Where FTC Holder Notice Improperly Omitted

Date

Demand Letter

President LaSalle Northwest National Bank 4747 West Irving Park Road Chicago, IL 60641 Re: Claim by Georgia Brown, 1720 N. Main, Chicago, IL 60639, against LaSalle Northwest National Bank

Dear Sir or Madame: On February 14, 1991, LaSalle Northwest unit financed Mrs. Brown's purchase of a 1989 Toyota from a used car dealer known as Lake Automotive. Mrs. Brown executed a $13,000 note at the place of business of Lake Automotive on a printed form that had been supplied to it by LaSalle Northwest, and without visiting LaSalle's offices. LaSalle Northwest delivered a check to the dealer, which Mrs. Brown endorsed to the dealer. Although any note which LaSalle Northwest furnishes to a seller of goods for use in consumer transactions is required by Federal Trade Commission regulations (16 C.F.R. part 433) to contain a statement that any holder was subject to any claims and defenses that the consumer has against the seller, this particular note did not. A claim was recently asserted against Mrs. Brown to the effect that Lake Automotive did not have good title to the vehicle sold to her. See enclosed letter [not reprinted infra]. As a result of this claim, Mrs. Brown has incurred legal fees and sustained mental anguish. If the letter is accurate, Lake Automotive breached its warranty of title and against infringement under 2-312 of the Uniform Commercial Code, entitling Mrs. Brown to rescind both the purchase and the financing and recover damages. (Mrs. Brown has paid LaSalle Northwest more than $6,200 on the note.) Of course, Lake Automotive is now defunct. The existence of a form document which fails to comply with 16 C.F.R. part 433 indicates a pattern of similar violations. Before taking any action, we wish to give LaSalle Northwest an opportunity to provide any explanation for the distribution of the forms. Please furnish us with any explanation for the form within ten days of the date of this letter. Any explanation should include (i) examples of financing instruments which LaSalle Northwest furnishes to car dealers that do comply with 16 C.F.R. part 433, (ii) the identities of all sellers of goods and services to which LaSalle Northwest furnished forms that do not comply with 16 C.F.R. part 433 and (iii) the number and status of the transactions that were written on the improper forms. Mrs. Brown will make no further payments on her account until this matter is resolved. Sincerely yours, Attorney for Plaintiff cc: Georgia Brown

4.2

Plaintiff's Motion for Leave to File Amended Complaint

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 PLAINTIFF'S MOTION TO AMEND THE JUDGMENT TO PERMIT HER LEAVE TO FILE AN AMENDED COMPLAINT Plaintiff, Georgia Brown ("Ms. Brown"), requests, pursuant to Fed.R.Civ.P. 59 that this Court amend the judgment which was entered on March 25, 1993, to permit her leave to file an amended complaint, and allow her to file the attached amended complaint instanter. Ms. Brown further requests that the Court delete the portion of its order striking the class allegations. In support of this motion, plaintiff states: a. On December 28, 1992, Ms. Brown filed a two count complaint against LaSalle Northwest National Bank ("LaSalle"), alleging that LaSalle violated of RICO (Count I) and the Illinois Consumer Fraud Act (Count II) when it issued loans to consumers on forms which did not include a notice, required by Federal Trade Commission regulations, subjecting LaSalle to claims and defenses the consumers had against the car dealers who referred the consumers to LaSalle. b. On March 25, 1993, this Court entered a judgment dismissing Count I of plaintiff's complaint with prejudice. The Court's Memorandum Opinion found that plaintiff had alleged a RICO violation but with insufficient specificity. The Court stated that the sole reason for the dismissal was that the complaint failed to satisfy the Fed.R.Civ.P. 9(b) pleading requirements because it did not contain any specific allegations as to transactions with other customers, other automobile dealers or other insurance agents.

c. Plaintiff believed and continues to believe that it should not be necessary to plead specific facts about other transactions in a case such as this one, which involves a standard form contract which was clearly used in multiple consumer transactions. Imposing such a requirement would make it impossible to allege a RICO violation in many cases clearly within the intended scope of the statute simply because no single victim knows the name of other victims. Most consumer and security fraud cases are of this nature. d. Nevertheless, plaintiff has prepared an amended complaint which contains facts about four other consumer transactions, involving four different automobile dealers (Exhibit A), in accordance with this Court's position on the pleading requirements. e. The geographic and temporal dispersal of the consumers and dealers plaintiff has identified in her amended complaint indicates that LaSalle has arrangements with a large number of auto dealers and State Farm agents. Plaintiff should also be able to obtain facts concerning additional transactions through discovery. The fact that at least five car dealers were involved shows that plaintiff's transaction was not isolated. f. The usual practice when a complaint is dismissed under Rule 9(b) for failure to plead specific facts, is to allow the plaintiff the opportunity to file an amended complaint setting forth additional facts. 2A J. Moore & J. Lucas, Moore's Fed. Practice 9.03 at 9-34 (2d Ed. 1986); Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986). Leave to amend should be granted unless the court determines that the allegations of other facts consistent with the challenged pleading could not possibly cure the deficiency. Ray v. Karris, 780 F.2d 636, 646 (7th Cir. 1985); Schreiber v. Serv-Well, 806 F.2d 1393, 1401 (9th Cir. 1986) (district court erred in dismissing RICO count with prejudice for failure to plead sufficient facts). Plaintiff should therefore be given the opportunity to file an amended complaint in this case. g. The Court struck the class allegations, on its own motion, for the stated reason that Ms. Brown had not yet filed a motion for class certification showing the prerequisites of Rule 23 had been met. However, Ms. Brown had propounded discovery seeking information that would show that the requirements for class certification had been met. The discovery requests are

attached as Exhibit B [not reprinted infra]. Ms. Brown also conducted an investigation which revealed the existence of other potential class members, including those described in the amended complaint. h. Ms. Brown is entitled to obtain discovery before having to show that the requirements for class certification are met. Walker v. World Tire Co., 563 F.2d 918, 921 (8th Cir. 1977) ("the parties must be afforded the opportunity to discover and present documentary evidence on the class issue"); Dillon v. Bay City Constr. Co., 512 F.2d 801, 804 (5th Cir. 1975) ("the plaintiffs were entitled to discovery" on class issues); Zakorik v. Cornell University, 98 F.R.D. 27 (N.D.N.Y. 1983) ("discovery is often necessary before plaintiffs can properly satisfy the requirements of Fed.R.Civ.P. 23(a)"). "To pronounce finally, prior to allowing discovery, the non-existence of a class or set of sub-classes, when their existence may depend on information wholly within defendant's ken, seems precipitate and contrary to the pragmatic spirit of Rule 23." McCray v. Standard Oil Co., 76 F.R.D. 490, 500 (N.D.Ill. 1976); accord, Yaffe v. Powers, 454 F.2d 1362, 1367 (1st Cir. 1972). Plaintiff's class allegations comply with notice pleading requirements, and the allegations concerning other car dealers and other transactions in the amended complaint indicate that discovery is likely to substantiate the existence of a class of other consumers similarly situated. WHEREFORE, the plaintiff requests that this Court amend the judgment which was entered on March 25, 1992 to allow the plaintiff leave to file an amended complaint, allow her to file the attached amended complaint instanter, and delete the portion of its order striking the class allegations. Respectfully submitted, Attorney for Plaintiff

4.3

Amended Complaint
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Judge William T. Hart SECOND AMENDED COMPLAINT MATTERS COMMON TO MULTIPLE COUNTS INTRODUCTION 1. This action is brought by two consumers to secure redress for an unfair, deceptive and unlawful trade practice perpetrated by defendant on plaintiffs and, it is believed, numerous other persons, generally poor and unsophisticated. Defendant maintained continuous business relationships with automobile dealers who directly or indirectly referred customers to defendant for financing. Accordingly, under Federal Trade Commission regulations, defendant is subject to claims and defenses which the consumer has against the provider of goods and services. Defendant devised a scheme to deceive and coerce borrowers into making payment to it notwithstanding the nonreceipt of the agreed-upon consideration from the dealer. 2. In this action, plaintiffs allege that defendant's practices violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 et seq., and the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill.Rev.Stats., ch. 121-1/2, par. 261 et seq. Plaintiffs seek compensatory, treble and punitive damages, as well as declaratory and injunctive relief.

JURISDICTION AND VENUE 3. Jurisdiction over Count I of this action exists under 28 U.S.C. 1331 and 18 U.S.C. 1964. Jurisdiction over Count II exists under 28 U.S.C. 1367. Venue in this District is proper, as the claim arose in this District. PARTIES 4. Georgia Brown is an individual who resides at 1720 N. Menard, Chicago, Illinois 60639. 5. Dean Martin, Jr. is an individual who resides at 7600 S. Stewart, Apt. 101, Chicago, IL 60620. 6. LaSalle Northwest National Bank ("LaSalle") is a national bank with its principal place of business located at 4747 W. Irving Park Road, Chicago, Illinois 60641. 7. LaSalle is part of a corporate group including LaSalle National Bank, LaSalle Bank Lake View, and other entities. All of these entities are owned by ABN AMRO North America, Inc., which is turn owned by a Netherlands corporation. The group is engaged in the provision of a variety of financial services in the Chicago area. 8. The activities of LaSalle and the corporate group of which it is a part affect interstate commerce, in that: a. The funds lent by LaSalle and the other members of the group are raised in part from residents of states other than Illinois. b. c. LaSalle makes loans in states other than Illinois. The profits derived by LaSalle, including profits from the lending activities at issue here, are ultimately transmitted to its Netherlands parent. d. The automobiles financed by LaSalle are produced in states other than Illinois.

FTC REGULATION ABROGATING HOLDER IN DUE COURSE DOCTRINE 9. In 1976, the Federal Trade Commission promulgated a regulation, 16 C.F.R. part 433, intended to address the problem of consumer liability to financial institutions which finance the purchase of defective goods. As explained in the FTC's Staff Guidelines on Trade Regulation

Rule Concerning Preservation of Consumers' Claims and Defenses, the purpose of the regulation was to make it impossible "for a seller to arrange credit terms for buyers which separate the consumer's legal duty to pay from the seller's legal duty to keep his promises." 10. The regulation, 16 C.F.R. 433.2(b), requires inclusion of a notice in contracts evidencing a consumer's duty to pay where a "creditor" makes a cash advance to a consumer which the consumer applies, "in whole or substantial part, to a purchase of goods or services from a seller who (1) refers consumers to the creditor or (2) is affiliated with the creditor by common control, contract, or business arrangement." (16 C.F.R. 433.1(d)) 11. The FTC regulation defines "contract" to include "[a]ny oral or written agreement, formal or informal, between a creditor and a seller, which contemplates or provides for cooperative or concerted activity in connection with the sale of goods or services to consumers or the financing thereof." (16 C.F.R. 433.1(f)) "Business arrangement" is defined to include any "understanding, procedure, course of dealing, or arrangement, formal or informal, between a creditor and a seller, in connection with the sale of goods or services to consumers or the financing thereof." (16 C.F.R. 433.1(g)) A "creditor" is defined as any "person who, in the ordinary course of business, lends purchase money or finances the sale of goods or services to consumers on a deferred payment basis." (16 C.F.R. 433.1) SCHEME COMPLAINED OF 12. LaSalle and certain State Farm insurance agents entered into agreements or understandings, which are referred to in a LaSalle's 1990 Community Reinvestment Act Performance Evaluation (attached as Exhibit A, p. 4) [not reprinted infra]. The terms of these arrangements included the following: a. State Farm agents would arrange with automobile dealers to obtain referrals of persons desirous of financing. b. State Farm agents would arrange with LaSalle to procure financing for these persons.

c.

LaSalle would prepare printed forms of note which did not contain the notice required by 16 C.F.R. part 433 and distribute these for use by the State Farm agents and/or the automobile dealers.

d.

LaSalle required and directed that its form of note be used in connection with any transactions with consumers referred in this manner, and would not accept notes which contained the notice required by 16 C.F.R. part 433.

e.

Neither LaSalle nor any of the participants in the transaction would inform the consumer of the matters required to be disclosed to the consumer by 16 C.F.R. part 433.

13. LaSalle planned to disclaim any responsibility for claims or disputes between the consumers and the automobile dealers on the theory that the business was referred by the State Farm agent and not the dealer. 14. LaSalle and the State Farm agents would not disclose to the consumer that the transaction was structured in a manner calculated to allow LaSalle to contend that it was not responsible for claims or disputes between the consumer and the automobile dealer. 15. In fact, the State Farm agent is the agent of LaSalle, and is authorized to (i) disburse loan proceeds by issuing "drafts" (instruments) for LaSalle, (ii) receive credit information about potential LaSalle borrowers, and (iii) prepare loan documents (notes and Truth in Lending disclosures) on behalf of LaSalle. Therefore, the automobile dealer (the "seller" within the meaning of 16 C.F.R. part 433) when referring consumers to a State Farm agent, is referring consumers to LaSalle (the "creditor" within the meaning of 16 C.F.R. part 433). 16. LaSalle supplied the State Farm agents with loan "packages" containing forms to be used in LaSalle transactions, including credit applications and loan forms. Exhibit B is an example of such a package. 17. Because of the status of the State Farm agent, as agent for LaSalle, the existence of the referral arrangements between the State Farm agent and the automobile dealer, on the one

hand, and LaSalle and the State Farm agent, on the other, constitutes an affiliation between the automobile dealer and LaSalle by "contract" or "business arrangement." (16 C.F.R. 433.1(d)) 18. LaSalle's financing of automobile purchasers referred by automobile dealers through State Farm agents was therefore subject to the FTC holder in due course regulation. There was an understanding and arrangement that automobile dealers would refer consumers for financing in such a manner that the consumers would receive financing from LaSalle. Such understandings and arrangements trigger applicability of the FTC rule. 19. LaSalle intentionally supplied State Farm agents and/or automobile dealers with form notes which omitted the notice required by 16 C.F.R. part 433. Exhibit C is an example of the form LaSalle supplied. It was the policy and practice of LaSalle to omit the notice. LaSalle supplied all of the agents with LaSalle loan applications and forms to keep at their offices. 20. LaSalle intended, by supplying the State Farm agents and automobile dealers with such notes, to: a. Cause to be concealed from consumers notice of their rights under 16 C.F.R. part 433. b. Collect money from consumers by representing to them that they had to pay LaSalle irrespective of claims and defenses which they might have against the automobile dealers. c. Cause consumers to be deprived of their rights under 16 C.F.R. part 433. GEORGIA BROWN'S TRANSACTION WITH LASALLE 21. On February 14, 1992, Georgia Brown and her son Michael Alexander went to Lake Automotive at Lake Automotive, 701 W. Lake, Maywood, Illinois 60153, and purchased a used 1989 Toyota. 22. Georgia Brown and her son selected the vehicle from the inventory of Lake Automotive and had no knowledge or reason to know of any defect in the title of Lake Automotive to the vehicle. 23. Lake Automotive undertook to arrange financing and insurance for Georgia Brown.

24. Lake Automotive directed Georgia Brown and her son to a State Farm agent, Archie B. Leach, 1306 Lake Street, Melrose Park, Illinois 60160, for automobile insurance. 25. Georgia Brown and her son then returned to the premises of Lake Automotive, where Lake Automotive had a loan application and note on forms issued by LaSalle for her to sign. Georgia Brown signed the papers. A true and accurate copy of the note is attached as Exhibit D [not reprinted infra]. 26. LaSalle approved the loan application. 27. The note signed by Georgia Brown provided for 48 payments of $345.54 each. LaSalle later mailed Ms. Brown a booklet of payment coupons to be sent in with her payments. 28. Within the space of several hours, a draft issued representing the proceeds of the loan was delivered to the place of business of Lake Automotive. Georgia Brown signed the draft, which was payable to Lake Automotive. 29. Lake Automotive did not have good title to the car. Georgia Brown was unable to register the vehicle in her name. A claim to the vehicle was asserted in 1992 by Champion Federal Savings & Loan Association. Ultimately, Champion took possession of the vehicle. 30. Lake Automotive is now defunct. 31. Prior to the assertion of a claim to the vehicle by Champion Federal, Georgia Brown made 18 payments of $345.54 each to LaSalle on the note. LaSalle occasionally sent documents by United States mail to Georgia Brown reminding her to make her payments. A true and correct copy of one such document is attached as Exhibit E [not reprinted infra]. Ms. Brown also sent several payments by mail. 32. Georgia Brown ceased making payments to LaSalle when she learned that Champion Federal had a claim to the vehicle and that she may not have received anything in exchange for her money. 33. LaSalle and the legal department of ABN AMRO North America, Inc., its parent, which apparently is responsible for legal representation of LaSalle, demanded that Georgia Brown resume making payments to it, and claim that LaSalle is not subject to claims and

defenses which Georgia Brown may have against Lake Automotive. Exhibit F, attached [not reprinted infra], is a letter to that effect received from the legal department of ABN AMRO North America, Inc., via the United States mail. DEAN MARTIN'S TRANSACTION WITH LASALLE 34. On September 9, 1991, Dean Martin, Jr. ("Mr. Martin") purchased a used 1990 Toyota automobile ("Toyota") from Enterprise Rent-A-Car ("Enterprise"), 4700 Southwest Highway, Oak Lawn, Illinois. 35. Enterprise undertook to arrange financing and insurance for Mr. Martin. Enterprise informed Mr. Martin that he would have to go through its insurance company in order to buy the car. 36. Enterprise directed Mr. Martin to a State Farm agent, Pat Appleton, whose offices are at 87th and Stony Island Avenue in Chicago, Illinois. 37. Mr. Martin completed a loan application at the offices of the State Farm agent. Appleton did a credit check and told Mr. Martin he would need a co-signer. 38. Mr. Martin asked his aunt, Essie Martin, to co-sign. Mr. Martin and his aunt returned to the State Farm office and signed LaSalle loan documents there. A true and accurate copy of the loan agreement is attached as Exhibit G [not reprinted infra]. 39. LaSalle approved the loan application and a draft, apparently signed by Appleton, was delivered to Enterprise. 40. Mr. Martin did not purchase State Farm automobile insurance. The only thing Mr. Martin obtained at the State Farm office was an automobile loan from LaSalle. 41. At the time Mr. Martin purchased the Toyota, Enterprise issued a written warranty to him. 42. In early 1991, the Toyota overheated and ceased functioning, requiring replacement of the engine. Enterprise refused to honor its warranty and replace the engine, on any terms. 43. After Mr. Martin purchased the Toyota he noticed that it had been extensively repaired. Initially, Mr. Martin discovered glass under the seat and in the seat tracks. Upon

further examination, he found that the bumper was scorched as if it had been welded, and that the undercoating was missing (this occurs if the frame has been straightened or welded). Mr. Martin took the Toyota to a frame shop, which confirmed that it had been in a severe accident and that the frame had been repaired. 44. Enterprise never disclosed to Mr. Martin that the Toyota had been in an accident. When he returned to Enterprise and informed them of his discoveries, Enterprise denied the Toyota had been in an accident and refused to provide any redress. Mr. Martin would not have purchased the Toyota had he know it had been in an accident. 45. LaSalle has filed suit against Mr. Martin in an attempt to collect the balance of his loan, and Mr. Martin seeks to raise defenses against LaSalle. However, the note he signed does not contain the FTC notice which would have allowed him to raise his defenses against LaSalle. OTHER TRANSACTIONS 46. Plaintiffs have ascertained through investigation that the manner in which they were referred from automobile dealers to LaSalle is part of a pattern of generating business engaged in by LaSalle, and that LaSalle has also disclaimed responsibility for the claims of other consumers whose transactions were financed in the same manner and who have claims arising from the purchase of their vehicles. 47. Rosie O'Grady of 1234 S. Elm, Chicago, went to a used car dealership called Unlimited Auto Sales, Inc., 10300 S. Michigan, Chicago, in November, 1987 to purchase a used car. Unlimited Auto Sales, Inc. referred her to a State Farm agent for financing. The State Farm agent wrote her a loan from LaSalle on November 30, 1987. Ms. O'Grady did not have State Farm insurance prior to obtaining this loan and did not purchase State Farm insurance in conjunction with this loan. A copy of the promissory note she signed is attached as Exhibit H [not reprinted infra]. Plaintiffs have determined, through discovery, that Unlimited Auto Sales, Inc. referred at least 175 other customers to LaSalle, pursuant to a referral arrangement between Unlimited Auto Sales, Inc. and two or three State Farm insurance agents who were acting as agents for LaSalle.

48. Chet Atkins of 456 S. Broad, Chicago, went to A-1 Motors, Inc. at 5670 S. Western, Chicago, on August 6, 1992 to purchase a used vehicle. An A-1 Motors salesman drove Mr. Atkins to a State Farm insurance agent at 71st and California in Chicago, where the State Farm agent completed a LaSalle loan application for Mr. Atkins. LaSalle approved the loan and Mr. Atkins signed the loan documents at the State Farm agent's office on August 6, 1992. Mr. Atkins' loan documents are attached as Exhibit I [not reprinted infra]. On information and belief, A-1 Motors referred other customers to LaSalle, pursuant to an arrangement between State Farm agents and A-1 Motors. 49. Tanya Tucker, of 789 W. Highland, Chicago and Mike Brando went to a used car dealer on Ashland Avenue in Chicago, which is no longer in business, to purchase a vehicle on August 4, 1989. The dealer had loan applications and forms from LaSalle in its offices, provided by a State Farm agent, and Ms. Tucker and Mr. Brando completed a loan application at the dealership. Ms. Tucker and Mr. Brando were approved for a loan from LaSalle, and signed the loan documents at the dealership. Ms. Tucker's loan documents are attached as Exhibit J [not reprinted infra]. Mr. Brando and Ms. Tucker later stopped payments on the loan because the vehicle they purchased was defective, and LaSalle filed suit against them to collect the balance allegedly due. 50. On information and belief, Currie Motors in Elgin, Illinois refers customers to LaSalle for financing, maintains LaSalle credit applications and loan documents on its premises and has customers complete the applications and sign the loan forms on its premises. USE OF MAILS AND INTERSTATE WIRES 51. Extensive use of the mails took place in connection with LaSalle's execution of the scheme described above. LaSalle invited the consumers to pay by mail, and most did so. LaSalle or its representatives transmitted demands for payment by mail. LaSalle or its representatives used the mails to transmit representations, such as Exhibit F, that they were not responsible for claims that consumers had against automobile dealers.

52. On information and belief, based on normal bank practices with respect to the origination of consumer credit transactions, LaSalle used interstate wire transmissions with credit reporting agencies in order to select the consumers with respect to which it engaged in the conduct complained of. The use of wire communications with credit reporting agencies was material, if not essential, to the commission of the scheme complained of herein, because the object of the scheme was to get the consumer's money, and LaSalle therefore had to determine if the consumer was creditworthy and able to pay money. CLASS ALLEGATIONS 53. Mr. Martin brings this action on behalf of a class. The class consists of all persons who: a) purchased an automobile; b) that was financed by LaSalle; c) the person was referred to LaSalle by the automobile dealer selling the automobile, either directly or through the medium of a State Farm agent who had a business relationship with the seller and LaSalle, d) the transaction was documented by LaSalle as one for personal, family or household purposes; e) the financing by LaSalle was not a refinancing of a prior automobile loan; f) the loan documentation for the financing transaction does not contain the notice required by 16 C.F.R. Part 433; and g) either i) the loan is still unpaid or (ii) the person notified LaSalle, the automobile dealer, a judicial tribunal, or a public or private agency of an unsatisfied claim or complaint arising from the transaction. 54. Plaintiffs allege on information and belief that the class is so numerous that joinder of all members is impractical. Investigation has revealed that LaSalle sought to arrange for the referral of business from automobile dealers through numerous State Farm agents, and that there are other consumers who have claims arising from their transactions. 55. There are questions of law and fact common to the class. The principal issues raised are: a. Whether transactions generated through the method of doing business alleged herein are subject to the FTC regulation abrogating the holder in due course regulation.

b.

Whether defendant engaged in the scheme alleged in this complaint to circumvent the FTC regulation.

c.

Whether such a scheme, engaged in for the purpose of getting money from consumers, constitutes a violation of the federal mail fraud statute, 18 U.S.C. 1341, and the federal wire fraud statute, 18 U.S.C. 1343.

d.

Whether LaSalle conducted the affairs of its corporate group through a pattern of mail fraud, thereby violating 18 U.S.C. 1962(c).

e.

Whether the scheme complained of herein is an unfair or deceptive practice, violative of the Illinois Consumer Fraud Act.

56. Plaintiffs' claim are typical of the claims of the class members. All are based on the same legal and remedial theory. 57. Mr. Martin will fairly and adequately protect the interests of the class. He has suffered serious financial injury, in that LaSalle is suing him and his aunt in an attempt to force them to pay for a defective vehicle and Mr. Martin is unable to assert his claims and defenses against LaSalle due to LaSalle's failure to include the FTC notice in his note. He feels that he has been victimized, wishes to obtain redress of the wrong, and wants defendant stopped from perpetrating similar wrongs on others. To that end, he has retained counsel experienced in handling class actions and actions involving unlawful business practices. Neither plaintiffs nor their counsel have any interests which might cause them not to vigorously pursue this action. 58. Certification of the class under Rule 23(b)(3) is appropriate. The questions of law and fact common to the members of the class predominate over any questions affecting only individual members. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, in that: a. Many of the victims are poor and unsophisticated inner-city and minority individuals who are unaware of their rights and lack the economic resources

necessary to undertake litigation against one of the largest banking organizations in Chicago. b. Because the essence of the wrong was the concealment of material information from the consumer, it is likely that most of the victims are not aware that they have been wronged. c. Concentration of the litigation concerning this matter in this Court is desirable, in that LaSalle is located within this District, and the relevant documents are in this District. d. The class is believed to be of moderate size and the difficulties likely to be encountered in the management of a class action are not great. COUNT I -- RICO 59. Plaintiffs incorporate 1-58. 60. The corporate group of which LaSalle is a part is an enterprise within the meaning of 18 U.S.C. 1961(4). Its activities affect interstate commerce. 61. LaSalle devised and implemented the scheme described in 12-20. This scheme constitutes a scheme or artifice to defraud, within the meaning of 18 U.S.C. 1341 and 18 U.S.C. 1343. 62. As described above, the mails and interstate wires were used for the purpose of executing this scheme and artifice. 63. LaSalle conducted and participated in the

conduct of the affairs of the enterprise described above through the scheme described above, in violation of 18 U.S.C. 1962(c). 64. Plaintiffs and each member of the class suffered pecuniary injury as a result of

these violations. RELIEF WHEREFORE, plaintiffs request that the Court grant the following relief against defendant: a. Treble damages.

b. c.

Attorney's fees, litigation expenses and costs. Such other or further relief as the Court deems appropriate. COUNT II -- CONSUMER FRAUD ACT

65. Plaintiffs incorporates 1-58. 66. Section 2 of the Illinois Consumer Fraud Act, Ill.Rev.Stats., ch. 121-1/2, 262, ("CFA") provides: Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the "Uniform Deceptive Trade Practices Act," approved August 5, 1965, are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In construing this section consideration shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to Section 5(a) of the Federal Trade Commission Act.

67. LaSalle violated 2 by devising and implementing the scheme described in 12-20, above. This unfair and deceptive practice was committed in connection with the conduct of trade and commerce in (a) the automobiles and other goods and services financed by LaSalle and (b) the provision of financing. 68. Plaintiffs and each member of the class described below suffered pecuniary injury as a result of these violations. 69. Pursuant to 10a of the Consumer Fraud Act,

Ill.Rev.Stats., ch. 121-1/2, 270a, plaintiffs and each class member are entitled to actual and punitive damages, a declaratory judgment that LaSalle is subject to claims and defenses that exist with respect to the transactions financed by LaSalle, an injunction requiring reformation of the affected loan agreements, attorney's fees and costs, and other appropriate relief.

RELIEF WHEREFORE, plaintiffs request that the Court grant the following relief against LaSalle: a. b. Appropriate compensatory and punitive damages. A declaratory judgment that LaSalle is subject to claims and defenses that exist with respect to the transactions financed by LaSalle. c. d. e. An injunction requiring reformation of the affected loan agreements. Attorney's fees, litigation expenses and costs. Such other or further relief as the Court deems appropriate.

Attorney for Plaintiff

4.4

Memorandum In Opposition to Motion to Dismiss

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Plaintiff, Georgia Brown ("Brown"), submits the following memorandum in opposition to defendant, LaSalle Northwest National Bank's ("LaSalle") motion to dismiss. I. THE FTC NOTICE WAS REQUIRED TO BE INCLUDED IN BROWN'S CONTRACT In 1976, the Federal Trade Commission ("FTC") issued a regulation which makes it an unfair and deceptive practice for a seller to, directly or indirectly, accept as payment for the sale of consumer goods the proceeds of a purchase money loan without including in the contract a

notice subjecting the lender to claims and defenses which the consumer has against the lender. 16 C.F.R. 433.2(b). The FTC regulation abrogates the holder in due course rule, which separates the buyer's duty to pay for goods and services from the seller's duty to perform as promised. 40 Fed.Reg. at 53522. The regulation was intended to shift the cost of seller misconduct in credit sales transactions from the consumer to the financer, who is in a better position to both police sellers and obtain recourse against them. 40 Fed.Reg. at 53522-3. Thus, when the FTC Notice is included in a consumer loan contract, the consumer may assert his claims and defenses against the financer as well as the seller. LaSalle incorrectly contends that Brown's transaction is not subject to the FTC Regulation because it did not have the necessary business arrangement/relationship with her seller, Lake. LaSalle's argument mischaracterizes Brown's complaint and the FTC Guidelines. Brown has alleged that Lake arranged for the financing of Brown's purchase through LaSalle, and had preprinted LaSalle loan applications and contract forms on its premises, which it prepared for Brown's signature. (Cmplt., 22, 24). The preprinted form LaSalle supplied to Lake to document the loan did not contain the FTC notice required by 16 C.F.R. part 433. (Cmplt. 18, Ex. A) LaSalle, in conjunction with certain State Farm insurance agents and car dealers such as Lake, had devised a scheme whereby it supplied the dealers with preprinted loan forms which did not contain the FTC-required notice, with the intention of depriving consumers of their rights under 16 C.F.R. part 433. (Cmplt. 19) When Brown discovered that Lake did not have good title to the vehicle1 and ceased payments to LaSalle, LaSalle informed her that she had no right to cease payments on the loan because LaSalle was not subject to 16 C.F.R. part 433. (Cmplt., Ex. B) The arrangement between LaSalle and Lake plainly makes Brown's transaction subject to the Regulation. The FTC's definition of "business arrangement" is very broad: Any understanding, procedure, course of dealing, or arrangement, formal or informal, between a creditor and a seller, in connection with purchases of goods or services. 16 C.F.R. 433.1(g).
1

The vehicle was eventually repossessed by Champion Federal, the actual title holder.

The FTC's Guidelines for determining whether a transaction constitutes a "business arrangement" repeatedly state that the "maintenance of loan application forms in the office of the seller" is a "business arrangement" within the reach of the Regulation.2 Additionally, the FTC has flatly stated: A seller has an agreement with a creditor to maintain loan application forms in the seller's office. When a buyer requests financing, the seller assists the buyer in filling out the forms. This relationship constitutes an affiliation and the Notice must be included in the consumer credit contract. CCH Trade Regulation Reporter, 38,031, p. 41,135-4. (Ex. A, attached [not reprinted infra]) LaSalle's motion ignores the fact that Lake maintained LaSalle loan applications and forms on its premises and assisted Brown in completing them. These facts make Brown's transaction covered by the Regulation even if hers were the first Lake transaction LaSalle financed. These allegations are reinforced by those concerning the involvement of State Farm agents in acting as intermediaries between LaSalle and the dealers. Brown has alleged that not only does the referral arrangement between LaSalle, State Farm agents and automobile dealers constitute a "business arrangement," but also that one of LaSalle's purposes for involving the State Farm agents is to enable it to "disclaim any responsibility for claims or disputes between the customers and automobile dealers on the theory that the business was referred by the State Farm agent and not the dealer." (Cmplt., 12) In summary, Brown has alleged facts showing that her transaction was subject to the FTC Regulation.

FTC Staff Guidelines on Trade Regulation Rule Concerning Preservation of Consumer's Claims and Defenses, May 4, 1976, p. 16; 41 Fed.Reg. 20026; CCH Trade Regulation Reporter par. 38,031 at pp. 41,135-3 and 41,135-4.

II. BROWN HAS STATED A CLAIM UNDER RICO. A. BROWN HAS ALLEGED A "PATTERN." LaSalle incorrectly argues that Brown has not satisfied the RICO "pattern" requirement. LaSalle contends that Brown has not satisfied the "continuity" prong of the "pattern" requirement because she has alleged the specific facts concerning only one transaction. The pattern requirement is satisfied by alleging "a threat of continued criminal activity, which is present if the racketeering activity constitutes an entity's regular way of doing business, or if the racketeering activity, by its very nature is likely to extend into the future." 420 East Ohio Ltd. Partnership v. Cocose, 1992 U.S.App. Lexis 31858, *5 (7th Cir. 1992); H. J.Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 242 (1989). Brown has alleged that it was part of LaSalle's "regular way of doing business" to disseminate contracts which were required to, but did not contain the FTC Notice. (Cmplt. 18) This allegation is corroborated by the fact that the offending document was a standard preprinted form, which was obviously intended for use in multiple transactions. The dissemination of such documents necessarily began prior to Brown's transaction. Moreover, LaSalle defended its practice ten months after Brown signed her contract (Cmplt., Ex. B), which demonstrates that there is a threat that LaSalle's conduct will continue into the future.3 Brown's allegations are thus sufficient to satisfy the RICO "pattern" requirement. The cases cited by LaSalle in which courts found that the "pattern" requirement was not satisfied involved single transactions, with one or a small number of victims, and conduct directed against those particular persons, not the general public.4 As the court stated in one of LaSalle's claim that Brown has alleged conduct which only lasted a few days (LaSalle mot., 21(e)) is clearly incorrect. The fact that LaSalle used a standard printed form indicates that its conduct lasted more than a few days. The conduct appears to have continued until at least 10 months later, when Cmplt., Ex. B was sent to plaintiff's counsel. Brown's contract called for payments over 4 years, and other loan contracts were comparable in length. J.D. Marshall Int'l, Inc. v. Redstart, Inc., 935 F.2d 815, 821 (7th Cir. 1991) (RICO claim was based on the breakdown of a business relationship between two parties to a contract regarding the payment of defendant's liabilities); Cocose, supra (RICO claim was based on a general contractor's failure to pay some of its subcontractors for a project); Uni-Quality Inc. v. Infotronx, (continued...)
4 3

those cases, there is "no indication that this is a type of activity in which the defendant normally engages, or, indeed, that there are other potential victims waiting in the wings." United States Textiles v. Anheuser Busch Co., 911 F.2d 1261, 1269 (7th Cir. 1990). Where a plaintiff allege facts about his transaction, but also alleges that the defendant's conduct was directed to the general public, the pattern requirement is satisfied. Ferleger v. First Amer. Mtge. Co., 662 F.Supp. 584, 589 (N.D.Ill. 1987). LaSalle cites no case suggesting that the dissemination of fraudulent printed form contract documents intended for use with any member of the public who enters one of multiple places of business does not satisfy the "pattern" requirement. Such a scheme by its very nature involves a threat of harm to a large number of victims. In this regard, it is significant that LaSalle's conduct was not directed against Brown in particular -- it was entirely fortuitous that she entered Lake's place of business and became a victim. LaSalle's characterization of Brown's claim as "garden variety fraud" which does not pose a significant threat is thus plainly erroneous. B. BROWN HAS COMPLIED WITH FED.R.CIV.P. 9(b). LaSalle contends that Brown has failed to satisfy the particularity requirements of Fed.R.Civ.P. 9(b). However, LaSalle's own cases show that Brown has satisfied Rule 9(b). Although Rule 9(b) does require more than is required under notice pleading, it does not require the plaintiff to "set out the detailed evidence plaintiffs would use to support the claim at a later date." Dunham v. Independence Bank, 629 F.Supp. 983, 991 (N.D.Ill. 1986); Heastie v. Community Bank, 690 F.Supp. 716, 722 (N.D.Ill. 1988). Even under Rule 9(b) "malice, intent, knowledge and other condition of mind of a person may be averred generally." Fed.R.Civ.P. 9(b);

(...continued) Inc., 974 F.2d 918 (7th Cir. 1992) (RICO claim was based on the defendant's failure to pay plaintiff for its services); United States Textiles, Inc. v. Anheuser Busch Co., 911 F.2d 1261 (7th Cir. 1990) (RICO claim was based on a dispute over one options contract).

General Elec. Capital Corp. v. Munson Marine, Inc., 1992 U.S.Dist. Lexis 2335 (N.D.Ill. 1992).5 All that is required to plead mail fraud under RICO is "a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants." Heastie, supra, 690 F.Supp. at 722. Brown has met these requirements. She set forth the specifics of her transaction with LaSalle in detail. (Cmplt. 20-33) In addition, she alleged a brief sketch of the scheme involving LaSalle and State Farm agents (Cmplt. 11-19), and attached a letter (Cmplt., Ex. B) showing State Farm's role and that LaSalle's actions were intentional rather than inadvertent. With respect to LaSalle's use of the mails and wires to further its scheme, Brown

alleged that LaSalle used the mail to make payment demands and collect payments (Cmplt. 34),6 that LaSalle used the wires to run credit checks on loan applicants to determine if they were able to pay (Cmplt., 35) and that Brown made 18 payments to LaSalle (Cmplt. 30). LaSalle invited payment by mail by sending coupons to Brown and other obligors. (Ex. B, attached [not reprinted infra]) Alleging the exact date of each payment is neither required nor meaningful -- LaSalle's own records show when it received payments. Finally, although Brown has not named other victims of LaSalle's fraudulent scheme, she has alleged facts showing that other victims are involved, i.e., that the offending loan forms were standard preprinted forms disseminated by LaSalle (Cmplt. 11(c), 18, 24), and that LaSalle stated that it intended to omit the FTC Notice (Cmplt., Ex. B). The cases LaSalle cites where the complaint was dismissed for lack of particularity do not resemble this case. The plaintiff in In re VMS Securities, 752 F.Supp. 1373 (N.D.Ill. 1990), alleged a securities fraud scheme involving multiple defendants, but did not allege which defendants did what. Similarly in Coronet Ins. Co. v. Seyforth, 665 F.Supp. 661, 667 (N.D.Ill. Thus, LaSalle's complaint regarding Ms. Brown's general allegation regarding LaSalle's intent is meritless. (LaSalle's Motion, 22(c)). Furthermore, it is obvious from Cmplt., Ex. B that we are not dealing with inadvertent conduct. "Use of the mails to collect the proceeds of the fraudulent scheme is sufficient" to support a mail fraud claim. United States v. Weinberg, 656 F.Supp. 1020, 1025 (E.D.N.Y. 1987). Obviously, the objective of the scheme to disseminate contract forms which omitted the FTC notice was to get money from persons, such as Brown, who would be protected from having to pay by the FTC notice. (Cmplt. 19)
6 5

1987), another multiple defendant securities fraud case, the plaintiff "lumped" all of the defendants together and failed to state which defendant did what. Finally, in Uni-Quality, supra, the plaintiff failed to allege what the misrepresentations were. Here there is one defendant, and the conduct complained of is clearly identified. Brown has pled more than enough facts to put LaSalle on reasonable notice as to her cause of action and to allow LaSalle to prepare a responsive pleading. LaSalle's motion to dismiss should therefore be denied. C. OMISSIONS CAN FORM THE BASIS OF A RICO CLAIM LaSalle mistakenly contends that an omission cannot form the basis for a mail fraud violation. LaSalle contends that Reynolds v. East Dyer Development Co., 882 F.2d 1249 (7th Cir. 1989), stands for the proposition that an omission can never serve as the basis for a RICO mail fraud violation (LaSalle mot., 16). What the court in Reynolds actually said was that a "mere failure to disclose, absent something more" does not constitute fraud. 882 F.2d at 1252. The "something more" that was missing in Reynolds, but present in this case, is a duty on the part of at least one participant to disclose the omitted information or an "elaborate attempt at concealment." 882 F.2d at 1252-3.7 Here, the FTC Regulation supplies the duty,8 and LaSalle engaged in an "elaborate attempt" to distance itself from Lake and other sellers in order to avoid that duty. Numerous courts, in addition to Reynolds, agree that an omission can constitute the basis of a mail fraud claim.9

The fraud claim in Reynolds was also defective for other reasons, including the fact that the plaintiffs had discovered the undisclosed facts and thus could not prove the omissions caused their injury. In this case, LaSalle's omission of the FTC Notice in Ms. Brown's contract is clearly the cause of her inability to assert her breach of warranty of title claims against LaSalle, contrary to LaSalle's suggestion otherwise. (LaSalle mot., 22(a)) Even though the duty to disclose in this case was technically Lake's, LaSalle is liable because it supplied the means of deception: the preprinted loan forms. Waltham Watch Co. v. FTC, 318 F.2d 28, 32 (7th Cir. 1963) ("those who put into the hands of others the means by which they may mislead the public, are themselves guilty of a violation of 5 of the FTC Act"). United States v. Biesiadecki, 933 F.2d 539, 543 (7th Cir. 1991); United States v. Keplinger, 776 F.2d 678,697-8 (7th Cir. 1985); United States v. O'Malley, 707 F.2d 1240, 1247 (7th Cir. 1983); United States v. Rasheed, 663 F.2d 843, 848-9 (9th Cir. 1991).
9 8

Furthermore, the omission of the FTC Notice is not a simple omission. This is not a securities case in which the allegation is that someone should have "blown the whistle" or provided more information. The note which should have contained the Notice created an affirmative obligation. The result of omitting the Notice was to make the obligation more extensive than it should have been. Finally, as Brown has also alleged, LaSalle affirmatively demanded payment from Brown (Cmplt., Ex. B) after being apprised that Brown had paid for a car for which the seller could not transfer title. D. BROWN HAS ALLEGED A SUFFICIENT ENTERPRISE NEXUS. Brown has alleged that LaSalle is the "person" under 18 U.S.C. 1962(c), and that LaSalle's corporate group, headed by ABN AMRO North America, Inc., is the "enterprise." Brown has further alleged in some detail how LaSalle and its corporate group engage in interstate commerce (Cmplt. 7) and that LaSalle conducted and participated in the affairs of the enterprise. (Cmplt. 47) Brown's allegations are corroborated by the financial statement of the parent (Ex. C), which shows that LaSalle's profits went to its parent, and that its parent used that revenue to raise capital from the public.10 The Seventh Circuit has made it clear that these allegations are sufficient to satisfy 1962(c) where the "person" is a subsidiary of the "enterprise": "we think it virtually self-evident that a subsidiary acts on behalf of, and thus conducts the affairs of its parent corporation. We doubt that more detailed allegations on the subject would serve any useful purpose, and we see no reason to require them." Haroco v. American Nat'l Bk. & Tr. Co., 747 F.2d 384, 402-3 (7th

"A plaintiff is free, in defending against a motion to dismiss, to allege without evidentiary support any facts he pleases that are consistent with the allegations of the complaint, in order to show that there is a state of facts within the scope of the complaint that if proved (a matter for trial) would entitle him to judgment." Early v. Bankers Life & Cas. Co., 959 F.2d 75, 79 (7th Cir. 1992).

10

Cir. 1984);11 accord, Aitken v. Fleet Mtge. Corp., 1992 U.S.Dist. Lexis 1687 (N.D.Ill. 1992) (Ex. D, attached [not reprinted infra]). Despite the Seventh Circuit's position on this issue, LaSalle argues that Brown has not met the "enterprise" nexus, because she has not alleged that LaSalle controlled the affairs of its parent. However, under the plain language of 1962(c) and Haroco, there is no requirement that the "person" control the "enterprise," but only that it conducted or participated in conducting the affairs of the enterprise. Id.. LaSalle mischaracterizes dicta contained in a footnote in Dunham v. Independence Bank, 629 F.Supp. 983, 991, n.10 (N.D.Ill. 1986). In Dunham, Judge Shadur found that the 1962(c) requirements were not met because the plaintiff did not allege that the parent engaged in interstate commerce. Id. Judge Shadur also noted, without citing Haroco, that he did not believe the plaintiff sufficiently alleged the subsidiary's involvement in the affairs of the parent, and elaborated in a footnote that while it may be possible to infer that a parent controls a subsidiary, "there is no basis for assuming the subsidiary's comparable degree of control over its parent." Id. Contrary to LaSalle's assertion, Judge Shadur never said that a plaintiff is required to plead that a subsidiary controls its parent.12 Brown has clearly satisfied the Seventh Circuit's requirements with respect to 1962(c), and LaSalle's attempt to change the law in this Circuit to require a plaintiff to allege that a subsidiary controls the affairs of its parent should be rejected.

The Supreme Court has also stated: "A parent and its wholly owned subsidiary have a complete unity of interest. Their objectives are common, not disparate; their general corporate actions are guided or determined not by two separate corporate consciousness, but one. They are not unlike a multiple team of horses drawing a vehicle under the control of a single driver. With or without a formal `agreement,' the subsidiary acts for the benefit of the parent, its sole shareholder. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771 (1984). The other case cited by LaSalle, Dun-Rite Tool & Fabricating Co. v. American Nat'l Bank, 1991 WL 293092 (N.D.Ill. 1991), also does not state that a plaintiff must plead control under 1962(c).
12

11

III. BROWN HAS STATED A CLAIM FOR VIOLATION OF THE ILLINOIS CONSUMER FRAUD ACT LaSalle's attack on Brown's Illinois Consumer Fraud Act ("ICFA") count (Count II), is based on a complete mischaracterization of Brown's cause of action. Count II does not attempt to impose liability on LaSalle for Lake's conduct based solely on the FTC Regulation, as LaSalle would have this Court believe. Instead it alleges that LaSalle itself engaged in unfair and deceptive conduct which violated ICFA. Specifically, LaSalle engaged in a scheme to deprive consumers of the protections afforded by the FTC Regulation by disseminating illegal forms for use by sellers. LaSalle's lengthy exposition about the fact that the FTC Regulation does not apply to lenders and that consumers are not protected by the FTC Regulation if the FTC Notice is not in their contract is entirely irrelevant, as are the cases LaSalle cites.13 A consumer can sue a lender for its own wrongful conduct regardless of whether the FTC notice is included in his contract.14 Additionally, the fact that the FTC does not have authority to regulate lenders does not mean that it is not an unfair and deceptive practice under state law for a lender to intentionally deprive consumers of their rights. One who prepares a misleading representation for another is liable. Waltham Watch Co. v. FTC, 318 F.2d 28, 31 (7th Cir. 1963) (owner of trademark long associated with expensive domestic watches granted license to use mark in connection with cheap imported clocks was held liable under 5% of the FTC Act because "[t]hose who put into the hands of others the means by which they may mislead the public, are themselves guilty of a violation of Section 5 of the
13

Vietnam Veterans of America, Inc. v. Guerdon Industries, Inc., 644 F.Supp. 951, 963 (D.Del. 1986) (plaintiff sought to impose liability on the lender for the seller's conduct based solely on the FTC Regulation; the Court noted that the plaintiffs did not allege that the lender participated in any misconduct); Norwest Bank v. Kovalski, 1991 WL 4051 (Minn.App. 1991) (plaintiff sought to holder lender liable for seller's conduct based solely on the FTC Regulation); Capital Bk. & Tr. Co. v. Lacey, 393 So.2d 668 (La. 1980) (same). Even absent the FTC Notice, a lender cannot qualify as a holder in due course or innocent assignee if it had notice of a consumer's claims and/or defenses. Thus, since LaSalle knew that the FTC Notice should have been included in its contract, it cannot now claim to have no notice of that fact.
14

Federal Trade Commission Act"); People ex rel. Lefkowitz v. Theraputic Hypnosis, Inc., 83 Misc.2d 1068, 374 N.Y.S.2d 576 (N.Y.Sup. Ct. 1975) (fraudulent educational institution which issued "diplomas" to untrained individuals who used them to sell worthless "services" committed unfair trade practice on same theory). The fact that the party who prepares the misrepresentation also derives pecuniary benefit from the misrepresentation (because it is the lender) hardly absolves it. Courts have held that it is an unfair and deceptive practice for a lender to participate in a scheme to evade the FTC Regulation in order to prevent consumers from asserting claims and defenses against the lender. Jackson v. Culinary School of Washington, 788 F.Supp. 1233, 1253 (D.D.C. 1992) (it was a violation of the District of Columbia consumer protection act for a lender to disseminate loan forms which did not contain the FTC notice); Heastie v. Community Bank, 727 F.Supp. 1133, 1138 (N.D.Ill. 1989); Iron & Glass Bank v. Franz, 9 D.& C.3d 419, 428 (C.P. Allegheny County, Pa. 1978) (a bank's knowing participation in a transaction that violates the FTC Regulation was an unfair and deceptive practice under the Pennsylvania consumer protection act). In Heastie, the defendant bank financed home improvement contracts which included the FTC notice, but also had consumers sign loans which stated that the bank was not responsible for the actions of the contractor. The plaintiff alleged that the non-responsibility provision violated the CFA "by sidestepping the requirements of part 433" of the FTC Regulation. 727 F.Supp. at 1137. The bank argued that the claim should be dismissed because the FTC Regulation does not apply to lenders, 727 F.Supp. at 1138, but the court rejected that argument, because the claim was brought under ICFA, not the FTC Regulation. The Court held that the bank's conduct violated ICFA because "the mechanical abrogation of consumer claims and defenses is unfair" and because the use of the non-responsibility provision "substantially injures consumers by taking away the legal protection provided by the notice requirements of part 433." 727 F.Supp. at 1139.

The FTC has also found it to be an unfair and deceptive practice for a lender to attempt to prevent consumers from asserting claims and defenses provided by the FTC Regulation.15 In re Beneficial Corp., 96 F.T.C. 120, 122 (1980) (it was misleading, deceptive and unfair practice within the meaning of 5 of the FTC Act to include a provision in a contract stating that a consumer must notify the lender of claims and defenses within a limited time period or they will be waived). In addition, the Regulation itself stated that it was unfair to separate a consumer's duty to pay for goods and services from a seller's duty to perform as promised. 40 Fed.Reg. 53,506, 53,523. B. THE AVAILABILITY OF AFFIRMATIVE RELIEF UNDER THE FTC REGULATION IS IRRELEVANT. LaSalle's arguments concerning the circumstances under which affirmative relief is available under the FTC Notice represents an attempt to insert a false issue into the case. Brown is not suing under the Notice. One of the two cases cited by LaSalle, Ford Motor Credit Co. v. Morgan, 404 Mass. 537, 536 N.E.2d 587 (1989), has been criticized as being incorrectly decided.16 Moreover, the damages suffered by the consumers in Morgan were not even comparable to the damages Brown suffered. In Morgan, the consumers complained of fairly minor defects in a car they had purchased, which had not prevented them from driving the car for eighteen months. 536 N.E.2d at 588. Paying money to purchase something which the seller does not own caused substantial damage to Brown, which would justify affirmative relief even under Morgan. LaSalle's other case, In re Hillsborough Holdings Corp., 146 B.R. 1015 (Bankr. M.D.Fla. 1992), indicates that even if Brown had sued under the Regulation, her damages would

15

ICFA 2 provides that "[i]n construing this section, consideration should be given to the interpretations of the Federal Trade Commission and the federal courts relating to Section 5(a) of the Federal Trade Commission Act." Ill.Rev.Stats., ch. 121-1/2, 262. People ex rel. Hartigan v. All Amer. Alum. & Const. Co., 171 Ill.App.3d 27, 524 N.E.2d 1067 (1st Dist. 1988). National Consumer Law Center, Unfair and Deceptive Acts and Practices, 6.6.3.3.2 (3d Ed. 1991) (Ex. E, attached).
16

justify affirmative recovery. The court in Hillsborough found that home purchasers who had begun payments and taken possession of their homes suffered sufficient damage to justify affirmative recovery under the Regulation when liens were imposed on their homes by a third party. 146 B.R. at 1021. The damage suffered by Brown (paying $6,000 on a car that was ultimately repossessed by a third party) was virtually identical. CONCLUSION For the reasons stated above, the Motion to Dismiss of LaSalle National Bank should be denied. Respectfully submitted, Attorney for Plaintiff

4.5

Plaintiffs' First Request for Admissions, Interrogatories, and Production of Documents

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK 92 C 8392 PLAINTIFF'S FIRST DISCOVERY REQUEST Plaintiff, Georgia Brown ("Brown") hereby requests that Defendant LASALLE BANK NORTHWEST NATIONAL BANK ("LaSalle") respond to the following interrogatories, document requests, and requests for admissions. Documents are to be produced at the offices of Brown's counsel.

Unless otherwise specified in a particular paragraph, the time period covered by this request is January 1, 1988 to the present. Other instructions and definitions to be used in making your response are attached hereto as Exhibit 1 [not reprinted infra]. If any paragraph of this request is believed to be ambiguous or unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. I. REQUESTS FOR ADMISSIONS 1. Brown is an individual who resides in Chicago, Illinois. 2. LaSalle is a national bank with its principal place of business in Chicago, Illinois. 3. LaSalle is part of a corporate group engaged in the provision of a variety of financial services in the Chicago area. 4. LaSalle National Corporation owns 100% of LaSalle National Bancorp Inc. 5. LaSalle National Bancorp Inc. owns 100% of LaSalle National Bank, LaSalle National Trust, N.A. and LaSalle Community Bancorp, Inc. 6. LaSalle Community Bancorp, Inc. is a six-bank holding company. 7. LaSalle Northwest National Bank is 100% owned by LaSalle Community Bancorp, Inc. 8. LaSalle Northwest National Bank is 100% owned by LaSalle Community Bancorp, Inc. 9. LaSalle National Corporation is wholly owned by ABN AMRO North America, Inc., a wholly owned subsidiary of ABN AMRO Bank N.V., a Dutch corporation. (A.B.N. AMRO Bank). 10. LaSalle Northwest National Bank has depositors who are located in states other than Illinois (according to their mailing addresses in the Bank's records). 11. The profits derived by LaSalle Northwest National Bank, including profits from lending activities, are ultimately transmitted to ABN AMRO Bank N.V. 12. LaSalle Northwest National Bank finances the purchase by consumers of cars produced in states other than Illinois.

13. LaSalle Northwest National Bank entered into agreements with certain State Farm insurance agents whereby State Farm agents would refer persons desirous of financing to LaSalle Northwest National Bank. 14. LaSalle Northwest National Bank did not prevent the State Farm insurance agents who agreed to refer business to it from obtaining referrals from automobile dealers. 15. LaSalle Northwest National Bank knew that the State Farm insurance agents who agreed to refer business to it were obtaining referrals from automobile dealers. 16. LaSalle Northwest National Bank provided State Farm insurance agents with printed forms of credit applications. 17. LaSalle Northwest National Bank provided State Farm insurance agents with printed forms of notes which did not contain the notice set forth in 16 C.F.R. part 433. 18. LaSalle Northwest National Bank did not prevent the State Farm insurance agents who were provided with its forms from putting the forms in the hands of automobile dealers. 19. LaSalle Northwest National Bank knew that the State Farm insurance agents who were provided with its forms were putting the forms in the hands of automobile dealers. 20. On February 14, 1992, Brown purchased a used Toyota from Lake Automotive, 701 W. Lake, Maywood, Illinois 60153. 21. While at Lake Automotive, Brown signed a loan application on a form supplied by LaSalle Northwest National Bank. 22. While at Lake Automotive, Brown signed a note on a form supplied by LaSalle Northwest National Bank, of which Exhibit A to the complaint in this action is a copy. 23. LaSalle Northwest National Bank approved Brown's loan application. 24. Within three hours after LaSalle Northwest National Bank received Brown's loan application, a check issued by LaSalle Northwest National Bank representing the proceeds of the loan was delivered by LaSalle Northwest National Bank directly to the place of business of Lake Automotive. 25. Brown signed this check, which was then endorsed over to Lake Automotive.

26. Brown made 18 payments of $345.54 each to LaSalle Northwest National Bank on the note. Some of the payments were made by mail. 27. LaSalle Northwest National Bank receives most payments on automobile loans in the mail. 28. LaSalle Northwest National Bank provided consumers obligated to it on auto loans with payment coupons and mailing labels to facilitate their making payments by mail. 29. When customers failed to make timely payments on auto loans, it is the practice of LaSalle Northwest National Bank to send demands for payment to them by mail. 30. LaSalle Northwest National Bank is able to obtain credit reports on consumers via telephone lines. Some of the agencies which provide the credit reports are located in states other than Illinois. 31. There are more than 50 people who satisfy the following criteria: a. b. c. d. They purchased an automobile; The purchase was financed by LaSalle; The purchaser was referred to LaSalle by a State Farm agent; The transaction was documented by LaSalle as one for personal, family or household purposes; e. The loan application was filled out at a car dealer or was transmitted to LaSalle from a facsimile machine belonging to a car dealer. f. The note signed by the person does not contain the notice specified in 16 C.F.R. part 433. II. INTERROGATORIES 1. Provide the following information for all persons involved in the processing of applications for automobile loans for LaSalle Northwest National Bank customers: full name; present or last known home and business addresses and telephone numbers; whether presently employed by LaSalle Northwest National Bank; all job title(s) at LaSalle Northwest National

Bank and dates during which each job was held; if not presently employed by LaSalle Northwest National Bank, Social Security number and exact date of birth. 2. State the number of 50 people who satisfy the following criteria: a. b. c. d. They purchased an automobile; The purchase was financed by LaSalle; The purchaser was referred to LaSalle by a State Farm agent; The transaction was documented by LaSalle as one for personal, family or household purposes; e. The loan application was filled out at a car dealer or was transmitted to LaSalle from a facsimile machine belonging to a car dealer. f. The note signed by the person does not contain the notice specified in 16 C.F.R. part 433. 3. Provide the following information for all persons who had any involvement in the origination or servicing of the Brown loan: full name; present or last known home and business addresses and telephone numbers; whether presently employed by LaSalle Northwest National Bank; all job title(s) at LaSalle Northwest National Bank and dates during which each job was held; if not presently employed by LaSalle Northwest National Bank, Social Security number and exact date of birth. 4. Provide the following information for all persons involved in any dealings between State Farm agents and LaSalle Northwest National Bank: full name; present or last known home and business addresses and telephone numbers; whether presently employed by LaSalle Northwest National Bank; all job title(s) at LaSalle Northwest National Bank and dates during which each job was held; if not presently employed by LaSalle Northwest National Bank, Social Security number and date of birth. 5. Provide the name and address of each State Farm agent who refers business to LaSalle Northwest National Bank.

6. Describe all forms of compensation paid to or received by State Farm or its agents in connection with the referral of business to LaSalle Northwest National Bank. 7. Identify all communications concerning any loan referred by a State Farm agent, or the referral of business by State Farm agents, between LaSalle Northwest National Bank and any regulatory or law enforcement or consumer protection agency (including any state Attorney General's office), Better Business Bureau, or other public or private agency which receives consumer complaints. 8. State the number of automobile loans held by LaSalle Northwest National Bank during each of the last five years and the number of these that were referred by State Farm agents. 9. Identify all officers and directors of LaSalle National Corporation, LaSalle National Bancorp, Inc., LaSalle National Bank, LaSalle National Trust, N.A., LaSalle Community Bancorp, Inc., and ABN AMRO North America, Inc. 10. If your response to any of the requests for admissions is anything other than an unqualified admission, please explain the basis for your denial. 11. If you are declining to produce any document or respond to any paragraph in whole or in part because of a claim of privilege, please: identify the subject matter, type (e.g., letter, memorandum), date, and author of the privileged communication or information, all persons that prepared or sent it, and all recipients or addresses; identify each person to whom the contents of each such communication or item of information have heretofore been disclosed, orally or in writing; state what privilege is claimed; and state the basis upon which the privilege is claimed. 12. If any document requested was, but no longer is, in your possession or subject to your control, please state: the date of its disposition; the manner of its disposition (e.g., lost, destroyed, transferred to a third party); and an explanation of the circumstances surrounding the disposition of the document. 13. With respect to each expert whom you will or may call upon to give evidence in connection with this case, please state: his name, address, telephone number, occupation, and current employment experience, and any other matters which you contend qualify him as an

expert; the substance of all facts and opinions to which he could testify if called as a witness; a summary of the grounds for each such opinion; the identification of all documents provided to or obtained by the expert in connection with this case; the identification of all documents relied upon by the expert as a basis for each of his opinions; the contractual arrangements for his retention, including the amount of his compensation, whether that compensation has already been paid, and whether any compensation is contingent on the outcome of this litigation; the name and docket number of each judicial, administrative, or legislative proceeding in which he has testified or otherwise (as by deposition or affidavit) given evidence within the last ten years, plus the name of the court or other body before which the evidence was given; and the identification of each book, article, paper, or public statement by the expert that relates to the subject matter of his expertise. III. REQUESTS FOR PRODUCTION OF DOCUMENTS Please produce: 1. All documents relating to Lake Automotive. 2. All documents relating to the State Farm agent who referred the Brown transaction to LaSalle Northwest National Bank. 3. All manuals, memoranda, guidelines, and other documents stating or describing LaSalle Northwest National Bank's policies, procedures or practices relating to the acquisition and servicing of automobile loans. 4. All agreements with State Farm agents relating to the referral of business. 5. The file for any transaction in which a customer: a. b. c. d. Purchased an automobile; The purchase was financed by LaSalle; The purchaser was referred to LaSalle by a State Farm agent; The transaction was documented by LaSalle as one for personal, family or household purposes;

e.

The loan application was filled out at a car dealer or was transmitted to LaSalle from a facsimile machine belonging to a car dealer.

f.

The note signed by the person does not contain the notice specified in 16 C.F.R. part 433.

6. All agreements between LaSalle Northwest National Bank and State Farm. 7. All documents which describe or discuss the policies and practices of LaSalle Northwest National Bank relating to the payment of consideration to State Farm agents. 8. All agreements between State Farm agents and car dealers. 9. All agreements between LaSalle Northwest National Bank and car dealers to whom LaSalle has paid the proceeds of automobile loans referred by State Farm agents. 10. All documents constituting or referring to communications concerning automobile loans referred by State Farm agents between LaSalle Northwest National Bank and any regulatory or law enforcement or consumer protection agency (including any state Attorney General's office), Better Business Bureau, or other public or private agency which receives consumer complaints. 11. All documents constituting or reflecting complaints from obligors or consumers concerning LaSalle Northwest National Bank's actions with respect to automobile loans referred by State Farm agents. 12. All documents relating to any instance in which a person other than Brown questioned LaSalle Northwest National Bank's practices with respect to the origination of automobile loans through State Farm agents. 13. One copy of each different form of document or instrument used by LaSalle Northwest National Bank in connection with automobile loans referred by State Farm agents. 14. LaSalle Northwest National Bank's annual financial statements, annual reports and semiannual and quarterly financial statements. 15. All documents relating to Brown, or which are indexed, filed or retrievable under her name or any number, symbol, designation or code (such as a transaction number or Social

Security number) assigned to her or her transaction or car, including but not limited to her entire transaction file and all computer information maintained by LaSalle Northwest National Bank on Brown. Attorney for Plaintiff

4.6

Plaintiffs' Supplemental Interrogatories

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 PLAINTIFF'S SUPPLEMENTAL INTERROGATORIES Plaintiff hereby requests that defendant respond to the following supplemental interrogatories. The time period covered by this request is January 1, 1986 to the present. Throughout this request: 1. "Northwest" includes both LaSalle Northwest National Bank and its predecessors. 2. "State Farm" includes State Farm Mutual Automobile Insurance Company, State Farm International Services, and any other entity with the words "State Farm" in its name. If any paragraph of this request is believed to be unduly burdensome, please contact the undersigned and an effort will be made to remedy the problem. 3. State the name of each payee of a Northwest draft issued pursuant to the State Farm Car Finance Plan. For each payee, state separately: the number of borrowers by year beginning January 1, 1986; the name, address and loan number of each borrower; the name of the State Farm agent who wrote or signed the draft; whether your records indicate that the transaction was

a refinancing. If you wish, you may exclude payees that are banks and finance companies and that you can determine do not also operate auto dealerships (for example, you may exclude First Chicago Bank of Ravenswood, but not Overland Bond & Investment Company, as the latter operates a used car lot in addition to providing financing). ANSWER: 2. State separately for each year beginning January 1, 1986 the names and addresses of State Farm agents who wrote or signed drafts for 100 or more Northwest loans during that year. ANSWER: 3. State the name of each payee of a Northwest draft written or signed pursuant to the State Farm Car Finance Plan by any of the following: Gerald Barr; Thomas Henderson; Archie Leach; Thomas Luscombe; Raymond Mitchell; Larry Williams. For each payee, state separately: the number of borrowers by year beginning January 1, 1986; the name, address and loan number of each borrower; whether your records indicate that the transaction was a refinancing. ANSWER: 4. State the name and address of every State Farm agent with respect to whom Northwest communicated to State Farm that the agent had, might have, or should be investigated for having a relationship (including but not limited to any "tie-in" arrangement) with any car dealer or automobile leasing company. For each such agent, state the dates when Northwest communicated about the agent to State Farm. ANSWER: 5. State the name and address of any State Farm agent which Northwest requested be removed, suspended, or terminated from the Car Finance Program or investigated by State Farm. ANSWER: 6. State the names of any State Farm agent with respect to whom Northwest either (a) determined not to accept loans or (b) performed any inquiry or investigation (of the agent or loans or applications obtained through the agent) not performed with respect to each and every

loan originated through each and every agent participating in the State Farm Car Finance Program. ANSWER: 7. State whether Northwest ever used or programmed a computer to monitor, check or determine, or provide information to be used in monitoring, checking or determining, whether State Farm agents were having or might have relationships with automobile dealers or leasing companies. If so, describe in detail what was done and what State Farm agents were identified for action (of any sort) or further inquiry. ANSWER: WHEREFORE, defendant requests this Court enter judgment on behalf of defendant and against plaintiff on the complaint.

Attorney for Plaintiff

4.7

Plaintiff's Response to Defendant's Discovery Request

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 PLAINTIFF'S RESPONSE TO FIRST DISCOVERY REQUEST OF LASALLE NORTHWEST NATIONAL BANK

Plaintiff Georgia Brown responds to the First Discovery Request of LaSalle Northwest National Bank ("LNNB") as follows:

GENERAL OBJECTIONS 1. Plaintiff objects to the requests to the extent that they seeks documents which are protected from disclosure by the attorney-client privilege, the attorney work-product doctrine, or any other applicable privilege, rule or doctrine. 2. Plaintiff objects to the requests to the extent they are unduly burdensome and

oppressive and intended merely to harass plaintiff. Plaintiff also objects to the requests to the extent they seek documents which are irrelevant and not calculated to lead to the production of admissible evidence. 3. Plaintiff objects to the Definitions and Instructions as overbroad and burdensome,

and to the extent that they attempt to impose obligations on plaintiff which are greater than those imposed by the Federal Rules of Civil Procedure. INTERROGATORY RESPONSES SUBJECT TO OBJECTIONS

1. Identify each individual the Plaintiff expects to call at trial as an expert witness.

With respect to each person so identified:

(a)

state (i) the subject matter on which the proposed expert is expected to testify, (ii) the substance of the facts and opinions to which the expert is expected to testify, and (iii) a summary of the grounds for each opinion;

(b)

separately identify each and every document, report, summary, analysis, etc. provided by the Plaintiff to the expert which pertains or relates in any way to the subject matter of this litigation or to the information contained in the responses to subpart (a) hereof;

(c)

separately identify each and every document, report, summary, analysis, etc. provided by the expert to the Plaintiff which pertains or relates in any way to the subject matter of this litigation or to the information contained in the responses to subpart (a) hereof;

(d)

separately identify each and every written or oral communication with the expert, including but not limited to a statement of all facts, assumptions, or theories provided to him;

(e)

state the basis on which each expert is being or will be compensated and identify all documents which reflect, refer or relate to compensation agreements or understandings;

(f)

state the qualifications of the expert to testify, including a statement of facts sufficient to show that the expert's testimony (see (a), above) is admissible; and

(g)

identify all other legal proceedings in which the expert has testified either in a deposition or at trial, including the case name and number, court, approximate date of testimony, party which retained the expert and the attorney for that party.

RESPONSE: Plaintiff has not yet consulted an expert with regard to Plaintiff's claims in this matter. At the time that an expert has been consulted and any such report has been prepared, plaintiff will produce such documents.

2. Identify each individual the Plaintiff expects to call as a witness at trial or use as a witness or affiant at any hearing on or in briefs or other court papers filed in connection with the Class

Motion. With respect to each person so identified, state the subject matter on which the proposed witness or affiant is expected to testify.

RESPONSE: Plaintiff is unable to respond to this interrogatory at this time, since defendant has refused to produce any discovery documents and plaintiff is in the process discovery with regard to other possible witnesses. However, persons that plaintiff may call as witnesses or use as affiants include [addresses not reprinted infra]: Georgia Brown, Michael Alexander, Archie B. Leach, Rosie O'Grady, Chet Atkins, Yolanda Herrera, Tanya Tucker, Mike Brando, Bob Spitkovsky, Trish Darey, William Pattara, Tom Luscombe, Ray Lizzio, Judy Gleason, Dean Martin, Jr..

3. Identify each individual who (a) (b) (c) (d) (e) was present when the Plaintiff purchased the Automobile from Lake Automotive; was present when the Plaintiff completed the Loan Application; was present when the Plaintiff executed the Promissory Note; was present when the Plaintiff executed the Check; and represents a member of the Putative Class and with whom the Plaintiff has communicated concerning the allegations in the Complaint, either orally or in writing.

RESPONSE: Plaintiff objects to responding to Interrogatory 3(e) with respect to communications between members of the putative class and any employee of Edelman & Combs on the ground that Edelman & Combs is not a party to this lawsuit and is not subject to a document request. Furthermore, such communications are protected by the attorney work product exception. Without waiving her objections, plaintiff responds as follows: a. Plaintiff; Plaintiff's son, Michael Alexander; A salesman for Lake Automotive, Mr. Lopez, whose address is unknown to me.

b.

Plaintiff; Plaintiff's son, Michael Alexander; A salesman for Lake Automotive, Mr. Lopez, whose address is unknown to me. Archie Leach.

c. d. e.

See the response to 3(b) above. See the response to 3(a) above. No one.

4. Identify any other lawsuit(s) in which the Plaintiff has been a party or a class member, including the court in which such lawsuit(s) was filed, the year in which such lawsuit(s) was filed, and the title and docket number of such lawsuit(s).

RESPONSE: Plaintiff objects to this Interrogatory on the basis that requests irrelevant information. Without waiving the objection, plaintiff states as she did at her deposition, that she has not been a party to any other lawsuit. REQUESTS FOR PRODUCTION OF DOCUMENTS RESPONSES SUBJECT TO OBJECTIONS

1. Produce or make available all letters or correspondence received by the Plaintiff or the Plaintiff's counsel pertaining to the allegations of the Complaint.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

2. Produce or make available for inspection all documents relating to the Plaintiff's purchase of the Automobile.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

3. Produce or make available for inspection all documents relating to the Plaintiff's financing of the Automobile through LaSalle Northwest.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any. 4. Produce or make available for inspection all documents relating to any insurance maintained by the Plaintiff on the Automobile.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any. 5. Produce or make available for inspection all documents reflecting communications between the Plaintiff on the one hand and State Farm or State Farm agents on the other hand.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

6. Produce or make available for inspection all documents reflecting communications between the Plaintiff and LaSalle Northwest.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any. 7. Produce or make available for inspection all documents reflecting communications between the Plaintiff and Lake Automotive.

RESPONSE: Without waiving her general objections,plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

8. Produce or make available for inspection all handwritten notes or other documents relating to conversations the Plaintiff had with LaSalle Northwest, State Farm, State Farm agents, Lake Automotive or members of the Putative Class.

RESPONSE: Without waiving her general objections,plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

9. Produce or make available for inspection all documents representing agreements or understandings between State Farm and/or State Farm agents on the one hand and LaSalle Northwest on the other hand.

RESPONSE: The only documents plaintiff has are documents which were produced by State Farm or State Farm agents. Copies of those have been previously provided to counsel for LNNB.

10. Produce or make available for inspection all documents reflecting an agency relationship between LaSalle Northwest on the one hand and State Farm and/or State Farm agents on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

11. Produce or make available for inspection all documents reflecting an agency relationship between State Farm and/or State Farm agents on the one hand and automobile dealers (including Lake Automotive) on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

12. Produce or make available for inspection all documents reflecting a Relationship between Lake Automotive on the one hand and State Farm and/or State Farm agents on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

13. Produce or make available for inspection all documents reflecting a Relationship between Lake Automotive and LaSalle Northwest.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

14. Produce or make available for inspection all documents reflecting a Relationship between LaSalle Northwest on the one hand and Unlimited Auto Sales, A-l Motors, Inc. or Haggerty Chevrolet, Inc. on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

15. Produce or make available for inspection all documents reflecting a Relationship between State Farm and/or State Farm agents on the one hand and Unlimited Auto Sales, A-l Motors, Inc. or Haggerty Chevrolet, Inc. on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

16. Produce or make available for inspection all documents reflecting a Relationship between LaSalle Northwest and any other automobile dealership.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

17. Produce or make available for inspection all documents reflecting a Relationship between State Farm and/or State Farm agents on the one hand and any other automobile dealership on the other hand.

RESPONSE: To date, the only documents plaintiff has are documents which were produced by State Farm, certain State Farm agents and Lake Automotive. Copies of those have been previously provided to counsel for LNNB.

18. Produce or make available for inspection a copy of the payment book referred to in paragraph 26 of the Complaint.

Plaintiff has already produced this item to counsel for LNNB.

19. Produce or make available for inspection all documents reflecting communications between the Plaintiff on the one hand and Champion Federal Savings & Loan Association or its representatives on the other hand.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

20. Produce or make available for inspection all documents relating to the transactions described in paragraphs 34-37 of the Complaint and paragraphs 2, 4 and 5 of the Class Motion.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

21. Produce or make available for inspection all documents reflecting communications between the Plaintiff and other members of the Putative Class.

RESPONSE: Plaintiff objects to producing any documents which encompass communications between members of the putative class and any employee of Edelman & Combs on the ground that Edelman & Combs is not a party to this lawsuit and is not subject to a document request. Furthermore, such communications are protected by the attorney work product exception. With regard to plaintiff's communications with class members, without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

22. Produce or make available for inspection all documents reflecting a relationship between LaSalle Northwest and the Corporate Entities in connection with automobile loans.

RESPONSE: Without waiving her general objections, plaintiff will produce non-privileged documents in her possession which are responsive, if there are any.

Attorney for Plaintiff

4.8

Motion for Class Certification

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Judge Hart PLAINTIFF'S MOTION FOR CLASS CERTIFICATION Plaintiff Georgia Brown respectfully requests that this Court enter an order pursuant to Rule 23 of the Federal Rules of Civil Procedure that the Amended Complaint may proceed against defendant LaSalle Northwest National Bank ("LaSalle") as a class action. Plaintiff seeks certification of a class consisting of all persons who satisfy the following criteria: a. b. c. They purchased an automobile; The purchase was financed by LaSalle; The person was referred to LaSalle directly from the auto dealer from which the automobile was purchased or through the medium of a State Farm agent;

d.

The transaction was documented by LaSalle as one for personal, family or household purposes;

e.

The loan documentation for the financing transaction does not contain the notice required by 16 C.F.R. part 433; and

f.

Either (i) the note is still outstanding or (ii) the consumer notified LaSalle, the automobile dealer, a judicial tribunal, or a public or private agency of an unsatisfied claim or complaint arising from the transaction.

The grounds for this motion are stated in the accompanying memorandum of law. Respectfully submitted, Attorney for Plaintiff

4.9

Memorandum In Support of Class Certification

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Judge Hart PLAINTIFF'S MEMORANDUM IN SUPPORT OF MOTION FOR CLASS CERTIFICATION NATURE OF THE ACTION Defendant LaSalle Northwest National Bank, formerly known as Northwest National Bank, ("LaSalle") is engaged in the business of extending consumer credit. LaSalle maintained

continuous business relationships with automobile dealers who directly or indirectly referred customers to LaSalle for financing. Amended Complaint ("Am.Cmplt.") 1 and Exhibit 1. Accordingly, under Federal Trade Commission regulations, 16 C.F.R. part 433, LaSalle is subject to claims and defenses which the consumer has against the provider of goods and services. LaSalle devised a scheme to deceive and coerce borrowers into making payment to it notwithstanding the nonreceipt of the agreed-upon consideration from the dealer. SCHEME COMPLAINED OF LaSalle and certain State Farm insurance agents entered into agreements or understandings, which are referred to in Am.Cmplt., Exhibit A, p. 4. State Farm agents would arrange with automobile dealers to obtain referrals of persons desirous of financing. Am.Cmplt. 11. State Farm agents would arrange with LaSalle to procure financing for these persons. Id. LaSalle would prepare printed forms of note which did not contain the notice required by 16 C.F.R. part 433 and distribute these for use by the State Farm agents and/or the automobile dealers. Id. LaSalle required and directed that its form of note be used in connection with any transactions with consumers referred in this manner, and would not accept notes which contained the notice required by 16 C.F.R. part 433. Id. Neither LaSalle nor any of the participants in the transaction would inform the consumer of the matters required to be disclosed to the consumer by 16 C.F.R. part 433. Id. LaSalle supplied State Farm agents and/or automobile dealers with

form notes which omitted the notice required by 16 C.F.R. part 433. Am.Cmplt. 18. It was the policy and practice of LaSalle to omit the notice. LaSalle supplied many of the agents and dealers with LaSalle loan applications and forms to keep at their offices. Am.Cmplt. 18. LaSalle planned to, and did in fact disclaim, any responsibility for claims or disputes between the consumers and the automobile dealers on the theory that the business was referred by the State Farm agent and not the dealer. Am.Cmplt. 12 and Exhibit C. LaSalle and the State Farm agents would not disclose to the consumer that the transaction was structured in a manner calculated to allow LaSalle to contend that it was not responsible for claims or disputes between the consumer and the automobile dealer. Am.Cmplt. 12. In fact, the

State Farm agent is the agent of either LaSalle, the automobile dealer, or both for the purpose of referring consumers, and the automobile dealer (the "seller" within the meaning of 16 C.F.R. part 433) is referring consumers to LaSalle (the "creditor" within the meaning of 16 C.F.R. part 433). The existence of the referral arrangements between the State Farm agent and the automobile dealer, on the one hand, and LaSalle and the State Farm agent, on the other, constitutes an affiliation between the automobile dealer and LaSalle by "contract" or "business arrangement." (16 C.F.R. 433.1(d)) In all cases, there was an understanding and arrangement that automobile dealers would refer consumers for financing in such a manner that the consumers would receive financing from LaSalle. Am.Cmplt. 17. In all cases, there existed the type of understandings and arrangements that trigger applicability of the FTC rule. Id. The financing of automobile purchasers referred by LaSalle through referrals, either directly of indirectly through State Farm agents, was therefore subject to the FTC regulation. EVIDENCE OF THE PRACTICE Plaintiff has not received any discovery responses from defendant, nor has defendant even answered the Amended Complaint. 17 However, plaintiff has secured a significant amount of evidence that the practice alleged in the Amended Complaint exists and has been applied in numerous instances:

1. The amended complaint alleges the transactions of plaintiff Georgia Brown and the four other persons. Am.Cmplt. 20-34 and Exhibits B, D, E and F. None of the loans contain the language required by the FTC regulation. 2. Each of the persons was referred to LaSalle by dealers:

Plaintiff believes that she will be able to submit additional evidence of the practice at the time of submitting her Reply Memorandum in Support of the Motion for Class Certification, when defendant has responded to discovery.

17

a.

Georgia Brown was directed to a State Farm agent for financing by the dealer and her loans documents were completed by the dealership. Am.Cmplt. 23, 24.

b.

Rosie O'Grady was referred directly to LaSalle by the dealer Unlimited Auto Sales, Inc. Am.Cmplt. 34.

c.

Chet Atkins was driven to a State Farm agent by a salesman from the dealership, where the documents were completed. Am.Cmplt. 35.

d.

Isadora Duncan was referred directly to LaSalle by Haggerty Chevrolet, Inc. Am.Cmplt. 36.

e.

Tanya Tucker completed her LaSalle loan application at the dealership. Am.Cmplt. 37.

3. LaSalle Northwest National Bank has acknowledged the relationship with State Farm for the purpose of generating car loans. In its Community Reinvestment Act Performance Evaluation, dated November 5, 1990, attached to the Amended Complaint at Exhibit A [not reprinted infra], LaSalle states (p. 4), that "as a result of an arrangement with a national auto insurance agency, a high level of car loans are originated outside of the bank's delineated community." 4. It is reasonable to infer that each of the dealers identified in 20-37 referred a number of consumers to LaSalle. Investigation confirms that this is true. a. Counsel for plaintiff spoke with an employee of Unlimited Auto Sales, Inc. ("Unlimited"). Declaration of Cathleen M. Combs, attached as Exhibit A [not reprinted infra]. Ms. Darcy stated that Unlimited has been doing business with LaSalle through State Farm agents since 1985, that Unlimited did a large volume of business with LaSalle Northwest, and that recently Unlimited was instructed to refer customers for financing only if they were previously insured by State Farm. Id.

b.

Archie Leach, a State Farm agent whose documents plaintiff subpoenaed, stated that if he were to copy the files of all of the persons whose loans he generated for LaSalle since 1989, there would be thousands of pages of documents. Id.

5. It is also reasonable to infer that other dealers were involved in LaSalle's scheme. Plaintiff's counsel has spoken to a Charles McKinley, who was referred by a sixth dealer to a State Farm agent for the purpose of getting a loan to finance the automobile he was purchasing. McKinley completed loan application forms both at the dealership and the State Farm agency. The note was signed at the offices of the State Farm agency. The check was also delivered to the State Farm agency. Mr. McKinley previously had not been a customer of State Farm. Declaration of Daniel A. Edelman, Exhibit B, attached [not reprinted infra].

Hence, LaSalle acknowledges that it has a relationship with State Farm for the purpose of generating auto loans. In turn, the State Farm agents establish relationships with specific auto dealers, as a result of which a large number of loans were generated. This took place with multiple dealers, as evidenced by the fact that six individuals have auto loans with LaSalle (which do not contain the required FTC language) entered into as a result of referrals from six different auto dealers. Plaintiff's proof will consist of statistics concerning the documents of LaSalle, the dealers and the State Farm agents. If large numbers of LaSalle loans were generated by dealers that have a referral relationship with State Farm agents, the requisite relationship to LaSalle is shown, thus requiring the FTC statement to be included in the loan documents. FTC Statement of Enforcement Policy, 6 CCH Trade Reg. Rptr. 38,031 (attached as Exhibit C [not reprinted infra]). If there is a referral relationship with the seller, all deals with the seller are covered, not just the ones referred. Federal Trade Commission, "Staff Guidelines on Trade Regulation Rule Concerning Preservation of Consumers Claims and Defenses", May 4, 1976, pp. 15, 17 (attached as Exhibit D [not reprinted infra]).

FACTORS TO BE CONSIDERED IN CERTIFYING A CLASS ACTION In determining whether a class action will be allowed, the substantive allegations of the complaint should be taken as true. Blackie v. Barrack, 524 F.2d 891, 901 n. 16 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989); Sharif by Salahuddin v. New York State Education Department, 127 F.R.D. 84, 87 (S.D.N.Y. 1989). The Court should resolve any doubt regarding the propriety of certification "in favor of allowing the class action," so that it will remain an effective vehicle for deterring corporate wrongdoing. Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968), cert. denied, 394 U.S. 928 (1969); accord, In re Folding Cartons Antitrust Litigation, 75 F.R.D. 727 (N.D.Ill. 1977). As demonstrated below, this is an ideal case for a class action. Each of the prerequisites for a class action is met. Indeed, the nature of the practice complained of -- subverting the rights of large numbers of customers whose claims are too small to make individual litigation practicable -- is such as to make a class action essential. NUMEROSITY The first requirement of Rule 23(a) is that the class members are so numerous that joinder is not practicable. The numerosity prerequisite is satisfied if it is reasonable to conclude that the number of members of the proposed class is greater than the minimum number required for class certification, which is about 30-40. Swanson v. American Consumer Industries, 415 F.2d 1326 (7th Cir. 1969)(18 sufficient); Riordan v. Smith Barney, 113 F.R.D. 60 (N.D.Ill. 1986) (10-29 sufficient); Sala v. National Railroad Passenger Corp., 120 F.R.D. 494, 497 (E.D.Pa. 1988) (4050 sufficient). It is not necessary that the precise number of class members be known. McCleery Tire Service, Inc. v. Texaco, Inc., 1975-2 Trade Cas. (CCH) 60,581 (E.D.Pa. 1975). "A class action may proceed upon estimates as to the size of the proposed class." In re Alcoholic Beverages Litigation, 95 F.R.D. 321 (E.D.N.Y. 1982). In the present case, it is reasonable to infer that there are a sufficient number of class members to satisfy the numerosity requirement. The geographic and temporal dispersal of the

consumers and dealers plaintiff has identified in her amended complaint indicates that LaSalle has arrangements with a large number of auto dealers and State Farm agents. One of the dealers and one of the State Farm agents has indicated that a large volume of business was done by LaSalle with that individual dealer and that individual agent. Exhibit A. Plaintiff should be able to obtain facts concerning additional transactions through discovery. However, despite the fact that the plaintiffs have received no class discovery from the defendants, it is clear that the numerosity requirement is met. COMMON QUESTIONS OF LAW AND FACT The commonality requirement is satisfied if there are common questions linking the class members that are substantially related to the outcome of the litigation. Jordan v. County of Los Angeles, 669 F.2d 1311, 1320 (9th Cir. 1982); Blackie v. Barrack, 524 F.2d 891, 910 (9th Cir. 1975). A number of such questions are presented in this case. These questions include, among others: a. Whether transactions generated through the method of doing business alleged in the amended complaint are subject to the FTC regulation abrogating the holder in due course regulation. b. Whether LaSalle engaged in the scheme alleged in the amended complaint to circumvent the FTC regulation. c. Whether the scheme, engaged in for the purpose of getting money from consumers, constitutes a violation of the federal mail fraud statute, 18 U.S. C. 1341, and the federal wire fraud statute, 18 U.S.C. 1343. d. Whether LaSalle conducted the affairs of its corporate group through a pattern of mail fraud, thereby violating 18 U.S.C. 1962(c). e. Whether the scheme complained of is an unfair or deceptive practice, violative of the Illinois Consumer Fraud Act. The only individual questions are: (i) whether the a particular obligation resulted from application of the practice; (ii) the amount of the class members' damages.

The answer to first inquiry requires nothing more than the ministerial examination of the files of LaSalle, the dealer or the State Farm agent. This type of "individual issue" is not a barrier to class certification. Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989). Although the damage determination is individual, that is not a bar to a class. Blackie v. Barrack, 524 F.2d 891, 910 (9th Cir. 1975). Indeed, under the state consumer fraud claim, the court could avoid the issue of individual damages by issuing declaratory and injunctive relief, in effect, reforming the contract to include the required FTC notice and notifying class members of the right to assert claims and defenses pursuant to the reformed contract. Any class member harmed as a result of the scheme would then be alerted that he or she has a claim for damages. An action challenging the legality of a standardized business practice applied to an entire group of customers is well-suited for class certification. Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161 (7th Cir. 1974) (propriety of disclosure documents under Truth in Lending Act); Haroco v. American National Bank & Trust Co., 121 F.R.D. 664, 669 (N.D.Ill. 1988) (improper computation of interest); Kleiner v. First National Bank of Atlanta, 97 F.R.D. 683 (N.D.Ga. 1983) (same); Heastie v. Community Bank of Greater Peoria, 125 F.R.D. 669 (N.D.Ill. 1989) (execution of home improvement financing documents in sequence that evaded consumers' rescission rights). Moreover, all of the evidence pertaining to the overall pattern of conduct is admissible and, indeed necessary, for each class member. As this Court held in ruling on the sufficiency of the complaint, a consumer cannot prevail by simply proving his own transaction. Plaintiff needs to show the entire pattern of business to establish the referral relationship. Also, plaintiff must prove the pattern for her RICO claim. Proof of an individual transaction is meaningless by itself. TYPICALITY The "typicality" requirement of Fed.R.Civ.P. 23(a)(3) is satisfied if the representatives' claim "arises from the same event or practice or course of conduct that gives rise to the claims of other class members and [the representatives'] claims are based on the same legal theory." De La

Fuentes v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983); Jordan v. County of Los Angeles, 669 F.2d 1311, 1321 (9th Cir. 1982). In the present case, the claims of plaintiff and the class members all arise from the same events and course of conduct. The claims of plaintiff and the class members all arise from LaSalle's practice of generating business through referrals from dealers. All of the evidence applies generally to all class members. Likewise, all of the claims are based on the same legal theories. Accordingly, the typicality requirement has been satisfied. ADEQUACY OF REPRESENTATION The adequacy of representation requirement is satisfied if plaintiffs' counsel is qualified, experienced, and generally able to conduct the proposed litigation and there are no antagonistic interests between the representative party and the class. Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978); Jordan v. County of Los Angeles, supra, 669 F.2d at 1323; Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 247 (3d Cir.), cert. denied, 421 U.S. 1011 (1975); In re Alcoholic Beverages Litigation, supra. Plaintiff has paid $6200 on a $13,000 note with LaSalle, for a vehicle for which the dealer did not have title. LaSalle has demanded that she continue to pay under the note. Hence plaintiff has incentive to vigorously pursue the lawsuit. Plaintiffs' counsel has experience in class action litigation and litigation involving unlawful practices by financial institutions. See, Declaration of Daniel A. Edelman, Exhibit E. The extensive experience and expertise of plaintiff's counsel in class actions and consumer litigation will ensure a vigorous prosecution of the rights of the class members. CERTIFICATION UNDER RULE 23(b)(3) Plaintiff seeks certification under Fed.R.Civ.P. 23(b)(3), which provides that the Court may certify a class if: (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include:

(A) the interest of members of the class in individually controlling the prosecution and defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. A. PREDOMINANCE OF COMMON QUESTIONS Common questions predominate if there is a "common nucleus of operative facts" relevant to the dispute. E.g., Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968), cert. denied, 394 U.S. 928 (1969); Blackie v. Barrack, 524 F.2d 891, 905-08 (9th Cir. 1975); Bisgeier v. Fotomat Corp., 62 F.R.D. 113 (N.D.Ill. 1972); Steiner v. Equimark Corp., 96 F.R.D. 603, 607 (W.D.Pa. 1983); Miles v. N. J. Motors, 32 Ohio App.2d 350, 291 N.E.2d 758, 763-64 (1972). B. SUPERIORITY OF CLASS ACTION A class action is the only appropriate means of resolving this controversy. The claim of each individual class member is such that it is unlikely that he or she could afford to take on LaSalle. This is precisely the sort of case contemplated by the class action statute -- a scheme by a company to violate the rights of many poor and unsophisticated consumers. "[O]ne of the primary functions of the class suit is to provide a device for vindicating claims, which, taken individually, are too small to justify legal action but which are of significant size if taken as a group." Brady v. LAC, Inc., 72 F.R.D. 22, 28 (S.D.N.Y. 1976). Furthermore, the nature of this case is such that an individual case would require proof of the entire scheme. A pattern of referral by a particular dealers would be necessary to establish the referral relationship contemplated by 16 C.F.R. part 433. In addition, a pattern and practice is an essential element of a RICO claim. An individual claim thus would be extremely expensive to litigate. The class action mechanism permits the determination of the claims of all of the class with little more than would be required to litigate one individual claim.

CONCLUSION For the reasons stated above, plaintiffs request this Court certify Amended Complaint to proceed as a class action.

Respectfully submitted, Attorney for Plaintiff

4.10 Reply Memorandum in Support of Class Certification

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Judge Hart Plaintiff submits this reply in support of her motion for class certification. In preparing this reply, plaintiff was severely hampered by the total refusal of LaSalle Northwest National Bank ("LNNB") to provide any significant discovery, which is the subject of a pending motion. LNNB simultaneously refuses to provide discovery and asserts that plaintiff cannot prove, through evidence obtainable only through discovery, the withheld facts. I. LNNB'S ENTIRE RESPONSE IS PREMISED ON FALSE FACTUAL ASSUMPTIONS. Besides attacking plaintiff and her counsel, LNNB's arguments against class certification are based on the proposition that it is necessary to inquire into each consumer's transaction. Although the only significant discovery which plaintiff has obtained is from one of the dealers

alleged to have referred business to LNNB through State Farm Agents, Unlimited Auto Sales, and a couple of State Farm Agents, this discovery is sufficient to refute LNNB's arguments, and demonstrate the need for, and propriety of, class certification. LNNB deals with all State Farm Agents in a uniform manner, issuing them a printed form "Consumer Loan Packet" (Appendix A). The "Packet" includes LNNB's printed form credit application and note. The State Farm Agent is required to obtain the credit information on the form. The "Packet" also requires that "all [loan] documents must be signed in the presence of the State Farm Agent or Staff." Finally, when the forms are filled out and signed, the State Farm Agent writes the check for the proceeds with respect to those transactions representing new car purchases -- i.e., the dealer-referred transactions at issue here.18 Thus, the "Consumer Loan Packet" establishes that, with respect to all loans originated through State Farm Agents, the State Farm Agent is acting as the agent of LNNB. The State Farm Agent is responsible for obtaining the borrower's application and credit information, and for disbursing the loan proceeds. The State Farm Agent is authorized to issue checks on behalf of LNNB, and is responsible for ensuring proper execution of loan documents. In short, the State Farm Agent performs all the functions that would normally be performed by a loan officer in LNNB's office. The relationship between dealers and State Farm Agents is exemplified by the evidence pertaining to Unlimited Auto Sales, a used car lot located in the Roseland area of Chicago (98.5% African-American,19 economically depressed). In response to a subpoena, Unlimited produced some 178 contracts of persons it had referred to LNNB through State Farm Agents (Appendix B). The financing terms are not known -- because LNNB refused to produce its

State Farm agents would sometimes refinance auto loans as well. These transactions would not result from dealer referrals. The refinancings can be easily distinguished because the payee is another financial institution, such as GMAC or Ford Motor Credit Company, rather than a car dealer. In addition, the credit application in the "Consumer Loan Packet" requires designation of refinances, so that the refinances are identified in the records which LNNB refuses to produce.
19

18

Woodstock Institute, Community Lending Fact Book, June 1992 edition, p. 242.

documents -- but the total payments including finance charges would be in the range of $5,000 to $15,000 per contract, for a total volume of business between $1 million and $3 million. Unlimited financial manager Latisha Darey testified that Unlimited has been doing business with LNNB through State Farm agents since 1986 or 1987. (Appendix C, p. 17) Unlimited "used State Farm agents as conductors to obtain financing from the bank." (Appendix C, p. 19) Unlimited would take credit applications and phone the information in to the State Farm Agent. (Appendix C, pp. 70-71) After the information was evaluated -- whether this was done by the State Farm Agent, LNNB or both is unclear -- the loan proceeds check would be given to Unlimited by the State Farm Agent. (Appendix C, p. 45) There were three agents involved at various times. (Appendix C, pp. 19-20) The notice required by the FTC "holder" rule must be included if there is a "business arrangement" between a creditor (LNNB) and a seller (Unlimited). The FTC's definition of "business arrangement" is very broad: Any understanding, procedure, course of dealing, or arrangement, formal or informal, between a creditor and a seller, in connection with purchases of goods or services. 16 C.F.R. 433.1(g). The FTC's Guidelines on Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses, 41 Fed.Reg. 20022, 20025 (May 14, 1975), state that the rule applies where "a seller is acting as a conduit for financing and channeling buyer-borrowers to a particular lender or limited group of lenders." "Where a seller regularly names, or otherwise designates, a particular loan outlet as a source of credit to be used by his buyers, he is referring consumers to the lender." Id. Maintenance of loan application forms in the office of the seller and transmission of the information to the creditor or its agents constitutes an "arrangement." 41 Fed.Reg. 20026. A practice of referrals resulting in the financing of 178 transactions involving $1-$3 million clearly satisfies this test. Finally, "once a seller is referring his customers to a lender,

all loan contracts between that lender and buyers from that seller must contain the Notice . . . ." 41 Fed.Reg. at 20026. Thus, if Unlimited has a referral relationship with LNNB or an agent of

LNNB, all transactions in which LNNB issues proceeds checks to Unlimited are subject to the Rule, without any need to inquire if the particular consumer was referred. While LNNB's refusal to comply with discovery makes it impossible to provide similar statistics for dealers other than Unlimited, it is reasonable to infer that the facts for other dealers and agents parallel those outlined above. The withholding of evidence gives rise to a presumption that it is unfavorable to the party withholding it,20 and the obvious reason for LNNB to withhold the information is that it would show that its dealings with Unlimited are typical of those of other car dealers. We expect that LNNB's records would allow the presentation of statistics showing that similar volumes of business were referred by other car dealers. Plaintiff has evidence that at least three other car dealers -- Lake (Alexander Dcl. [Appendix D], 9), Enterprise (Martin Dcl. [Appendix E], 2), and A-1 Motors (Atkins Dcl. [Appendix F]) -directed consumers to State Farm Agents. Since the State Farm Agents are the agents of LNNB, a car dealer who regularly refers business to a State Farm Agent is regularly referring business to LNNB, just as if the dealer regularly dealt with a specific loan officer at LNNB. The FTC rule then requires inclusion of the notice in all loan agreements in which that dealer receives the proceeds. There is no need to establish what happened in any particular transaction. In short, statistical information coupled with information about LNNB's overall practice of doing business through State Farm Agents -- the key evidence which LNNB is withholding - will establish plaintiff's case. Furthermore, the strength of the statistical evidence increases exponentially with the number of dealers shown to have referral relationships. Once it is shown that LNNB sought to generate business through a referral network of the sort described, and that multiple dealers in fact referred business, then the inference that any group of loans paid out to a given dealer resulted from referrals is greatly strengthened.

Buehler v. Whalen, 70 Ill.2d 51, 374 N.E.2d 460, 468 (1977); Le Master v. Chicago, R. I. & P. R. Co., 35 Ill.App.3d 1001, 343 N.E.2d 65 (1976).

20

Proving this on a classwide basis is not expected to pose any problem, once LNNB disgorges its records. It is simply a question of determining the volume of business with each dealer. Precisely this was done in Heastie v. Community Bank, 125 F.R.D. 669 (N.D.Ill. 1990), later opinions, 727 F.Supp. 1133 (N.D.Ill. 1990), and 727 F.Supp. 1140 (N.D.Ill. 1990), with respect to several dozen home improvement contractors listed in the last-cited opinion. The evidence is statistical in nature, and does not require transaction-by-transaction evidence. Indeed, because the FTC rule applies as long as a referral relationship exists between the car dealer and LNNB (represented by the State Farm Agent), regardless of whether a given consumer was referred, it would not even be open to LNNB to try to prove that specific transactions were not referred. Once the extent of the referral relationships is identified, substantial and meaningful relief can be afforded to the class by, as LNNB puts it, reforming their contracts to include the FTC notice, pursuant to the state law claim, and by giving appropriate notice to the class members. Heastie, 727 F.Supp. 1133. At the present time, no class member has a right to assert any claims and defenses against LNNB, because their notes purport to be negotiable instruments not admitting any such defenses. Consequently, the entire class needs, and would benefit from, this relief. Indeed, the basic problem that LNNB's clever method of generating business created -the insulation of LNNB from the business conduct of used car dealers that refer business to LNNB -- will have been solved. Identification of the class members who have substantial damages (such as the plaintiff and Mr. Martin), is not necessary to grant this relief at all. Nor are the facts of the specific transactions relevant, as long as the transaction fit within the pattern of referrals. Thus, even without adjudication of any individual damage claims, certification of a class will provide a very material benefit. The only individual question is damages. If the number of persons with damage claims is small, it can be readily handled by a Magistrate Judge or master. The individual damage claims were included in the class in Heastie, supra, 125 F.R.D. 669. If the number is large, the Court

can simply enter judgment providing that any class member who proves damages in an individual case is entitled to trebling of those damages. Fed.R.Civ.P. 23(c)(4)(A). The issue is not whether a class should be certified, but the extent to which classwide adjudication is required. We now turn to each of the specific objections raised by LNNB. II. NUMEROSITY LNNB claims that the assertion of numerosity is "speculation." The 178 Unlimited transactions in and of themselves show numerosity. The fact that other car dealers also referred consumers confirms numerosity. LNNB's argument is unfounded and nothing more than an attempt to take advantage of its own withholding of information. LNNB's statement that it "does not maintain such [referral] relationships with automobile dealers, through the medium of State Farm agents or otherwise" (Def.Mem., p. 3) is belied by the evidence. III. COMMONALITY AND PREDOMINANCE LNNB claims that an "inquiry would have to be undertaken on behalf of each class member should certification be granted" (Def.Mem., p. 9) to determine if that class member was referred. As demonstrated in Point I, above, that is simply not the case. All of the cases cited by LNNB, which are based on this false premise, are therefore inapposite. This is simply not a case where individual inquiries are necessary to establish the existence of a cause of action in each class member.21 IV. TYPICALITY Under the heading of "typicality" (Def.Mem., pp. 10-11), LNNB makes a number of disjointed arguments, most of which are based on the false premise that "the focal point of this suit is necessarily the presence or absence of the requisite referral relationship in the particular individual loan transaction under consideration." (Def.Mem., p. 10) LNNB's claim that plaintiff has "failed to . . . develop facts through discovery demonstrating an ongoing referral relationship between Lake Automotive" and LNNB is This was the case in many of the decisions cited by LNNB, e.g., Butt v. Allegheny PepsiCola Bottling Co., 116 F.R.D. 486 (E.D.Va. 1987), and Davenport v. Gerber Prods. Co., 125 F.R.D. 116 (E.D.Pa. 1989).
21

frivolous. Plaintiff was referred to a State Farm agent. (Appendix D, 7-9) LNNB does not deny that Lake Automotive referred plaintiff to a State Farm Agent, or that the Agent issued LNNB's check to Lake. Other matters included by LNNB are factually immaterial. This is not a case where LNNB has identified "an arguable defense peculiar to the named plaintiff." Proof of LNNB's method of doing business in originating loans through State Farm Agents, and that such method makes the State Farm Agent the agent of LNNB, is not a "defense peculiar to the named plaintiff." V. ADEQUACY OF REPRESENTATION A. LEGAL STANDARD In Searls v. Glasser, 1992 U.S.Dist. LEXIS 6643 (N.D.Ill., May 8, 1992), this Court stated that "To determine whether a named plaintiff will adequately represent the proposed class, two factors must be examined: (1) whether conflicts of interest exist between the named plaintiff and other members of the class; and (2) whether plaintiff's counsel is qualified to protect the interests of the class." The Court in Searls rejected attacks on the personal characteristics of the plaintiff as a ground for denying class certification: "[D]efendants argue that plaintiff is an inadequate representative because [he] has abdicated his responsibility to his attorneys. This objection will not defeat class certification." See also, Harman v. Lyphomed, 122 F.R.D. 522, 528 (N.D.Ill. 1988). B. ALLEGED CONFLICTS OF INTEREST With respect to conflicts of interest, LNNB suggests that there is a "divergence in remedies" between plaintiff, who suffered serious monetary loss ($16,585.92 paid or owed on a car note) and those class members who have not yet suffered serious economic harm, and whose principal interest is in "reformation of their promissory note with LNNB." (Def.Mem., p. 12) This suggestion is specious. Neither plaintiff nor anyone else can obtain any relief without obtaining "reformation of their promissory note" or the equivalent -- a finding that the FTC-

required notice was improperly omitted from their note. The fact that plaintiff and some class members are entitled to more relief does not establish a "conflict" of interests. LNNB also claims that plaintiff (or any other customer) is interested primarily in establishing a referral relationship as to her dealer. This overlooks the fact that proof of LNNB's overall method of soliciting referral business through State Farm Agents, and that the State Farm Agents thereby become agents of LNNB, supports the claims of each and every customer. It also overlooks the fact that it is simply not economically feasible to bring suit for 150 or 200 customers of a single car dealer. As a practical matter, a consumer injured by LNNB's method of generating business has two choices: (i) pay $10,000 or $15,000 to LNNB for nothing or (ii) prove the entire case against LNNB. C. ATTACKS ON COUNSEL LNNB claims that plaintiff's counsel are inadequate because they offered an inadequate class representative, Mrs. Brown. However, as discussed below, under Surowitz v. Hilton Hotels Corp., 383 U.S. 363 (1966), and numerous other decisions involving class representatives who were not competent to handle their own affairs, e.g., Coley v. Clinton, 635 F.2d 1364, 1379 (8th Cir. 1980); Johnson v. Brelje, 482 F.Supp. 121 (N.D.Ill. 1979), Mrs. Brown can be the class representative. In any event, the position that persons such as Mrs. Brown are entitled to have their rights vindicated through a class action is certainly one "warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law" (Fed.R.Civ.P. 11). Plaintiff's counsel got this case because we undertook to the Chicago Bar Association to represent aggrieved consumers. (Appendix G) Many of the consumers are disadvantaged persons. If there is a serious wrong inflicting serious harm on a class and a claim that can be established notwithstanding the disability of the named plaintiff, we feel we should bring the action. It is obvious from the resistance disclosed by the record that neither plaintiff's counsel nor anyone else could economically bring this case on an individual basis. LNNB next claims (Def.Mem., p. 19) that since Mrs. Brown is a person of limited intelligence, plaintiff's counsel must have violated Rule 11 because she could not have supplied

any of the information to support the complaint. This is a non sequitur. No one consumer could give testimony supporting the necessary elements of a claim that requires proof of a pattern of conduct. LNNB then asserts that Ms. Combs' affidavit mischaracterized the statements of

Latisha Darcy. In fact, Ms. Combs accurately characterized the underlying facts -- 178 transactions and $1-$3 million is "a large volume of business." LNNB's attorney got Ms. Darcy to deny the characterization. That hardly shows that Ms. Combs is not being accurate. LNNB continues by making unfounded personal attacks on plaintiff's counsel, quoting statements from cases about "threatening their adversaries with the prospect of classwide relief" and "exacting a settlement from LNNB." (Def.Mem., p. 20) No facts are provided suggesting that plaintiff's counsel have done anything of the sort, and they have not. (Appendix G) While LNNB's personal attacks on plaintiff's counsel have no merit, they do underscore the fact that certification of a class is essential to avoid widespread evasion of the FTC regulations and serious financial loss to multiple consumers who can ill afford it. LNNB will go to any lengths to "defend" its method of doing business. LNNB's behavior is calculated to make it impossible to pursue an individual case against it. D. ATTACKS ON PLAINTIFF LNNB's attacks on Mrs. Brown are largely a rehash of those its "Motion to Stay Discovery." Rather than burden the Court with repetition, we refer to pp. 1-9 of PLAINTIFF'S RESPONSE TO LASALLE'S "MOTION TO STAY DISCOVERY" and attach the relevant pages as Appendix H [not reprinted infra]. We submit that Mrs. Brown, with the aid of her son, is able to serve as class representative; if the Court disagrees, there is no good reason why Mr. Martin cannot intervene and serve as class representative.22 We add only that one of the decisions LNNB cites, Horton v. Goose Creek Indep. School Dist., 677 F.2d 471, 488-89 (5th Cir. 1982), expressly holds that when the person upon whom the

Even the cases cited by LNNB for the proposition that the named plaintiff has to be intelligent and understanding allow intervention of substitute class representatives if the court feels the original representative does not meet such standards. Lubin v. Sybedon Corp., 688 F.Supp. 1425, 1463 (S.D.Cal. 1988).

22

law confers a cause of action is unable to look after his or her own interests, a "next friend" may sue, on behalf of a class if appropriate, and whatever adequacy of representation requirements exist may be satisfied by the "next friend." The notion that the class representative's duties are "non-delegable" (Def.Mem., p. 18) is untenable: many class actions have been brought by persons incapable of looking after their own interests. VI. CLASS DEFINITION LNNB's claim that the class definition is too broad is based on a misconstruction of the class definition. The objective was to cover persons who did business with car dealers with respect to whom LNNB had referral relationships, either directly or through a State Farm Agent. The words "directly . . . or" were added when it became evident that the State Farm Agents were acting as the agents of LNNB. The referral relationship between LNNB/ State Farm Agent and the dealer is an essential element in all cases. The class thus does not include refinancings -- i.e., persons who obtained automobile loans from LNNB through a State Farm Agent, but where the proceeds were not disbursed to a car dealer with respect to whom a referral relationship existed. As discussed in Point I, the refinancings are readily identifiable. Proposed paragraph (f) was intended to refine the persons in need of relief: all persons whose notes are outstanding, or had a complaint, need reformation of their notes, and those with complaints need damages. The reference to the note being prepared on LNNB's printed form was deleted as superfluous because it appeared that LNNB only made loans written on its printed form. Plaintiff has been hampered in providing a precise class definition by LNNB's noncompliance with discovery. Ideally, we desire to define the class in terms of facts which can be readily extracted from LNNB's records by computer, which we have been prevented from doing. However, this is not a ground for denial of class certification -- class definitions often must be modified in light of litigation developments, and the Court is not bound by the class definition proposed, Castaneda v. Greyhound Retirement and Disability Plan, 1991 U.S.Dist.

LEXIS 3950 (N.D.Ill. 1991); Gomez v. Illinois State Bd. of Education, 117 F.R.D.__, 397 (N.D.Ill. ); Chevalier v. Baird Sav. Ass'n, 72 F.R.D. 140, 144 (E.D.Pa. 1976). VII. SUPERIORITY LNNB claims that a "multitude of mini-trials will be necessary to dispose of individual claims" (Def.Mem., p. 21). However, this claim is based on the false premise that it is necessary to prove referrals on an individual basis. No individual hearings at all are necessary to grant the basic relief of "reforming" the class members' contracts to permit assertion of claims and defenses against LNNB. LNNB further claims that "the better approach calls for individual actions in which the particular details of the referral relationship, if any . . . could be explored . . . ." (Def.Mem., p. 6) As a practical matter, because of the need to prove a pattern of conduct by a defendant which refuses to comply with discovery, pursues Stalingrad defense tactics, and vilifies its adversaries, this will insure no actions are brought: "To permit the defendants to contest liability with each claimant in a single, separate suit, would, in many cases give defendants an advantage which would be almost equivalent to closing the door of justice to all small claimants." Hohmann v. Packard Instr. Co., 399 F.2d 711, 715 (7th Cir. 1968). The legality of LNNB's practice is precisely the sort of issue intended to be addressed by Rule 23. A large defendant engages in a clever evasion of consumer protection regulations. The practice is carried out on a uniform basis, using standardized document packages. It is directed at working-class individuals, with a disproportionate percentage belonging to minorities -- persons who are unlikely to realize that their rights are being violated. As a result, a significant number of these consumers find themselves liable to pay amounts which they can ill afford to pay and which the FTC rule was intended to protect against. The amounts involved are devastating to the individuals -- $16,585.92 in plaintiff's case -- but not enough to justify individual litigation in the face of the sort of defense tactics that the Court has seen. A class action is essential to prevent a failure of justice and a flaunting of the law.

CONCLUSION For the reasons stated above and in our initial memorandum, the Court should grant plaintiff's motion for class certification. Respectfully submitted, Attorney for Plaintiff

4.11 Plaintiff's Response to Defendant's Motion for Reconsideration of Class Certification

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 PLAINTIFFS' RESPONSE TO MOTION FOR RECONSIDERATION Plaintiffs briefly address several of the matters raised in LaSalle's motion to reconsider, as follows: 1. LaSalle's motion repeatedly refers to alleged "improper conduct" of plaintiffs' counsel in connection with their becoming attorneys for Dean Martin, supposedly in "scouring the Circuit Court of Cook County court files for potential class representatives . . . ." (Motion, 5) No substantiation or evidence supporting this serious charge is provided. We assure the Court that all rules of the Illinois Supreme Court and this Court relating to solicitation and advertising were strictly complied with. 2. No one has deprived LaSalle of an opportunity to depose Dean Martin. LaSalle unilaterally decided to cease participating in discovery.

3. LaSalle questions whether a State Farm agent is an agent of LaSalle in connection with the origination of loans. This "issue" is specious. LaSalle does not dispute that it disseminated a loan package to the State Farm agents ( Appendix A to Plaintiff's Reply in Support of Class Certification), or that the State Farm agent receives credit information, prepares the note and Truth in Lending disclosures and executes the draft representing the loan proceeds. We do not see how, if A is authorized by P to sign P's name on P's checks, A is not the agent of P. In any event, plaintiffs are not required to prove the merits of their case on a motion for class certification. If the plaintiffs can point to evidence that would establish the claims of the class, the defendant cannot avoid certification by disputing that evidence and arguing that the class members' claims can be established, if at all, only through individual evidence. Courts have frequently been confronted with a situation is presented where the plaintiff's claim is eminently suitable for classwide adjudication if the plaintiff's substantive legal and factual contentions are correct, but not suitable for classwide adjudication if the defendant's position on the merits is correct. In that situation, the appropriate course of action is to certify the class for the purpose of determining whether the plaintiff's substantive contentions are correct, particularly if the class members' claims are of a size that makes individual litigation infeasible. That is, whether plaintiff's legal and factual contentions are valid is itself the predominant common question that warrants class certification. This sort of problem is often presented in antitrust cases, where the plaintiff contends that there was a national conspiracy to fix prices and the defendant asserts that any price-fixing was isolated and unauthorized. For example, in In re Corrugated Container Antitrust Litigation, 80 F.R.D. 244 (S.D.Tex. 1978), plaintiffs proposed to prove, on a classwide basis, that there was a nationwide price-fixing conspiracy that effectively increased all corrugated container prices by a minimum amount during the period of the conspiracy. The defendants countered that "if any price-fixing conspiracies existed they must have been local in character, since the industry is inherently fragmented and incapable of concerted action. Should plaintiffs have to build their

case like a patchwork quilt, showing price-fixing in one small market after another, the economy offered by class treatment would be lost." (80 F.R.D. at 250) The plaintiffs responded that "they will be able to offer generalized proof of conspiracy," and provided an outline of the proposed evidence. Thus, the court was faced with a situation where a class was proper if the plaintiffs could establish their contentions on the merits, but not appropriate if the defendants' view of the merits were accepted. The court resolved the situation by looking only to the plaintiffs' contentions and evidence and holding that this was sufficient to justify certification of a national class: Whether the proof ultimately adduced will establish the existence of a national conspiracy among the defendants is not in issue here; it is not the court's function to weigh this evidence for its truth but merely to ascertain whether it is of a type suitable for classwide use. The court is persuaded that the conspiracy issue -whether price information was exchanged; if it was, with what intent; whether action was taken by defendants based upon such exchanges; etc. -- is susceptible of generalized proof, since it deals primarily with what the defendants themselves said and did. (80 F.R.D. at 250) The court concluded that "defendants' essential contention is that plaintiffs cannot prove what they assert they will prove," and that this was not a proper basis for denying a class, because plaintiffs were entitled to place their proof before the jury. (80 F.R.D. at 252) Other decisions to the same effect include In re Independent Gasoline Antitrust Litigation, 79 F.R.D. 552 (D.Md. 1978); and In re Folding Carton Antitrust Litigation, 88 F.R.D. 211 (N.D.Ill. 1980). A similar issue was presented in Santiago v. Turner Acceptance Corp., 76 C 1247 (N.D.Ill., April 21, 1980) (attached)[not reprinted infra]. In Santiago, the plaintiff brought a Truth in Lending class action, alleging that defendants engaged in a practice of requiring the execution of certain documents in a certain sequence, and that this violated the Truth in Lending Act. The defendants denied that they had any such practice, claiming that whether a Truth in Lending violation existed with respect to any consumer would therefore have to be determined on an individual basis. The court held that under these circumstances a class should be certified: Notwithstanding individual negotiations, the plaintiff argues that the defendants use the two-note procedure without material variation in all their credit sales with the result that a credit relationship is colorably established at the time that the first

contract is signed, long before the TILA disclosures are made. [citation] If the plaintiff ultimately proves that the use of the two-note method is the defendants' standard operating procedure, he will in effect have demonstrated that common issues predominate. Remaining then will be the common legal issue of whether this two-note practice violates the TILA. If plaintiff cannot initially establish the asserted practice because each transaction is demonstrably unique, then we may be compelled to decertify the class, although the named plaintiff could still proceed to show that the use of the practice in his specific credit transaction violated the TILA. . . . [W]e must preliminarily decide whether the plaintiff's allegation that the defendants systematically use the two-note procedure is more than frivolous in order to find that common issues predominate. [citation] Plaintiff has carefully analyzed the two-note practice and outlines four factual inquiries which if answered in the affirmative by the fact-finder would tend to establish the two-note practice. . . . Plaintiff also points to five documents, available in each class member's file, which provide at least partial answers to these inquiries. [citation] Thus, common issues predominate irrespective of their ultimate resolution. If the plaintiff prevails on the practice issue, . . . the class device will have served its purpose of fairly and efficiently adjudicating many similar claims. (Slip opinion, pp. 12-14) A contrary position (requiring resolution of the merits in connection with a class motion) would not only be inconsistent with Rule 23 but run afoul of the Seventh Amendment. 4. The same answer applies to LaSalle's contention that there is no "business relationship" between Unlimited and a State Farm agent. LaSalle's contention at 7 of its motion, that Latisha Darey expressly denied the existence of a referral relationship, is flatly wrong. The testimony of Latisha Darey, cited at pages 17-19 of the Deposition of Latisha Darey, attached as Appendix C to the Reply in Support of Class Certification [not reprinted infra], clearly supports a finding that such a relationship existed. For present purposes, that is more than sufficient. 5. LaSalle's statement that "there have been no allegations of any improper relationship between Enterprise Rental Car (from which Martin allegedly purchased his car) and the State Farm agent" (Motion, 9) is not accurate. Martin testifies in his declaration that Enterprise referred him to the State Farm agent. Declaration of Dean Martin , 2(c), attached as Exhibit A [not reprinted infra] to Motion to Intervene as Named Plaintiff and For leave to File Amended

Complaint. Again, this would support a finding of a referral relationship. Federal Register, Vol. 40, No. 223, p.53525 (". . . the act of referral is sufficient to justify imposition of the rule. . .").

Respectfully submitted, Attorney for Plaintiff

4.12 Notice of Pendency of Class Action

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 NOTICE OF PENDENCY OF CLASS ACTION To: All persons who purchased a car for personal use with a loan from LaSalle Northwest National Bank f/k/a Northwest National Bank, who were referred to LaSalle by the car dealer directly or through a State Farm agent. Pursuant to Rule 23(c)(2) of the Federal Rules of Civil Procedure, you are hereby notified that a class action lawsuit is pending in this Court. You may be a member of the class. The lawsuit contends that LaSalle Northwest, in connection with its financing of automobile purchases, violated state and federal law by engaging in a scheme to deprive consumers of their rights to assert claims and defenses against LaSalle that they might have against the car dealers who referred them to LaSalle Northwest, by failing to include certain required language in the loan contracts. LaSalle Northwest denies all liability in connection with the allegations made in the lawsuit. PLEASE READ THIS NOTICE CAREFULLY. THIS IS NOT A NOTICE OF A LAWSUIT AGAINST YOU. YOU MAY BENEFIT FROM READING THIS NOTICE. DEFINITION OF THE CLASS This lawsuit is being maintained on behalf of all persons who satisfy the following criteria:

a) they purchased an automobile; b) that was financed by LaSalle Northwest; c) the person was referred to LaSalle Northwest directly from the automobile dealer selling the automobile pursuant to a business arrangement with LaSalle Northwest or through the medium of a State Farm agent who had a business arrangement with the seller and LaSalle Northwest, d) the transaction was documented by LaSalle Northwest as one for personal, family or household purposes; e) the financing by LaSalle Northwest was not a refinancing of a prior automobile loan; f) the loan documentation for the financing transaction does not contain the notice required by 16 C.F.R. Part 433; and g) either i) the loan is still unpaid or (ii) the person notified LaSalle Northwest, the automobile dealer, a judicial tribunal, or a public or private agency of an unsatisfied claim or complaint arising from the transaction. To be a member of the class you must meet all of the criteria listed in (a) through (g) of the definition above. If you do not meet the class definition, this notice does not apply to you. If you are uncertain as to whether you are a class member, you should contact counsel for the class or your own attorney. As explained below: (i) If you meet the class definition and do not exclude yourself from the class, you will become a member of the class. Members of the class may receive a benefit if plaintiffs win the case. If plaintiffs lose, class members will be bound by the judgment, but will not have to pay any money. (ii) If you exclude yourself from the class, you will not receive a benefit if the class prevails and you will not be bound by the judgment if the plaintiffs lose. By an order entered earlier in this case, the Court has permitted Georgia Brown and Dean Martin, Jr. ("Brown and Martin") to be the class representatives to litigate the case on behalf of all class members. Brown and Martin's attorneys are:

Daniel A. Edelman EDELMAN & COMBS 135 S. LaSalle Northwest, Suite 100 Chicago, IL 60603 (312) 739-4200 WHAT THIS LAWSUIT IS ABOUT Georgia Brown, a LaSalle Northwest Bank automobile loan customer, filed this class action suit against LaSalle Northwest in the United States District Court for the Northern District of Illinois. Dean Martin, another LaSalle Northwest customer, was later granted leave to intervene as an additional plaintiff. Brown and Martin allege that they both had serious problems

with the cars they purchased, and that LaSalle Northwest insisted that they pay off their loans despite the problems.

LaSalle Northwest finances the purchases of new and used automobiles. Brown and Martin allege that some loan customers are referred to LaSalle Northwest by State Farm insurance agents. Brown and Martin allege that State Farm agents have set up referral arrangements with car dealers, whereby the car dealers refer customers to the State Farm agents, who in turn arrange to finance the customers' purchases with a loan from LaSalle Northwest. In other cases, Brown and Martin allege that the dealer may have referred the customer directly to LaSalle Northwest, or LaSalle Northwest forms may have been completed at the dealership.

Brown and Martin allege that the loan forms LaSalle Northwest uses in these transactions do not contain a statement which would allow the consumer to assert any claims or defenses against LaSalle Northwest that he or she might have against the car dealer, such as the fact that the car they purchased was defective. Brown and Martin contend that LaSalle Northwest should have included the statement in its loan contracts because of the relationship between LaSalle Northwest, the car dealers and the State Farm agents.

Brown and Martin have alleged that LaSalle Northwest's actions in failing to include the statement in its loan contracts violates federal and state laws prohibiting fraudulent and deceptive practices.

Brown and Martin seek, on behalf of themselves and the class: a) appropriate compensatory, punitive and treble damages, b) a declaration that LaSalle Northwest is subject to claims and defenses that exist with respect to the transactions financed by LaSalle Northwest, c) an injunction requiring reformation of the affected loan agreements, d) attorneys' fees, litigation expenses and costs, and e) such other or further relief as the Court deems appropriate.

On August 13, 1993, the Court determined that the action should proceed on behalf of a class.

The Court has not made any final determination as to the merits of the case. LaSalle Northwest denies that it engaged in any improper, illegal or fraudulent conduct and denies any and all liability to Brown, Martin or the class members. This notice is not an admission by LaSalle Northwest of the validity of the claims asserted by Brown and Martin in this case, or of any wrongdoings or any violation of law. This notice is not an expression of opinion by the Court as to the merits of the case.

YOUR OPTIONS

You have the choice of staying in the class or electing to opt out of the class. Either choice has certain risks and consequences. You have the right to discuss your decision with your own attorney.

1. If you stay in the class, you will be bound by the result of the lawsuit, whether that result is favorable or unfavorable. You might receive monetary relief. However, you will not have to pay any money as a result of staying in the class.

2. As a class member you will be represented by the attorneys acting on behalf of the class. That representation by class counsel with respect to the class claims is entirely contingent -- that is, class counsel are paid only if they win the case and you need not pay them anything if they are not successful

3. If you elect to be excluded from the class, you (a) will not be bound by any judgment or disposition of the class action, (b) will retain any claims you may have against LaSalle Northwest, and (c) will not share in any recovery if the class prevails on the claims at trial or enters into a settlement with LaSalle Northwest.

4. You have the right to enter an appearance yourself or through an attorney by mailing a notice of appearance to the Clerk of the Court at the following address:

H. Stuart Cunningham, Clerk United States District Court Northern District of Illinois 219 South Dearborn Street Chicago, IL 60604 Your notice must contain the name and case number of this case. You also have the right to have your own lawyer represent you in this case, but if you do so, the terms of such representation are a matter for you and your lawyer to negotiate.

5. Neither this notice nor the lawsuit permit you to suspend payments on any loans (including automobile loans) you may have outstanding to LaSalle Northwest. Payments must continue to be made in accordance with the terms of any such loans.

HOW TO OPT OUT OF THE CLASS

If you wish to be a member of the class in this case, you need do nothing further at this time. If you wish to opt out of the class, you must write and sign a letter asking to be excluded and send it by First Class mail to the Clerk of the Court at the above address, so that it is received by the Clerk's office on or before xx xx, 1993.

IMPORTANT: THE COURT REQUIRES THAT ANY REQUESTS FOR EXCLUSION BE ACTUALLY RECEIVED BY THE CLERK ON OR BEFORE xx xx, 1993. IF YOU MAIL A REQUEST FOR EXCLUSION, YOU BEAR THE RISK OF ANY PROBLEM WITH THE MAILS.

NOTICE TO ATTORNEYS OF RECORD

Copies of all documents filed with the Clerk of the Court (including exclusion letters) should be sent to the following counsel: [names and addresses of both counsel] CORRECT ADDRESS

If this Notice was sent to you at your current address, you do not have to do anything further to receive any further correspondence concerning this case. If it was forwarded by the postal service, or if it was otherwise sent to you at an address which is not current, you should immediately send a letter to each of the lawyers named above stating your past and current addresses and (if possible) your loan number. AVAILABILITY OF FILED PLEADINGS All pleadings and other papers filed in this case are available for you to inspect and copy at the office of the Clerk of the Court (below) during regular business hours. INQUIRIES Any inquiry you or your counsel may wish to make concerning this notice should be addressed to Edelman & Combs at the above address. DO NOT ADDRESS ANY QUESTIONS ABOUT THE SETTLEMENT OR THE LITIGATION TO THE CLERK OF THE COURT OR TO THE JUDGE. They are not permitted to answer your questions.

Dated:

, 1993 H.Stuart Cunningham, Clerk United States District Court Northern District of Illinois 219 South Dearborn Street Chicago, IL 60604

4.13 Plaintiff's Memorandum in Support of a Proposed Settlement

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No. 92 C 8392 Judge William T. Hart PLAINTIFFS' MEMORANDUM IN SUPPORT OF ENTRY OF ORDERS (I) CONDITIONALLY CERTIFYING SETTLEMENT CLASS (II) PRELIMINARILY APPROVING COMPROMISE AND SETTLEMENT (III) SETTING PROOF OF CLAIM BAR DATE (IV) APPROVING NOTICE TO THE CLASS, (V) SCHEDULING FINAL SETTLEMENT HEARING AND (VI) APPROVING COMPROMISE AND SETTLEMENT AFTER FINAL SETTLEMENT HEARING Georgia Brown and Dean Martin ("plaintiffs"), respectfully submit this memorandum in support of their motion for entry of orders (1) conditionally certifying the settlement class, (2) preliminarily approving the proposed compromise and settlement, (3) approving forms of class notice and proof of claim, (4) setting a proof of claim bar date, (5) scheduling a settlement hearing, and (6) finally approving settlement agreement following the settlement hearing.

NATURE OF THE ACTION In this action, plaintiffs allege that defendant, LaSalle Northwest National Bank ("LaSalle Northwest"), is engaged in the business of extending consumer credit, maintains business relationships with automobile dealers either directly, or indirectly through State Farm insurance agents, is referred customers for financing by the dealers and State Farm agents, and, accordingly, under Federal Trade Commission regulations, 16 C.F.R. Part 433, is subject to claims and defenses which the consumer has against the provider of goods and services. The plaintiffs allege that LaSalle Northwest, pursuant to a plan and policy, provided form loan documents which did not contain the notice, required by 16 C.F.R. Part 433, to dealers or to State Farm agents who would then execute the loan documents as agents of LaSalle Northwest. The plaintiffs allege additionally that LaSalle Northwest required the use of its form loan documents by its agents, and neither it, nor any of the participants in the transaction, would inform the consumer of the matters required to be disclosed to the consumer under 16 C.F.R. Part 433. The plaintiffs allege that LaSalle Northwest planned to, and did in fact, disclaim any responsibility for claims or disputes between the consumers and the automobile dealers on the theory that the business was referred by the State Farm agent and not the dealer. Class counsel have engaged in extensive investigation and pretrial discovery with respect to the plaintiffs' claims including (i) written discovery, (ii) review of LaSalle Northwest documents and computer records, including 30,000 loan files, (iii) depositions of State Farm insurance officials and agents, and automobile dealer personnel, (iv) review of automobile dealer documents, and (v) a survey of approximately 200 LaSalle Northwest borrowers. In the consideration of (a) the benefits class members will receive from the settlement; (b) the risks of litigation; (c) the expense and length of time necessary to pursue this action through a trial; and (d) the appeals that may follow, class counsel have concluded that a settlement on the terms and conditions set forth in the settlement agreement, attached as Exhibit A to plaintiffs' motion [not reprinted infra], is in the best interests of the class of consumers described therein at 2.1.

LaSalle Northwest denies each and every allegation of wrongdoing described above and disclaims any liability with respect to any and all claims. It has concluded, however, that it is desirable to resolve this action on the terms and conditions set forth in the settlement agreement in order to avoid further expense, inconvenience, and interference with their ongoing business operations, and to put to rest all claims that were, or could been brought in this, or a similar action. TERMS OF SETTLEMENT Definition of the Settlement Class For purposes of the settlement only, the settlement class consists of all individuals who (1) purchased a used automobile, (2) for personal, family or household purposes, (3) from one of the automobile dealerships listed in 2 on p. 4 of plaintiffs' motion, and in A(ii) of the proposed order for final approval of the settlement agreement (4) from January 1, 1985 through and including August 15, 1994, and (5) financed the purchase of the used automobile through a loan from LaSalle Northwest ("old borrower"); and (2) after the consummation of the settlement, finance the purchase of an automobile through a loan from LaSalle Northwest obtained with the assistance of a State Farm insurance agent or staff member ("future borrower"). Persons who purchased a used automobile from a covered automobile dealership through a loan from another lending institution, and who later refinanced the loan through LaSalle Northwest, are not considered to be part of the settlement class. Monetary Relief for Old Borrowers Who Have Been Damaged Monetary relief is available from LaSalle Northwest to an old borrower who can demonstrate that he or she has a legally enforceable claim under Illinois or federal law against a covered automobile dealer and has suffered legally compensable damages. Any old borrower's claim is limited to amounts paid by the old borrower on account of his or her promissory note to LaSalle Northwest relating to the covered automobile, and excludes punitive damages. For purposes of the settlement, an old borrower has a legally enforceable claim under Illinois and federal law only if he or she has a cause of action against a covered automobile dealer for breach of implied warranty of title or merchantability (considering the age and condition of the vehicle at the time of purchase and any effective warranty disclaimers), breach of

express warranty, fraud or consumer fraud (considering the documents executed and the credibility of the claimant), or non-compliance with odometer and other applicable regulatory laws. A pool of $350,000 (less certain expenses specified in the settlement agreement) is available to compensate plaintiffs as described below, and pay claims of old borrowers who have a legally enforceable claim under Illinois and federal law against a covered automobile dealership, and have suffered legally compensable damages. Monetary Relief to Plaintiffs The plaintiffs are deemed to have legally enforceable claims against covered automobile dealerships and to have suffered legally compensable damages, and will have the following: a. Georgia Brown: cancellation by LaSalle Northwest of automobile loan indebtedness of $9,480.96, and payment by LaSalle Northwest to Georgia Brown of $12,000, for a total of $21,480.96. b. Dean L. Martin, Jr.: cancellation by LaSalle Northwest of automobile loan indebtedness of $4,204.87, and payment by LaSalle Northwest to Dean L. Martin, Jr. of $4,000, for a total of $8,204.87. Process of Obtaining Relief Regarding Old Borrowers In order to prove that he or she has a legally enforceable claim against a covered automobile dealership, and has suffered legally compensable damages, an old borrower must submit, along with a completed proof of claim, all documents relating to his or her purchase of the covered automobile from the covered automobile dealership, including, without limitation, the sales contract. Old borrowers who assert that the covered automobile dealer breached an implied warranty of merchantability bear the burden of submitting adequate documentation and of demonstrating the absence in such documentation of an effective warranty disclaimer. Completed proofs of claim, and supporting documentation, will be returned to class counsel. After reviewing completed proofs of claim the class counsel and LaSalle Northwest may agree that certain old borrowers have legally enforceable claims against covered automobile

dealerships, and may also agree, with the consent of the old borrowers concerned, on the amount of an old borrower's claim. Old borrowers who return properly completed proofs of claim and all required documentation, and whom the class counsel and LaSalle Northwest do not agree as having a legally enforceable claim against a covered automobile dealership, and/or having suffered legally compensable damages, shall be permitted the opportunity to participate in binding arbitration offered by the Better Business Bureau of Chicago and Northern Illinois, Inc. ("BBB"), 211 West Wacker Drive, Chicago, Illinois 60606. The BBB will determine (1) whether the eligible old borrower has a legally enforceable claim against a covered automobile dealership, and/or (2) the amount of any legally compensable damages which the old borrower has suffered. The BBB shall provide written notice to eligible old borrowers of their right to arbitrate their claims. The notice supplied to the old borrower by the BBB will inform the old borrower, additionally, that he or she must pay a $25 fee in order to arbitrate his or her claim. The $25 fee will be refunded if an award is made by the BBB, but will be forfeited in the event no award is made. Payment of Old Borrowers' Claims Promptly after the completing the arbitration of all claims of eligible old borrowers whose claims were not resolved prior to arbitration as described above, the BBB shall total the amount of all awards made through arbitration, and communicate that figure to counsel for LaSalle Northwest and class counsel. The figure provided by the BBB will be added to the amount awarded to eligible old borrowers pursuant to the agreement of the parties. If the total of (1) amounts awarded to eligible old borrowers through arbitration and pursuant to agreement of the parties, and (2) certain administrative expenses specified in the settlement agreement, exceed $350,000, payments by LaSalle Northwest to individual old borrowers entitled to awards will be made on a pro rata basis. As a condition to a monetary award under the settlement an old borrower entitled to an award may be required to return his or her covered automobile, or its proceeds, to LaSalle Northwest. Any old borrower whose

monetary award is predicated on such a requirement must, before receiving the monetary award, execute and deliver to LaSalle Northwest a transfer of title for the covered automobile which shall be free and clear of any liens and encumbrances, and deliver actual possession of the vehicle to LaSalle Northwest. Finally, before old borrowers, who are entitled to an award, receive payment they must execute and deliver assignments to LaSalle Northwest of any claims they have against the covered automobile dealerships for which they have been compensated by LaSalle Northwest in accordance with the settlement, in an amount equal to the amount of such compensation. Relief for Future Borrowers After the consummation of the settlement, LaSalle Northwest shall include a written disclosure in the documentation for all automobile loan transactions involving future borrowers in the State Farm automobile loan program which in form and substance shall read as follows: Your automobile loan is part of program sponsored by State Farm International Services, Inc. in cooperation with LaSalle Northwest National Bank. Under this program: (1) your financing is being obtained through the clerical assistance of a State Farm insurance agent or staff member; (2) no compensation of any kind is to be paid between the seller of your automobile and the State Farm agent or staff member; (3) no referral relationship or arrangement is to exist between the State Farm agent or staff member and the seller of your automobile relating to the purchase of your automobile or your automobile loan; and (4) you are to receive the credit application, promissory note and other documentation for this loan from the State Farm agent or staff member, and those documents are to be completed and executed in the presence of the State Farm agent or staff member, and not on the premises of the seller of your automobile. IF THE FOREGOING IS NOT AN ACCURATE STATEMENT OF THE WAY YOUR LOAN TRANSACTION HAS BEEN HANDLED, DO NOT EXECUTE ANY FURTHER DOCUMENTATION AND CONTACT LASALLE NORTHWEST NATIONAL BANK AT ONCE AT 1-800-435-7566. By executing this [disclosure], you acknowledge that you have received this disclosure, that you have read this disclosure, that you understand this disclosure, and that your loan transaction has been handled in accordance with the conditions stated above. LaSalle Northwest shall require all future borrowers to execute the document on which the above disclosure appears, and shall furnish a copy of such document to all future borrowers. The number listed in the disclosure will be maintained by LaSalle Northwest. A employee of LaSalle Northwest will answer calls during normal business hours. After receiving calls, LaSalle

Northwest shall secure affirmances, as described below, from the applicable State Farm Insurance agents. Screening Methods to Police State Farm Automobile Loan Program LaSalle Northwest shall prepare a monthly State Farm agent activity report to determine the possible existence of relationships between automobile dealers and State Farm agents which would trigger LaSalle Northwest's obligation to include notices in its loan documents consistent with 16 C.F.R. Part 433. A State Farm agent shall be included in an agent activity report if he or she submits for processing by LaSalle Northwest 10 or more automobile loan applications in one month with a corresponding loan rejection rate of such applications of 60% or higher. The settlement agreement allows for amendment of the screening process so long as the new screening process fulfills substantially the same purpose as that described in the settlement agreement, and LaSalle Northwest files notice of such substitute screening process with the District Court and class counsel. LaSalle Northwest shall investigate a State Farm agent's activities if (1) the State Farm agent is identified in the agent activity report, and has processed more than 5 loan applications involving the same automobile dealership in one month, or (2) the State Farm agent is involved in a case where a future borrower refuses to execute documents and calls the number pursuant to the above disclosure. Under the circumstances described in the foregoing sentence, LaSalle shall obtain affirmances by the State Farm agent that he or she (1) does not receive any consideration in connection with financing provided by LaSalle Northwest, (2) provides no LaSalle Northwest loan documents to automobile dealers for their use, (3) does not permit LaSalle Northwest loan documents to be executed on the premises of automobile dealers, (4) does not provide loan applications to automobile dealers and does not actively solicit referral of loan applicants from dealers, and (5) does not have any office or staff on the premises of an automobile dealership. If the State Farm agent does not provide the necessary affirmances, LaSalle Northwest shall either not accept business from the dealership identified as having a potential relationship with the State Farm agent for a period of time of not less than 6 months, or not accept business from the State

Farm agent for a period of 6 months or such time as LaSalle Northwest obtains the necessary affirmances. In instances where a State Farm agent is repeatedly identified on the agent activity report, or is repeatedly implicated in cases involving future borrowers who refuse to execute loan documents and call the number pursuant to the above notice, LaSalle Northwest shall take all steps, in addition to those already identified, reasonably necessary under the circumstances. In addition, LaSalle Northwest shall use its best efforts to communicate to all State Farm insurance agents who participate in the State Farm Automobile Loan Program that such agents shall not maintain contract or business arrangement relationships with automobile dealers. Further, LaSalle shall not maintain any contract or business arrangement relationships directly with automobile dealers unless it complies fully with the requirements of 16 C.F.R. Part 433. Exceptions to the Screening Process LaSalle Northwest is not required to take the actions identified above with respect to State Farm agents whose names appear on agent activity report(s) when the agents' names appear as a result of (1) unilateral referrals by automobile dealerships, without the existence of a relationship between the State Farm agent and the dealership, (2) a close geographic proximity between the State Farm agents' offices and the offices of the automobile dealerships, (3) the absence, in the close geographic proximity to the automobile dealerships, of other automobile loan providers. This exception exists, in part, because some State Farm agents involved in the State Farm automobile loan program are located in small towns which have only one agent and one used car dealer. Payment of Attorneys' Fees and Costs LaSalle Northwest will pay the reasonable fees and expenses of Edelman & Combs, the class counsel, as approved upon application by the Court and not to exceed $150,000. STANDARDS FOR APPROVAL The standard for approval of a proposed class settlement is whether the settlement is fair, reasonable, and adequate. Armstrong v. Board of School Directors of City of Milwaukee, 616

F.2d 305, 313 (7th Cir. 1980). Relevant factors to this determination are (1) the strength of the case of plaintiffs on the merits, balanced against the extent of the settlement offer, (2) the complexity, length and expense of further, litigation, (3) the extent of opposition to the settlement, (4) the reaction of members of the class to the settlement, (5) the opinion of competent counsel, and (6) the progress of the proceedings. Gautreaux v. Pierce, 690 F.2d 616, 631 (7th Cir. 1982). The opinion of class counsel as to the desirability of settlement is an important consideration. Alliance to End Repression v. City of Chicago, 91 F.R.D. 182, 204 (N.D.Ill. 1981). Indeed, there is a "strong initial presumption" that an arms-length settlement is fair when it is arrived at by counsel experienced in the type of the litigation involved, and on the basis of sufficient information concerning the claims at issue. Feder v. Harrington, 58 F.R.D. 171, 174 (S.D.N.Y. 1972). There are a number of factors that make the proposed settlement fair, reasonable, and appropriate. These include: 1. While class counsel believe that the claims asserted are meritorious, this is

vigorously disputed by LaSalle Northwest. LaSalle Northwest does not believe that any class members exist who would fit the criteria outlined by the Court in granting plaintiffs' class certification motion, or that plaintiffs could prove at trial either that LaSalle Northwest was engaged in relationships with automobile dealers, directly or indirectly through State Farm agents, or that LaSalle Northwest was involved in any violations under 16 C.F.R. Part 433, the Consumer Fraud Act or RICO. 2. The settlement agreement strikes a fair compromise between the relief that would

be available if the settlement class were to prevail on its claims and the risk that no relief would be available if the settlement class were to lose on the merits. With respect to old borrowers, the settlement agreement provides a means whereby approved individuals can obtain prompt resolution of their claims by a neutral arbitrator. With respect to future borrowers, the settlement agreement sets in place a procedure whereby borrowers are alerted to the conditions under which their loan transaction should occur, and a means of identifying and rectifying situations in which

relationships exist between LaSalle Northwest and automobile dealers, either directly or indirectly through State Farm insurance agents. The result will be the elimination of the problems which gave rise to plaintiffs' lawsuit. 3. The rights of any old borrowers who do not fall within the settlement class

defined by the settlement agreement are not affected as the release described in 6.1 of the settlement agreement expressly excludes old borrowers who purchased new vehicles as well as old borrowers who purchased used vehicle from dealers other than those listed at 2, pages 4-5 of plaintiffs' motion, and A(ii) of the proposed order for final approval of the settlement agreement, which is attached to plaintiffs' motion as Exhibit F [not reprinted infra]. The settlement agreement also excludes (1) claims of releasing settlement class members based on acts or omissions of LaSalle Northwest other than the non-inclusion of the notice required by 16 C.F.R. Part 433, or regarding the State Farm automobile loan program, and (2) disputes over LaSalle Northwest's receipt and application of payments made by the releasing class members on LaSalle Northwest automobile loans. 4. Further litigation would be costly and likely would result in an appeal and

substantial attorneys' fees, which might have to come from the class recovery. 5. Class counsel estimate that $350,000 will be sufficient to cover the damages of

old borrowers, the liquidated damages of plaintiffs, the arbitration costs, and mail notice expenses in excess of $2,500. Class counsel surveyed 194 LaSalle Northwest borrowers as potential witnesses. Of those who responded, 5 needed repairs of less than $1,000, and 3 had substantial claims for breach of warranty or fraud. Two persons had been sold wrecked cars, and a third had been sold a car with a defective engine. Assuming (1) that those persons who had no problems with their loan transaction and have had no problems with their vehicle do not respond, and (2) those who do respond, do so at a rate equivalent to the group surveyed, class counsel expect to receive between 130 and 150 claims, of which 40-45 will be major claims involving substantial breaches of warranty or fraud. Class counsel assume that $250,000 will be paid in awards for major claims to old borrowers, based on the following:

a. b.

Major claims will be compensated at an average of $6,000. LaSalle Northwest's exposure is limited, under 16 C.F.R. Part 433, to the loan amount. Further, the loans involved exclusively used cars.

c.

Arbitration costs will be low. Assuming that the parties choose not to resolve the claims of two-thirds of the claimants, arbitration costs should not exceed $20,000. The nominal filing fee assessed when old borrowers request arbitration will screen out frivolous claims, as well as underwrite, to a small degree, arbitration expenses. CONCLUSION

For the foregoing reasons, class counsel believe that the proposed settlement is fair, reasonable, and adequate, and urge that it be approved.

Respectfully submitted,

Attorney for Plaintiff

4.14 Request for Attorney's Fees

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

GEORGIA BROWN and DEAN MARTIN, JR. [vs.] LASALLE NORTHWEST NATIONAL BANK No 92 C 8392 Judge William T. Hart

DECLARATION OF DANIEL A. EDELMAN IN SUPPORT OF REQUEST FOR ATTORNEY'S FEES Daniel A. Edelman declares under penalty of perjury, as provided for by the laws of the United States (28 U.S.C. 1746), that the following statements are true:

1.

I have been a member of the Illinois state bar and that of the U. S. District Court

for the Northern District of Illinois since 1976. I am also a member of the Northern District of Illinois trial bar and the Seventh Circuit bar.

2.

I am a 1976 graduate of the University of Chicago Law School. From 1976 to

1981 I was an associate at the Chicago office of Kirkland & Ellis, with heavy involvement in the defense of consumer class action litigation (such as the General Motors Engine Interchange cases). In 1981 I became an associate at Reuben & Proctor, a firm formed by some former Kirkland & Ellis lawyers, and was made a partner there in 1982. I was also heavily involved in the defense of consumer class action litigation at that firm. In addition, I was involved in one class action at Reuben & Proctor where I represented the plaintiffs.

3.

From the end of 1985 I have been in private practice in downtown Chicago.

Virtually all of my practice involves litigation on behalf of consumers.

4.

I am the coauthor of Rosmarin & Edelman, Consumer Class Action Manual (2d

edition), National Consumer Law Center 1990, and author of Consumer Fraud and Insurance Claims, in Bad Faith and Extracontractual Damage Claims in Insurance Litigation, Chicago Bar Ass'n 1992. I have spoken on National Public Radio and before community groups on consumer protection issues. I am on the board of directors of the National Association of Consumer Attorneys.

5.

My partner, Cathleen M. Combs, is a 1976 graduate of Loyola University Law

School. She formerly supervised the Northwest office of the Legal Assistance Foundation of Chicago, where she was lead or co-counsel in class actions in the areas of unemployment compensation, prison law, social security law, and consumer law. She joined me in early 1991 as an associate. Decisions in which she was involved prior to joining our firm include: Johnson v. Heckler, 607 F.Supp. 875 (N.D.Ill. 1984), and 100 F.R.D. 70 (N.D.Ill. 1983); Sanders v. Shephard, 185 Ill.App.3d 719, 541 N.E.2d 1150 (1st Dist. 1989); Maller v. Cohen, 176 Ill.App.3d 987, 531 N.E.2d 1029 (1st Dist. 1988); Wright v. Department of Labor, 166 Ill.App.3d 438, 519 N.E.2d 1054 (1st Dist. 1988); Barron v. Ward, 165 Ill.App.3d 653, 517 N.E.2d 591 (1st Dist. 1987); City of Chicago v. Leviton, 137 Ill.App.3d 126, 484 N.E.2d 438 (1st Dist. 1985); Jude v. Morrissey, 117 Ill.App.3d 782, 454 N.E.2d 24 (1st Dist. 1983).

6.

The firm has four associates:

a.

O. Randolph Bragg was most recently an attorney with the National Consumer Law Center and litigation coordinator for the UAW Legal Services Plans. He previously was project director, deputy director and executive director of several legal services organizations in Pennsylvania. He is a contributing author to Fair Debt Collection (National Consumer Law Center), 2d ed. 1991 and the 1992 and 1993 supplements. Mr. Bragg has been involved in numerous consumer cases under the Fair Debt Collection Practices Act and other statutes, including Wright v. Finance Service of Norwalk, Inc., 22 F.3d 647 (6th Cir. 1994); Dutton v. Wolpoff and Abramson, 5 F.3d 649 (3d Cir. 1993); Hollis v. Roberts, 984 F.2d 1159 (11th Cir. 1993); Carroll v. Wolpoff & Abramson, 961 F.2d 459 (4th Cir. 1992), cert. denied, 113 S.Ct. 298 (1992); Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991); Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22 (2d Cir. 1989); Emanuel v. American Credit Exchange, 870 F.2d 805 (2d Cir. 1989);

Miller v. Payco-General American Credits, Inc., 943 F.2d 482 (4th Cir. 1991); Anderson v. White, 885 F.2d 985 (3d Cir. 1989); David v. City of Scranton, 633 F.2d 676 (3d Cir. 1980); Smith v. Law Offices of Mitchell N. Kay, 124 B.R. 182 (D.Del. 1991); Perez v. Perkiss, 742 F.Supp. 883 (D.Del. 1990); Games v. Cavazos, 737 F.Supp. 1368 (D.Del. 1990); Cristiano v. Courts of the Justices of the Peace, 115 F.R.D. 240 (D.Del. 1987) (class certification), and 669 F.Supp. 662 (D.Del. 1987) (merits); Northern Pennsylvania Legal Services v. County of Lackawanna, 513 F.Supp. 678 (M.D.Pa. 1981); Mays v. Scranton City Police Dept., 503 F.Supp. 1255 (M.D.Pa. 1980).

b.

Tara L. Goodwin is a 1991 graduate of Chicago Kent Law School. She was an intern at the Legal Assistance Foundation.

c.

James Eric Vander Arend is a 1991 graduate of Northwestern University Law School and spent a year with the Lawyers Committee for Civil Rights Under Law.

d.

Michelle A. Weinberg is a 1992 graduate of Chicago Kent Law School. She was also an intern at the Legal Assistance Foundation.

7.

We also have six legal assistants and other support staff.

8.

The firm is presently involved in some 30 cases complaining of illegal charges on

mortgages. The recoveries in the escrow overcharge cases alone are over $200 million to date. We have brought several cases challenging practices relating to automobile sales and financing, such as practices relating to cosigners, phony fees and charges. We are involved in some ten cases alleging illegal charges on automobile leases.

9.

Some of the reported decisions in our cases include: Fidelity Financial Services,

Inc. v. Hicks, 214 Ill.App.3d 398, 574 N.E.2d 15 (1st Dist. 1991), leave to appeal denied, 141 Ill.2d 539, 580 N.E.2d 112; Metmor Financial, Inc. v. Eighth Judicial District Court, No. 23848 (Nev.Sup.Ct., Apr. 27, 1993); Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990); Highsmith v. Chrysler Credit Corp., 18 F.3d 434 (7th Cir. 1994); Jenkins v. Heintz, 25 F.3d 536 (7th Cir. 1994); GMAC Mtge. Corp. v. Stapleton, 236 Ill.App.3d 486, 603 N.E.2d 767 (1st Dist. 1992), leave to appeal denied, 248 Ill.2d 641, 610 N.E.2d 1262 (1993); Tolentino v. Friedman, 833 F.Supp. 697 (N.D.Ill. 1993); Oglesby v. Rotche, 1993 U.S.Dist. LEXIS 15687 (N.D.Ill., Nov. 4, 1993), later opinion, 1994 U.S.Dist. LEXIS 4866 (N.D.Ill., April 15, 1994); Hoffman v. Partners in Collections, Inc., 1993 U.S.Dist. LEXIS 12702 (N.D.Ill., Sept. 15, 1993); Wrightson v. ITT Financial Services, 617 So.2d 334 (Fla. 1st DCA 1993); Brown v. LaSalle Northwest Nat'l Bank, 148 F.R.D. 584 (N.D.Ill. 1993), 820 F.Supp. 1078 (N.D.Ill. 1993), and 1993 U.S.Dist. LEXIS 11419 (N.D.Ill., Aug. 13, 1993); Elliott v. ITT Corp., 764 F.Supp. 102 (N.D.Ill. 1990), later opinion, 150 B.R. 36 (N.D.Ill. 1992); Lundquist v. Security Pacific Automotive Financial Services Corp., Civ. No. 5:91-754 (TGFD) (D.Conn.), aff'd, 993 F.2d 11 (2d Cir. 1993); Johnson v. Steven Sims Subaru and Subaru Leasing, 1993 U.S.Dist. LEXIS 8078 (N.D.Ill., June 9, 1993), and 1993 U.S.Dist. LEXIS 11694 (N.D.Ill., August 20, 1993); McCarthy v. PNC Credit Corp., 1992 U.S.Dist. LEXIS 21719 (D.Conn., May 27, 1992); Kinsella v. Midland Credit Mgmt., Inc., 1992 U.S.Dist. LEXIS 1405, 1992 WL 26908 (N.D.Ill. 1992); Sanders v. Lincoln Service Corp., 1993 U.S.Dist. LEXIS 4454 (N.D.Ill. 1993); Smith v. Keycorp Mtge., Inc., 151 Bankr. 870 (N.D.Ill. 1992); Simon v. World Omni Leasing Inc., 146 F.R.D. 197 (S.D.Ala. 1992); Gordon v. Boden, 224 Ill.App.3d 195, 586 N.E.2d 461 (1st Dist. 1991), leave to appeal denied, 144 Ill.2d 633, 591 N.E.2d 21, cert. denied, __ U.S. __ (1992); Heastie v. Community Bank of Greater Peoria, 690 F.Supp. 716 (N.D.Ill. 1989), later opinion, 125 F.R.D. 669 (N.D.Ill. 1990), later opinions, 727 F.Supp. 1133 (N.D.Ill. 1990), and 727 F.Supp. 1140 (N.D.Ill. 1990); Mayo v. Key Financial Services, Inc., 812 F.Supp. 277 (D.Mass. 1993); Hairston v. Home Loan & Investment Bank, 814 F.Supp. 180 (D.Mass. 1993); Armstrong v. Edelson, 718

F.Supp. 1372 (N.D.Ill. 1989); Leff v. Olympic Fed. S. & L. Ass'n, 1986 WL 10636 (N.D.Ill. 1986); Newman v. 1st 1440 Investment, Inc., 1993 U.S.Dist. LEXIS 354 (N.D.Ill. 1993); Mountain States Tel. & Tel. Co. v. District Court, 778 P.2d 667 (Colo. 1989); Disher v. Fulgoni, 124 Ill.App.3d 257, 464 N.E.2d 639, 643 (1st Dist. 1984); Harman v. Lyphomed, Inc., 122 F.R.D. 522 (N.D.Ill. 1988); Baker v. America's Mtge. Servicing, Inc., 1992 U.S.Dist. LEXIS 10244 (N.D.Ill., July 13, 1992); Hayes v. Fireman's Fund Mortgage Corp., 1991 U.S.Dist. LEXIS 17171 (N.D.Ill., Nov. 8, 1991); Ballard v. Goldome Realty Credit Corp., 1991 U.S.Dist. LEXIS 11572 (N.D.Ill., Aug. 15, 1991); Aitken v. Fleet Mtge. Corp., 1991 U.S.Dist. LEXIS 11572 (N.D.Ill., July 30, 1991), and 1992 U.S.Dist. LEXIS 1687 (N.D.Ill., Feb. 12, 1992); Poindexter v. National Mtge. Corp., 1991 U.S.Dist. LEXIS 19643 (N.D.Ill., Dec. 23, 1991); Robinson v. Empire of America Realty Credit Corp., 1991 U.S.Dist. LEXIS 2084 (N.D.Ill., Feb. 20, 1991); April v. Union Mtge. Corp., 709 F.Supp. 809 (N.D.Ill. 1989); Vaughn v. CSC Credit Services, Inc., 1994 U.S.Dist. LEXIS 2172 (N.D.Ill., March 1, 1994); Haslam v. Lefta, Inc., 1992 U.S.Dist. LEXIS 3623 (N.D.Ill., March 25, 1994); Mount v. LaSalle Bank Lake View, 1994 U.S.Dist. LEXIS 4027 (N.D.Ill., March 31, 1994); Source One Mortgage Services Corp. v. Jones, 1994 U.S.Dist. LEXIS 333 (N.D.Ill., Jan. 13, 1994); Beasley v. Blatt, 1994 U.S.Dist. LEXIS 9383 (N.D.Ill., July 14, 1994); Bermudez v. First of America Bank Champion, N.A., 1994 U.S.Dist. LEXIS 11387 (N.D.Ill., August 11, 1994).

10.

Many of these are novel precedents. Heastie, for example, granted certification of

a class of over 6,000 in a home improvement fraud case. Mount certified a similar class for claims including rescission of contracts under Truth in Lending. Gordon v. Boden is the first decision approving "fluid recovery" in an Illinois class action. Elder v. Coronet Insurance held that an insurance company's reliance on lie detectors to process claims was an unfair and deceptive trade practice. Leff was the seminal case on mortgage escrow overcharges. Wrightson involved an attack on an attempt by a consumer finance company to require its customers to arbitrate. Brown v. LaSalle Northwest National Bank deals with novel issues concerning a

lender's responsibility under the FTC regulation abrogating the holder in due course doctrine in most consumer transactions. Lundquist v. Security Pacific, Highsmith v. Chrysler and Johnson v. Steven Sims Subaru involves novel issues under the Consumer Leasing Act, also known as the Truth in Leasing Act.

11. others:

We have also successfully settled a large number of cases. These include, among

a.

GMAC Mtge. Corp. v. Stapleton, 236 Ill.App.3d 486, 603 N.E.2d 767 (1st Dist. 1992) (mortgage overescrowing) ($50 million benefit).

b.

Hoffman v. Bancboston Mtge. Corp., CV-91-1880-Z (Mobile County, Alabama, Circuit Court) (mortgage overescrowing) ($60 million benefit).

c.

Aitken v. Fleet Mortgage Co., 90 C 3708 (N.D.Ill.) (mortgage overescrowing) ($100 million benefit).

d.

Shepherd v. Volvo Finance North America, Inc., 1-93-CV-971 (N.D.Ga.) (auto lease case; $8 million benefit).

e.

McCarthy v. PNC Credit Corp., 291 CV 00854 PCD (D.Conn.) (auto lease).

f.

Hayes v. Source One Mtge. Services Corp., f/k/a Fireman's Fund Mtge. Corp., 92 CH 2987 (Circuit Court of Cook County, Illinois) (mortgage overescrowing) ($26 million benefit).

g.

Brundidge v. Glendale Federal Bank FSB, 91 CH 5391 (Circuit Court of Cook County, Illinois) (mortgage overescrowing) ($6 million benefit).

h.

Ezell v. Secor Bank, FSB, CV-91-048-K (Choctaw Co., Alabama, Circuit Court) (mortgage overescrowing) ($3 million benefit).

i.

Lynch Leasing Co. v. Moore, 90 CH 876 (Circuit Court of Cook County, Illinois) (class in auto lease case was certified for litigation purposes, partial summary judgment was entered, and case was then settled).

j.

Blank v. Nissan Motor Acceptance Corp., 91 L 8516 (Circuit Court of Cook County, Illinois) (lease).

k.

Mortimer v. Toyota Motor Credit Co., 91 L 18043 (Circuit Court of Cook County, Illinois) (lease).

l.

Boddie v. Meyer, 93 C 2975 (N.D.Ill.) (Fair Debt Collection Practices Act class action).

m.

Patterson v. Bowest Corp., 90 CH 5767 (Circuit Court of Cook County, Illinois) (mortgage overescrowing).

n.

Greenberg v. Universal Mtge. Co., 91 CH 4077 (Circuit Court of Cook County, Illinois) (mortgage overescrowing).

o.

Marine Midland Bank v. Nunn/ Nunn v. Marine Midland Bank, 88 CH 5385 (Circuit Court of Cook County, Illinois) (usury).

p.

Smith Rothchild Financial Co. v. Fields/ Fields v. Smith Rothchild Financial Co., 89 CH 9867 (Circuit Court of Cook County, Illinois) (usury).

q.

Wilson and Rios v. LaSalle Bank Lake View, 93 C 36 (N.D.Ill.) (force placed insurance).

r.

Resolution Trust Corp. v. Shanks/ Shanks v. Resolution Trust Corp., 90 C 4384 (N.D.Ill.) (usury).

s.

J.I.K. Realty Co. v. Strachan/ Strachan v. J.I.K. Realty Co., 88 CH 5514 (Circuit Court of Cook County, Illinois) (usury; First American Mortgage loans) ($2 million benefit).

t.

Hicks v. Corinthian Mtge. Co., 93 C 03085 (Johnson Co., Kansas, Dist. Ct.) (mortgage overescrowing).

u.

Petro v. Ford Motor Credit Co., 88 CH 5699 (Circuit Court of Cook County, Illinois) (repossession practices).

v.

Joosten v. Avondale FSB, 92 CH 3185 (Circuit Court of Cook County, Illinois) (mortgage overescrowing).

w.

Duffy v. Security Pacific Automotive Financial Services, Inc., 93-729 IEG (BTM) (S.D.Cal., April 28, 1994) (auto lease).

x.

Hawkins and Litchfield v. Transworld Mortgage Corp., Adversary No. 93-0413 (Bankr. E.D.Pa., March 22, 1994) (Chapter 13 servicing practices).

y.

Willis v. Harvey Cycle & Camper, Inc., d/b/a Watson Motorsport, Ltd. and Wonderlic & Associates, Inc., d/b/a Wonderlic Finance, 94 C 1709 (N.D.Ill., June 21, 1994) (vendor single interest insurance).

12.

The documents comprising Exhibit A consist of true and accurate copies of

contemporaneous time records prepared by each of the attorneys involved in this matter.

13.

All attorneys and legal assistants in my firm are required to and do in fact keep

track of their time on a daily basis, on computer. Time is entered at the end of the day unless the person is travelling, in which case it is entered upon his or her return. Once a month the time is collected by one of the legal assistants, by copying the appropriate file from everyone else's computer, and collated for the entire firm. Expenses are recorded as they are incurred.

14.

The hourly rates listed are those normally submitted in fee petitions and in bills to

our paying clients. We adjust them annually to account for inflation and increasing experience. I am familiar with hourly rates charged by attorneys in this and other areas. In my opinion, these rates are consistent with the rates charged by attorneys of comparable experience and expertise in the Chicago area.

15.

Examples of our being paid at these rates include:

a.

Edelman & Combs has within the past 4 months been paid in excess of $25,000 by an estate in connection with a usury case using the same rates as are requested in the case. Stob v. F.G.L.M. Enterprises, 91 L 17357 (Cir.Ct. of Cook County). All of our bills were reviewed by principal counsel for the estate, who hired us, and found unobjectionable.

b.

The rates requested in this case were approved by Judge Shadur in Wesley v. General Motors Accept. Corp., 91 C 3368 (N.D.Ill., Feb. 15, 1994). Copies of the papers from Wesley showing the rates allowed are included in Exhibit B.

c.

The rates requested in this case were relied upon as an alternative ground for a $200,000 award in McCarthy v. PNC Credit Corp., 291 CV 00854 PCD (D.Conn., February 15, 1994). However, although we specifically asked that the Court rely on the benefit to the class in making its fee award in that case.

d.

In Hayes v. Source One Mortgage Services Corp., 92 CH 2987 (Circuit Court of Cook County), an escrow case, Judge Lester Foreman approved a rate of $250 for myself and $210 for Cathleen Combs, for the year 1992. Copies of the papers from Hayes showing the rates involved are included in Exhibit C. In Fleet Finance, Inc. v. Sandra Ford, 91 CH 5689 (Circuit Court of Cook County), Judge Edward Hofert approved fees at a rate of $250 to myself for 1992.

e.

In Cramer v. First of America Bank Corporation, 93 C 3189 (N.D.Ill.), a Fair Debt Collection Practices class action, on April 20, 1994 Judge Zagel approved payment of fees at the rate of $275 for myself, $235 for Ms. Combs, and $135 for Ms. Redmond. Copies of the relevant papers are attached as Exhibit D [not reprinted infra].

16.

In determining the rates our firm charges and requests, I consulted the National

Law Journal rate survey. The most recent is that for 1993, found in the December 20, 1993 issue. Prior editions of the survey have been relied upon by courts in awarding fees. E.g., FDIC v. Morris, 1992 U.S.Dist. LEXIS 9439 (N.D.Ill., June 29, 1992); Alliance to End Repression v.

City of Chicago, 1993 U.S.Dist. LEXIS 1972 (N.D.Ill., Feb. 22, 1993). The 1993 survey states that the following major firms in the Chicago metropolitan area charged the following rates:

Partners

Associates

Bell, Boyd & Lloyd

$ 140-$ 300

$ 100-$ 195

Chapman and Cutler

$ 215-$ 375

$ 95-$ 240

Jenner & Block

$ 190-$ 500

$ 110-$ 210

Lord, Bissell & Brook

$ 120-$ 300

$ 80-$ 180

McDermott, Will & Emery

$ 175-$ 325

$ 105-$ 160

Pope & John Ltd.

$ 175-$ 275

$ 95-$ 160

Ross & Hardies

$ 160-$ 315

$ 85-$ 160

Vedder, Price, Kaufman & Kammholz $ 190-$ 300 $ 98-$ 190

Wildman, Harrold, Allen & Dixon $ 150-$ 300 $ 95-$ 165

Winston & Strawn

$ 200-$ 375

$ 120-$ 260

17.

I eliminated the lowest rates because the firms in question do some work in the

nature of collections and/ or personal injury / property damage defense and subrogation claims, which I did not consider comparable. I considered the other rates to be an appropriate basis for comparison because either presently or during the last three years, we have been involved in cases with all except one of the firms listed. I am reasonably confident that the rates are accurate, based on my personal knowledge of large firm rates when I was at Kirkland & Ellis and Reuben & Proctor, my general awareness of rates in the legal community, court awards, negotiations with defendants, and discussions with other attorneys.

18.

I also include figures from the following non-Chicago firms, all of which have

appeared as opposing counsel in our cases in the last several months. I consider such figures a valid basis of comparison because the selection of the firms by adverse parties represents a judgment that the employment of counsel of such caliber is warranted.

Dorsey & Whitney

$ 180-$ 350 $ 100-$ 225

Edwards & Angell

$ 175-$ 300

$ 100-$ 190

Howrey & Simon

$ 210-$ 340

$ 105-$ 208

Pitney, Hardin, Kipp & Szuch $ 215-$ 325 $ 110-$ 205

Weil, Gotshal & Manges

$ 300-$ 500 $ 105-$ 270

19.

The rates we used are also consistent with fee awards by courts in this or other

comparable areas for comparable work:

a.

For example, in Covington v. District of Columbia, 839 F.Supp. 894 (D.D.C. 1993), Judge Lamberth found, on the basis of court-approved surveys of rates in the Washington, D.C., area, that it was appropriate to award $260 per hour to attorneys with between 11 and 19 years experience for the time period 1992-93. He further found that it was appropriate to have an annual increment of $10 per year or, alternatively, to multiply by 103.4% in accordance with the Consumer Price Index (the result is approximately the same). He also noted that it had been relied upon by six other District Judges in the District of Columbia and the Court of Appeals for the District of Columbia Circuit. Judge Lamberth awarded current rates for all work done in the past, in lieu of making the award at the then-current rate and awarding interest on it.

b.

In Alliance to End Repression v. City of Chicago, 1993 U.S.Dist. LEXIS 1972 (N.D.Ill., Feb. 22, 1993), Magistrate Judge Gottschall approved rates for experienced litigators in a civil rights case of $225 in 1991 and $250 in 1992.

c.

In Lewis v. General Employment Enterprises, Inc., 1992 U.S.Dist. LEXIS 5464 (N.D.Ill., April 14, 1992), Judge Rovner approved rates for experienced litigators of $195, $200 and $300 for work done in 1991-92, in a case that was "not particularly difficult or risky".

d.

In Spicer v. Chicago Board Options Exchange, 844 F.Supp. 1226 (N.D.Ill. 1993), Judge Will found appropriate rates of $275 and $240 to the partners in a small firm with a practice somewhat comparable to our own, $100-120 for junior associates, $140 and $150 for associates with some experience, and $65 and $70 for legal assistants.

Executed at Chicago, Illinois, on September 14, 1994.

Daniel A. Edelman