ARKANSAS FEDERAL CREDIT UNION v. LENORIA E. HALEY and WALTER T. MORRIS

Case No. 72CV-21-1024 in the Circuit Court of the Washington County, Arkansas, Civil Division

NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED SETTLEMENT, HEARING AND CLAIM FORM

TO: All persons who (a) executed, co-signed, or guaranteed a finance agreement for a consumer automobile loan from AFCU; (b) for whom the collateral for the finance agreement was repossessed by AFCU or its agents during the period from May 15, 2018, to July 23, 2021 (“Class Period”); (c) were sent post-repossession notices of sale; (d) have not filed a bankruptcy petition or otherwise become a bankruptcy debtor since the date of repossession, (e) have not settled or paid in full the amount due on the finance agreement, (f) are not deceased, and (g) have not had a judgment entered against them in relation to the finance agreement.

  1. Why was this notice issued?

    1. A court authorized this notice because you have a right to know about a Proposed Settlement of this class action lawsuit against Arkansas Federal Credit Union (“AFCU”) and about your options before the Court decides whether to give “final approval” to the Proposed Settlement.  This notice explains the lawsuit, the Proposed Settlement, your legal rights, what benefits will be provided, and who will receive them.

      This case is currently pending in the Circuit Court of Washington County, Arkansas, and is known as Arkansas Federal Credit Union v. Lenoria E. Haley and Walter T. Morris, Case No. 72CV-21-1024.

  2. What is this lawsuit about?

    1. The class action lawsuit was filed as counterclaims by Ms. Haley and Mr. Morris in response to collection actions filed by AFCU against them. The lawsuit is about whether AFCU violated state law through its use of repossession notices and/or post-sale notices which Ms. Haley and Mr. Morris alleged were not in compliance with the requirements of Article 9, Part VI of the Uniform Commercial Code.

      AFCU denies the claims asserted in the counterclaim and maintains that it did not act wrongfully or unlawfully.  AFCU contends that the claims of Ms. Haley and Mr. Morris (hereinafter “the Class Representatives”) have no merit and that, if the lawsuit proceeded, AFCU would prevail at trial.

  3. Why is this a class action?

    1. The parties have agreed, and the Court has ordered that, for settlement purposes only, this lawsuit may be maintained as a class action under Rule 23, Arkansas Rules of Civil Procedure, subject to final approval at the conclusion of the settlement process.  If the Proposed Settlement is not finally approved, or if any party withdraws from the Proposed Settlement, the lawsuit will return to the same status as before the Settlement Agreement was signed, and the Court will later determine if the case may proceed as a class action.

  4. How do I know if I am part of the Proposed Settlement?

    1. The Proposed Settlement includes all persons who meet each and every one of the following criteria, namely all persons who All persons who (a) executed, co-signed, or guaranteed a finance agreement for a consumer automobile loan from AFCU; (b) for whom the collateral for the finance agreement was repossessed by AFCU or its agents during the period from May 15, 2018, to July 23, 2021 (“Class Period”); (c) were sent post-repossession notices of sale; (d) have not filed a bankruptcy petition or otherwise become a bankruptcy debtor since the date of repossession, (e) have not settled or paid in full the amount due on the finance agreement, (f) are not deceased, and (g) have not had a judgment entered against them in relation to the finance agreement.
                 
      You are receiving this Notice because it is believed that you meet the above criteria and that you are a member of the Class. There are approximately 495 accounts in the Class.

  5. Why is there a Proposed Settlement?

    1. The parties arrived at the Proposed Settlement as a result of arms-length negotiations at mediation.  The parties reached the Proposed Settlement before the Court determined whether class certification was appropriate.  The Proposed Settlement is a compromise of disputed claims and does not mean that any law was violated or that AFCU did anything wrong.

  6. What benefits does the Proposed Settlement provide?

    1. The Proposed Settlement provides both equitable and monetary benefits (“Settlement Benefits”):  

      • AFCU shall cease all collection activities with respect to the alleged deficiency balances under the Class Member Finance Agreements.     
      • AFCU will waive all outstanding balances and/or deficiency balances allegedly owed in connection with the Finance Agreements of the Class Members whose personal property was sold by AFCU following repossession. The outstanding balances and/or deficiency balances is estimated to total $2,350,000.00. The waiver of such balances may have significant adverse tax consequences to Class Members as discussed in Paragraph 10 below.    
      • AFCU shall request the deletion of negative credit reporting tradelines previously reported for any Class Member Finance Agreement to the credit reporting agencies, Equifax, Experian, and TransUnion (“CRAs”) and shall not in the future provide adverse information with respect to same. As the CRAs are separate entities from AFCU, AFCU cannot guarantee nor take responsibility for the performance of the CRAs with respect to a class member’s account subject to the settlement.
      •  AFCU shall establish a fund in the sum of $200,000.00 to fund the costs of class notice and class settlement administration, attorney’s fees, litigation expenses and costs, and Class Representatives’ compensation. (“Settlement Payment”).

      More details are in a document called the Settlement Agreement, which is available for your inspection at the Office of the Clerk of Circuit Court, Washington County Courthouse, 280 N. College Avenue, Fayetteville, AR 72701, during normal business hours.

  7. When will the Proposed Settlement go into effect?

    1. The Court will hold a final approval hearing on November 17, 2022 at 9:00 a.m. to decide whether to approve the Proposed Settlement (see Question 16) including the request for attorneys’ fees and litigation expenses (see Question 13).  Even if the Court approves the Proposed Settlement, there could be appeals.  The time for an appeal varies.

      The Proposed Settlement becomes final and binding on the Effective Date. If no appeals are taken, the Effective Date is the date on which the Court approves the Proposed Settlement as final, subject to certain conditions.  If an appeal is taken, the Effective Date is the date when all appeals are completed, and the Proposed Settlement becomes final.

      The Proposed Settlement will go into effect on the Effective Date.

  8. How does the Proposed Settlement affect my rights?

    1. If the Proposed Settlement is finally approved, the Court will enter a judgment dismissing all claims against AFCU and any related parties with prejudice.  Under the terms of the Proposed Settlement, you will release AFCU with respect to the claims that were raised or could have been raised in the case. This means you cannot seek equitable relief or any type of monetary relief against AFCU based on any claim related to or arising out of the repossession of your personal property and the finance agreement involved in this case. You will be giving up all such claims, whether you know about them. Notwithstanding the foregoing, the release shall not encompass any claims for personal injury or for violations of the Service Members Civil Relief Act or Telephone Consumer Protection Act.

      Your interests as a member of the Class will be represented by the Class Representatives and Class Counsel. You will not be billed for their services. Class Counsel will receive a fee only if the Court approves the Proposed Settlement, and the fee award will be set by the Court and paid by AFCU (see Question 13).
      The Court’s order will apply to you even if you objected or have any other claim, lawsuit, or proceeding pending against AFCU.  If you have any questions about the release, you should consult with a lawyer.

  9. If I do nothing, what am I giving up as part of the Proposed Settlement?

    1. If you do nothing, you will be part of the Class.  That means you cannot sue AFCU over the claims settled in this case.  It also means that all of the Court’s orders, including the release of claims and dismissal of the lawsuit with prejudice (see Question 8), will apply to you and legally bind you.

  10. What are the tax consequences of the Settlement?

    1. The waiver of deficiency balances of the respective Class Members involves disputed debts which the Class Representatives contend are discharged by operation of law and which AFCU contends are enforceable.

      AFCU may issue a Form 1099-C tax report which may report as income to you any deficiency balance waived as a result of the settlement. As a result, the settlement may have significant adverse tax consequences and you should seek the advice of a tax professional if you have any questions concerning the taxation of settlement benefits and whether you should remove yourself from the Proposed Settlement pursuant to Paragraph 11 below.

  11. How do I remove myself from the Proposed Settlement?

    1. If you choose to exclude yourself from the Class, you will not be bound by any order, judgment, or settlement of the lawsuit. If you exclude yourself from the Class, you will not receive any benefits from this class action. You will retain and be free to pursue any claim against AFCU, including claims based on the notice(s) you received after repossession of your personal property or based on your finance agreement.
      If you exclude yourself from the Class, AFCU may still issue a 1099-C tax report which will report as income any deficiency balance waived as a result of the settlement as described in paragraph 10 above.
      To exclude yourself from the Proposed Settlement, you must mail a letter saying that you want to be excluded from the Class in Haley, et al. v. Arkansas Federal Credit Union. You must include your full name, current mailing address, and telephone number, and the letter must be signed by you personally. Your letter or exclusion form requesting exclusion must be mailed or otherwise delivered to the following address such that it is received by November 15, 2022.

      Haley-Morris Class Action
      PO Box 23668
      Jacksonville, Florida 32241

      You cannot exclude yourself on the phone or by email.

  12. Do I have a lawyer in this case?

    1. Yes.  The Court has appointed Robert W. Murphy and Corey D. McGaha to represent you and the other Class Members in this case.  Mr. Murphy and Mr. McGaha are called Class Counsel and Mr. Murphy is the Lead Class Counsel.

      You will not be charged for Mr. Murphy’s or Mr. McGaha’s representation. Class Counsel’s compensation will be paid by AFCU.  If you want to be represented by another lawyer, you may hire one at your own expense.

  13. How will the lawyers be paid? What will the Class Representatives receive? What expenses will be paid?

    1. Class Counsel will ask the Court to approve attorneys’ fees and expenses to be paid by AFCU from the Settlement Payment.  As fees, Class Counsel will ask the Court to award attorneys’ fees and costs in a sum not to exceed $180,000.00 (“Attorney Fee Request”).
          
      Class Counsel will also ask the Court to approve incentive awards in the collective sum of $6,000 to be paid by AFCU to the Class Representatives for the time and resources they have spent helping the lawyers on behalf of the whole Class, to be paid to the Class Representatives in addition to other settlement benefits.

      The Court may award less than the requested amount.  

      The cost of administering the Settlement, including the expense of sending this Notice, will also be paid by AFCU from the Settlement Payment.
      No Class Member will owe or pay anything directly for attorneys’ fees and expenses or the incentive award.  Any award of attorneys’ fees and expenses as well as the incentive award will be paid by AFCU.  
      The Court must approve both the attorneys’ fees and expenses for Class Counsel and the incentive award for the Class Representative.  The Court will conduct a hearing on attorneys’ fees and litigation expenses at the same time of the final approval hearing.

  14. How do I tell the Court I don’t agree with the Proposed Settlement?

    1. You may object to any part of the Proposed Settlement.  To do so, you must file a written objection in the case Haley, et al. v. Arkansas Federal Credit Union, Case No.: 72CV-21-1024. Any objection must set forth your full name, current mailing address and telephone number and must include: (a) a written statement explaining the reasons for your objection; (b) copies of any papers, briefs, or other documents you want to bring to the Court’s attention; (c) any evidence you wish to introduce in support of your objection; and (d) a statement of whether you or your lawyer will ask to appear at the final approval hearing to talk about your objections.

      Your objection must be mailed or otherwise delivered to each of the following addresses so that it is received by November 15, 2022:

      Court

      Clerk of Circuit Court
      Washington County Courthouse
      280 N. College Avenue
      Fayetteville, AR 72701

      Class Counsel

      Counsel for AFCU

      Corey D McGaha PLLC
      5507 Ranch Drive, Suite 104-D
      Little Rock, AR 72223
      Phone: (501) 205-4027
      Fax: (501) 367-8208

      Andrew King, Esq. and McKenzie Raub, Esq.
      KUTAK ROCK, LLP
      124 W. Capitol Ave., Suite 2000
      Little Rock, AR  72201

      If you or your lawyer asks to appear at the final approval hearing, in addition to providing the above information, you must include in your objection letter: (a) the points you wish to speak about at the hearing; (b) copies of documents you intend to rely upon at the hearing; (c) the amount of time you request for speaking at the hearing; and (d) whether you intend to have a lawyer speak on your behalf.

      If you intend to have a lawyer present, your lawyer must file a written notice of appearance of counsel with the Clerk of the Court no later than November 15, 2022.

  15. What is the difference between objecting and asking to be excluded?

    1. Objecting is simply telling the Court that you do not like something about the Proposed Settlement.  You can object only if you stay in the Class.  Excluding yourself is telling the Court that you do not want to be part of the Class.  If you exclude yourself from the Class, you have no basis to object because the case no longer affects you.

  16. When and where will the Court decide whether to approve the Proposed Settlement?

    1. The Court will hold a final approval hearing to decide whether the Proposed Settlement is fair, reasonable, and adequate and should be granted final approval.  The Court will also consider whether to award attorneys’ fees and other expenses to Class Counsel, whether to provide an incentive award to the Class Representative, and whether to enter a final judgment and dismiss the lawsuit.  If there are objections, the Court will consider them. You may attend and you may ask to speak.

      The final approval hearing will be on November 17, 2022 at 9:00 a.m., before the Honorable Doug Martin at the Washington County Courthouse, 280 N. College Avenue, Fayetteville, AR 72701 in Courtroom #402. The Proposed Settlement may be approved by the Court with modifications, and without further notice, if consented to by the Class Representatives and AFCU and their respective attorneys in accordance with the terms of the Settlement Agreement.

  17. Do I have to come to the hearing?

    1. No.  Class Counsel will answer any questions the Court may have.  If you send a written objection, you do not have to come to the final approval hearing to talk about it.  As long as you mailed your written objection on time and according to the Court’s rules, the Court will consider it.  You may also pay your own lawyer to attend the final approval hearing, but it is not necessary.

  18. What happens if I do nothing?

    1. You have the right to do nothing.  If you do nothing, you will remain part of the Class and you will not be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against AFCU about the claims in this case, ever again. You will receive all the Settlement Benefits described in Paragraph 6 above.  Further, the tax consequences of the Settlement described in Paragraph 10 above will apply.

  19. How do I get more information?

    1. You may visit Important Court Documents section to view the Settlement Agreement for additional information. You may also update your address on the website. If you have any questions concerning the matters dealt with in this notice, please direct your inquiries to the following Class Counsel:

      Robert W. Murphy, Esquire
      440 Premier Circle
      Suite 240
      Charlottesville, VA 22901
      Email: [email protected]
      Corey D. McGaha, Esquire
      5507 Ranch Drive, Suite 104-D
      Little Rock, AR 72223
      Email: [email protected]

      The pleadings and other records in this litigation are available and may be examined and copied during regular office hours at the Office of the Clerk of Circuit Court, Washington County Courthouse, 280 N. College Avenue, Fayetteville, AR 72701. PLEASE DO NOT TELEPHONE THE CLERK’S OFFICE OR THE JUDGE’S CHAMBERS CONCERNING THIS NOTICE OR THIS CASE.