                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 05-3669
MAV MIRFASIHI,
                                                 Plaintiff-Appellee,
                                 v.

FLEET MORTGAGE CORP.,
                                              Defendant-Appellee.


APPEAL OF:
    ANGELA PERRY and MICHAEL E. GREEN,
                                            Objectors-Appellants.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
        No. 01-C-0722—Joan Humphrey Lefkow, Judge.
                          ____________
   ARGUED FEBRUARY 24, 2006—DECIDED JUNE 19, 2006
                   ____________


  Before BAUER, POSNER, and WILLIAMS, Circuit Judges.
  WILLIAMS, Circuit Judge. This is the second time we visit
the fairness of a proposed class settlement stemming from
Fleet Mortgage Corporation’s (“Fleet”) alleged violations of
various state consumer protection laws, as well as various
other federal and state laws. We rejected the first proposed
settlement because, among other reasons, the district court
failed to consider adequately the value of the claims of the
2                                                No. 05-3669

so-called “information-sharing class” (a class of consumers
whose privacy interests were purportedly intruded upon,
but who did not suffer any out-of-pocket damages). See
generally Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781
(7th Cir. 2004). Following remand, the district court did not
adequately consider the potential value of the information-
sharing class’s claims. We therefore reverse and remand the
case for further consideration of this limited issue.


                    I. BACKGROUND
  This lawsuit was brought on behalf of approximately 1.6
million people whose home mortgages were owned by Fleet.
Plaintiff’s core allegations are that Fleet sold mortgage
information (including loan amounts, the type of loan, and
repayment histories) to third-party telemarketing compa-
nies for the purpose of selling certain financial products to
the class (which they purportedly did not want). The
complaint alleges (and Fleet does not deny) that Fleet was
an active collaborator in drafting the script that the
telemarketers used and allowed direct billing of the fees for
the telemarketers’ products onto the mortgage bill of its
customers, without obtaining pre-approval from customers.
Plaintiff alleges, among other things, that Fleet violated the
Truth-in-Lending Act and the Fair Credit Reporting Act,
along with various state consumer protection laws.
  In 2004, the parties entered into the initial settlement
agreement (the “First Settlement”), which provided for
two plaintiff classes: a “telemarketing class” and an
“information-sharing class,” comprised of approximately
190,000 and 1.4 million members, respectively. The
telemarketing class consisted of Fleet customers (outside of
certain customers in Minnesota and California, who were
the subject of other pending lawsuits, since settled) who
purchased, and were later billed on their mortgage account
statements, for some of the financial products pitched to
No. 05-3669                                                3

them by telemarketing firms. The information-sharing class
consisted of all Fleet customers whose mortgage informa-
tion was transmitted to telemarketers in the prior six years,
but who did not purchase any services from the
telemarketers.
  As detailed more fully in our prior opinion, see Mirfasihi,
356 F.3d at 783-84, the First Settlement provided that Fleet
would set aside $2.4 million to pay the telemarketing class’s
claims, in addition to $243,000 in disgorgement of profits to
this class, which would have resulted in payments ranging
from $10 to $135 to each of the telemarketing class claim-
ants. The First Settlement provided $750,000 in fees for the
class lawyers. The information-sharing class, however, was
left out in the cold and received nothing.
  After the district court approved the settlement,
Intervenors Michael Green and Angela Perry appealed,
arguing that the settlement was unfair and unreasonable
on a number of grounds. See Mirfasihi, 356 F.3d at 783-85.
And we agreed. Id. The First Settlement contained a
number of troubling “warning signs,” including: (1) the
payment of disgorged profits to the telemarketing class
(despite the fact that the profits appeared to come from
members of the information-sharing class); (2) the reversion
of unclaimed funds to Fleet; (3) a “handsome fee for class
lawyers,” despite the meagerness of the relief provided in
the settlement agreement to class members; and (4) the fact
that the information-sharing class did not have separate
counsel from the telemarketing class. See id. The reversion
feature was particularly favorable to Fleet because, based
upon the number of telemarketing claimants who filed
claims, Fleet stood to recoup approximately half of the total
$2.4 million payout. Furthermore, the lack of separate
counsel for the two classes (or, more accurately, the
information-sharing class and the telemarketing subclass),
coupled with the lack of any recovery for the information-
sharing class members, created the impression that class
4                                                No. 05-3669

counsel had not properly considered the interests of these
1.4 million claimants. Id. at 785. But our core concern—and
one that, as will be apparent below, continues to trouble
us—is that the district court failed to consider with ade-
quate specificity the reasonableness of an entire class
receiving a “big fat zero” in the settlement. Id. at 785.
Specifically, the district court did not canvass all potential
avenues of recovery to determine whether the information-
sharing class’s claims were indeed essentially hopeless (and
thus worthless) under the pertinent controlling law.
  Following this court’s disapproval of the First Settlement,
the parties engaged in additional settlement talks, as well
as mediation, and ultimately reached a “new” settlement
agreement (the “Second Settlement”). Under the terms of
the Second Settlement, the information-sharing class will
not receive any direct payments. Fleet agrees to send the
$243,000 in disgorged funds, as well as any excess funds not
claimed by the telemarketing class claimants, to unaffili-
ated third-party public interest groups and/or charitable
institutions devoted to consumer privacy concerns. Fleet’s
maximum payment under the various provisions is $2.4
million. The class lawyers continue to receive $750,000 in
fees.
  After the case was reassigned to another district court
judge, the parties presented the Second Settlement for
approval. The district court approved the settlement,
holding that valuing the information-sharing class’s
claims at zero was fair and reasonable because, among
other reasons, they suffered no actual damages, and, as a
result, probably have no recovery under various states’
consumer protection statutes (and common law causes of
action), and moreover, the claimants faced significant
hurdles in obtaining class certification. The district court
also approved of the valuation of the telemarketing claims
and the attorneys’ fees, and generally found that the Second
No. 05-3669                                                   5

Settlement properly addressed the “warning signs” that we
had discussed in our prior opinion.


                       II. ANALYSIS
  It is well-settled that district judges presiding over
proposed class settlements are “expected to give careful
scrutiny to the terms of proposed settlements in order to
make sure that class counsel are behaving as honest
fiduciaries for the class as a whole” because “class actions
are rife with potential conflicts of interest between class
counsel and class members.” Mirfasihi, 356 F.3d at 785
(collecting and citing cases). District judges must therefore
“exercise the highest degree of vigilance in scrutinizing
proposed settlements of class actions” to consider whether
the settlement is “fair, adequate, and reasonable, and not
a product of collusion.” Reynolds v. Beneficial Nat’l Bank,
288 F.3d 277, 279 (7th Cir. 2002). Indeed, the district court
judge functions as “a fiduciary of the class, who is subject
therefore to the high duty of care that the law requires
of fiduciaries.” Id. at 280. As a general principle, a district
court should evaluate, among other things, the probability
of plaintiff prevailing on its various claims, the expected
costs of future litigation, and hints of collusion. See, e.g.,
Mars Steel Corp. v. Cont’l Illinois Nat’l Bank & Trust Co.,
834 F.2d 677, 681-82 (7th Cir. 1987); Reynolds, 288 F.3d
at 283-85. Our review of the district court’s scrutiny of a
proposed class settlement is more limited: we review the
district court’s decision for abuse of discretion. Isby v. Bayh,
75 F.3d 1191, 1196-97 (7th Cir. 1996).
  As an initial observation, there is not much that is
substantially “new” in the Second Settlement. For instance,
Fleet’s total out-of-pocket expenses remain capped at $2.4
million, the telemarketing class members remain eligible
for the same range of payments, plaintiff’s counsel retains
its $750,000 fee, and the information-sharing class contin-
6                                                No. 05-3669

ues to receive nothing. There are, however, some minimal
improvements in the Second Settlement. For example, in
negotiating the Second Settlement, the information-sharing
class received separate counsel from the telemarketing
class. But the reconfiguration of the representation was
counter-intuititive: it was the telemarketing class—not the
information-sharing class—that received brand new
counsel, Clifford Cantor, while the attorneys who had
negotiated the unimpressive First Settlement slid over to
the information-sharing class. This is an odd result, given
our concerns over the possibility that the attorneys who
negotiated the First Settlement had “sold [the information-
sharing class] down the river.” Mirfasihi, 356 F.3d at 785.
It seems clear to us that it was the information-sharing, not
the telemarketing, class that needed a fresh look at the
settlement value of their claims. Wouldn’t the proposition
that their claims were worthless be bolstered if independent
counsel, unclouded by prior positions and assumptions,
concurred with the assessment reached in the First Settle-
ment? Whatever the reason for this particular reconfigura-
tion of representation, the information-sharing class
appears to have received no tangible benefit.
  Another minor improvement in the Second Settlement is
that it eliminates the broad reversion allowance in the First
Settlement, which allowed Fleet to recoup directly any
unclaimed funds from the telemarketing class. The un-
claimed “balance” (the telemarketing class only filed
$276,000 in claims out of an approximately $2 million-plus
pot) is now targeted for the Electronic Privacy Information
Center (“EPIC”) or other charitable institution devoted to
consumer privacy concerns. But the devil is in the details,
and EPIC likely should not be eagerly awaiting a large-sum
check because before any unclaimed balance can be distrib-
uted to third-party charities, Fleet is allowed to subtract (1)
the amounts it paid to settle a similar, but separate, lawsuit
in California (the “Koluncich” suit) and (2) “any amounts
No. 05-3669                                                      7

paid to satisfy the claims of any class members, including
class counsels’ attorneys’ fees, any class notice, and costs,
whether in this Litigation or otherwise.” (Settlement
Agreement at par. 9). This provision allows Fleet to deduct
approximately $1 million ($750,000 in attorneys’ fees and
$270,000 class notice costs) incurred in the present litiga-
tion, plus another $300,000 in costs associated with the
settlement of the separate Koluncich litigation in Califor-
nia, as well as an unspecified (and undefined) amount of
other “costs” incurred. In reviewing this portion of the
settlement agreement, the district court commented that
“[t]here will be no reversion of any portion of the $2.4
million” to Fleet. Although this may be technically correct,
there is a negligible practical distinction between a rever-
sionary provision that sends cash directly back to Fleet and
line-item deductions right off the $2.4 million pot that allow
Fleet to pay its other outstanding bills, including ones
unrelated to the present litigation.
  But these wrinkles, standing alone, are not enough for us
to find that the district court abused its discretion in
approving the settlement. Our concern remains the prop-
er valuation of the information-sharing class’s claims, which
is the true sticking point in the district court’s otherwise
thoughtful and well-reasoned analysis of the objectors’ other
protests.1 In our prior opinion, “we emphasized the district
judge’s duty in a class action settlement situation to
estimate the litigation value of the claims of the class and
determine whether the settlement is a reasonable approxi-
mation of that value.” Mirfasihi, 356 F.3d at 786 (citing
Reynolds, 288 F.3d at 284-85 (other citations omitted)).
Here, in evaluating the strength of the information-sharing
class’s claims, the district court reviewed the consumer


1
  Indeed, the district court properly analyzed (and disposed of)
the objectors’ other complaints not relating to the information-
sharing class’s claims evaluation and we need not address these
issues here (nor need the district court revisit them upon remand).
8                                                 No. 05-3669

protection statutes in Illinois, Maryland, Massachusetts,
and Wisconsin, which were the jurisdictions in which suits
have been brought against Fleet. But it is not clear why the
district court limited its analysis to just these four jurisdic-
tions in light of the fact that the information-sharing class
was not limited to residents from these four states. The
analysis should have considered, at a minimum, the
pertinent consumer protection statutes (and other potential
bases for claims) in the states where the information-
sharing class members resided. The likely reason for this
truncated analysis was that the parties did not draw the
district court’s attention to a compiled fifty-state survey of
consumer protection statutes, which was one in a large
series of exhibits to the parties’ joint motion for approval of
the Second Settlement. Not surprisingly, the district court’s
opinion makes no mention of the reliability of this fifty-
state survey, nor does it apply the survey to its claims
evaluation.
  The district court’s analysis of the information-sharing
class’s claims primarily focused on Massachusetts’s con-
sumer protection statute (Chapter 93A), which is where the
objectors place their greatest faith in potential recovery.
Setting aside the fact that a proper estimate of the claims
here should include a broader canvass of the potentially
applicable law, the district court’s analysis of Chapter 93A’s
applicability is nonetheless curious in that it seems to
suggest that Chapter 93A provides a potential toehold for
recovery. Specifically, the district court noted that in Leardi
v. Brown, 474 N.E.2d 1094 (Mass. 1985), the Supreme
Judicial Court of Massachusetts held that Chapter 93A
“create[s] a legal right, the invasion of which, without more,
constitutes injury,” and “under circumstances where there
has been an invasion of a legally protected interest, but no
harm for which actual damages can be awarded . . . the
statute provides for the recovery of minimum [statutory]
damages” in the amount of twenty-five dollars. Id. at 1102.
No. 05-3669                                                    9

On its face, this language suggests that the objectors’
position that the information-sharing class members may be
entitled to statutory damages of $25 per claimant (which
places the maximum potential value of their claims at
approximately $35 million) is not frivolous—and thus
should have some settlement value. The district court
summarily dismissed the significance of Leardi, concluding,
without analysis, that it was likely that there was no basis
for applying Massachusetts law to the information-sharing
class’s claims.2
  Although the record is not clear on this issue, it appears
that the information-sharing class in this action was a
nationwide class that did not necessarily exclude Massachu-
setts residents. In addition, Fleet’s principal place of
business is located in Massachusetts and, although the
Complaint is not (and need not be) crystal clear on this,
Fleet may process many of the information-sharing class’s
mortgages in Massachusetts. See First Am. Cmpl. at ¶9. As
a result, the objectors’ argument that Massachusetts law
could apply to at least a subset of the claims does not
appear so outlandish as to deprive their claims of all
settlement value on that basis alone, and the district court
should revisit this issue with fresh eyes. Moreover, the
choice-of-law issues in nationwide class actions are rarely so
uncomplicated that one can delineate clear winning and
losing arguments at an early stage in the litigation. See In
re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1300-03 (7th Cir.
1995) (recognizing difficulty of class certification created by


2
  We note that after the district court’s consideration of claims
under Chapter 93A, the Supreme Judicial Court of Massachusetts
issued an opinion that appears to have limited the concept of
injury articulated in the Leardi decision, and, in so doing, may
have torpedoed the information-sharing class’s best arguments
under Chapter 93A. See Hershenow v. Enterprise Rent-A-Car Co.,
840 N.E. 2d 526 (Mass. 2006).
10                                               No. 05-3669

differences in the laws of 50 states); see also Jeremy T.
Grabill, Comment, Multistate Class Actions Properly
Frustrated by Choice-of-Law Complexities: The Role of
Parallel Litigation in the Courts, 80 TUL. L. REV. 299 (2005);
Ryan Patrick Phair, Comment, Resolving the “Choice-of-
Law Problem” in Rule 23(b)(3) Nationwide Class Actions, 67
U. CHI. L. REV. 835 (2000). And it would seem that the legal
uncertainty resulting from the complicated choice-of-law
issues in this case should not cut solely against the value of
plaintiff’s claims here, but should also be a factor in
considering the value of Fleet’s defenses.
  In any event, in basic terms, a claim analysis under these
circumstances would require consideration of (1) the
probability of the information-sharing class having grounds
of recovery under any applicable law; (2) the probability of
such favorable law applying to the entire information-
sharing class (rather than differing subsets); and (3) the
probability of winning on the merits. We cited cases
describing this methodology in the our prior opinion, and do
so again. See Mirfasihi, 356 F.3d at 786, citing Mars Steel
Corp., 834 F.2d at 682; In re General Motors Corp. Engine
Interchange Litigation, 594 F.2d 1006, 1132 n.44 (7th Cir.
1979); In re General Motors Pick-Up Truck Fuel Tank
Products Liability Litigation, 55 F.3d 768, 806 (3d Cir.
1995); In re Traffic Executive Association-Eastern Railroads,
627 F.2d 631, 633 (2d Cir. 1980); see also Reynolds, 288
F.3d at 284-85. The calculations in this case are simplified
by the fact that the upper value of the information-sharing
claims are likely capped by the maximum of any applicable
statutory damages, and therefore quantifying the highest
potential damages for the information-sharing class is not
subject to the wider range of imprecision that accompanies
the prediction of jury verdicts on compensatory or punitive
damages. Moreover, the district court may use its discretion
in requesting additional briefing or even an evidentiary
hearing (if necessary) to obtain greater information and
No. 05-3669                                               11

analyses pertinent to claims evaluation in this case. It is
understood that mathematical certainty and precision is not
possible in valuing claims, particularly at this early stage
in the litigation, but more is needed here to ensure that the
information-sharing class’s interests are properly consid-
ered. See Reynolds, 288 F.3d at 285. Thus, on remand, the
district court should consider and analyze the full cross-
section of potentially applicable state law and arrive at a
clearer estimate of the potential value of the information-
sharing class’s claims to allow proper evaluation of the
reasonableness of the proposed settlement.


                   III. CONCLUSION
  For the foregoing reasons, the judgment of the district
court is REVERSED and we REMAND for further proceed-
ings consistent with this opinion.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




                   USCA-02-C-0072—6-19-06
