The case centered on a "flip" arrangement where small real-estate investor LLCs paid $10,000 to defendants to receive loans for purchasing and remodeling homes. Under the structure, investors paid interest and fronted rehab costs but never held legal title to the properties; instead, they served only as beneficiaries of a trust controlled by the defendants.
Plaintiffs alleged that defendants failed to adequately disclose this arrangement, depriving investors of rights they would have held as outright owners. The court previously certified a class limited to civil RICO and breach of fiduciary duty claims after dismissing other counts.
The settlement establishes a common fund of $1.3 million. Two defendant subgroups will contribute $366,670 and $658,330 respectively. A third subgroup, tied to defendant Gary Bailey, is responsible for a $275,000 contribution paid over a potential twelve-year period, contingent on Bailey refinancing his residence.
Class counsel will receive one-third of the common fund as of the date the settlement administrator prepares to distribute funds, plus any future payments collected from Bailey. The court also awarded $163,940.77 in litigation costs and expenses.
Each of the five named plaintiffs will receive a $10,000 service award. The court found these awards reasonable given the plaintiffs' extensive involvement in the litigation, which included depositions, mediation, and discovery over several years.
Class members will receive payments calculated using a formula that accounts for variable purchase-price mark-up damages and a uniform $10,000 down-payment damage component. The settlement administrator estimates an average payout between $3,407.30 and $3,656.06 per claimant.
The court noted that no class members opted out or objected to the settlement. The agreement includes a cy pres provision for any unclaimed funds, which will be donated to a state fund or non-profit organization approved by the court.