A federal district court in Philadelphia recently rejected a $4 million proposed settlement of a TCPA class action in part because the amount was not fair to the class.
The plaintiff brought a putative class action against an auto lender seeking damages for violations of the TCPA’s autodialing provisions due to calls made to consumer cellphones. The parties immediately entered mediation and agreed to a $4 million settlement fund to be split among the settlement class pro rata, minus attorneys’ fees of approximately $1.3 million, $282,393 in administrative costs, and a $10,000 incentive award for the class representative. After providing notice to potential class members and receiving claims, the court determined that the resulting award would be roughly $35.30 per class member among a class of 67,255 members.
The parties also engaged in preliminary and confirmatory discovery as part of the process to receive initial approval of the proposed settlement. The court, however, denied the parties’ request for final approval of the settlement agreement. Applying the factors listed under Federal Rule of Civil Procedure 23 and Third Circuit precedent, the district court ultimately denied final approval of the settlement based on three main reasons.
First, the court held that it was unable to properly assess the strengths or weaknesses of the case and the propriety of the settlement because the defendant—given the early settlement efforts in the case—did not file an answer or other motion showcasing its view on the plaintiff’s claims. The factual record was limited and the court was reluctant to approve the settlement amount. Second, the court rejected the proposed settlement amount of $4 million because it found the lender’s statement, that it was unable to pay more than the settlement fund, to be “inaccurate.” No financial information was given to the class members and the court’s own review of the lender’s financial statements called into question the lender’s claim. Further, after noting that the potential recovery for the possible class could reach a minimum of $163,962,000, the court observed that “there is a large gap between $4,000,000 and $163,962,000” and that “class members may reasonably be left wondering why a company with almost $3 billion in assets can only afford a $4 million settlement.”
Finally, in rejecting the settlement amount, the court determined that the $35.30 award was not fair, given that each call in violation of the TCPA is subject to at least $500 in statutory damages with no statutory cap. The court balked at the idea that consumers would pay more monthly to maintain their cellular service than they would receive from this “de minimis” award. Similarly, the court criticized the proposed attorney’s fees in this case: “the court is doubtful that an attorney’s fee award of one-third of the settlement fund is justified . . . because every dollar that goes to counsel is one less dollar available for distribution to the class.”
The case is Ward v. Flagship Credit Acceptance LLC, Case No. 17-2069 (E.D. Pa.).