In Newman v. GM Financial, Judge Sabraw issued an Order Denying Preliminary Approval rejecting a proposed TCPA class settlement in part on the basis that disparately situated classmembers with different damages claims would obtain the same settlement sums under the class settlement and, due to the claims-made procedure, it was unclear what that sum would be anyway.
A class action settlement may be approved only based on a finding that the settlement is “fair, reasonable, and adequate.” Fed. R. Civ. Proc. 23(e)(1)(C). In general terms, the settlement (see Decl. of Joshua B. Swigart Ex. 1) provides for a lump sum payment of $6.5 million from Defendant. The payment would be divided as follows: (1) up to $2,040,000 for attorneys’ fees; (2) up to $25,000 for costs; (3) class action notice and settlement administration costs; (4) $10,000 to the class representatives as incentive payments; and (5) pro rata payments to class members of no more than $500 per claim. Only one claim can be submitted (a) for a joint loan account with only one associated mobile phone number; or (b) when multiple mobile phone numbers are associated with the same person; and (c) regardless of the number of calls placed to the mobile phone number. If the number of submitted claims results in a pro-rata distribution greater than $500 per claim, the excess over $500 per claim is to be distributed as a cy pres distribution to the Consumers Union. On the other hand, if a large number of claims is submitted resulting in a pro-rata distribution of less than $30 per claim, then Defendant’s settlement payment is increased up to $8.5 million. The benefit of the settlement to the class members is difficult to evaluate because it is unclear what recovery the class members can expect. In part, this is because the motion does not disclose a firm estimate of the first notice and settlement administration costs, and the size of the class is unclear. Plaintiffs indicate that the pool from which class membership will be determined consists of 1,477,090 auto loan accounts with 2,805,051 associated mobile phone numbers. Only individuals who were actually called to a mobile phone number are members of the putative class, however. Defendant maintains a database of accounts, telephone numbers and calls, and it appears that the size of the class can be more precisely estimated than the information provided in the motion. With a clearer estimate of the notice and settlement administration costs, and the size of the class, Plaintiffs should be able to provide the Court and the class with a more reliable estimate of the amount the class members can expect to recover if each class member files a claim. Furthermore, the proposed claim distribution raises fairness issues. The class period spans more than five years, yet class members who received one unlawful call to their mobile phone would be compensated the same as those who received numerous calls over the years. Because it appears that Defendant maintains a database of mobile phone calls, it may be possible to distribute the settlement more equitably among the class members.