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Cullan and Cullan LLC v. M-Qube, Inc.

United States District Court, D. Nebraska

September 27, 2016

CULLAN AND CULLAN LLC, individually and on behalf of all others similarly situated; Plaintiff,
v.
M-QUBE, Inc. a Delaware corporation; MOBILE MESSENGER AMERICAS, Inc., a Delaware Corporation; CF ENTERPRISES PTY., Ltd., an Australian Company; and JOHN DOES 1-200, Defendants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon, Senior United States District Judge.

         This matter is before the court on the plaintiff's motions for preliminary approval of class action settlements, Filing Nos. 165 and 167, and on Intervenor Richard Geier's motion to withdraw as intervenor, Filing No. 187.

         I. BACKGROUND

         Geier had objected to the motion for preliminary approval. Filing No. 169, Response (properly denominated as “Objection”). In an earlier order, this court granted Richard Geier leave to intervene in the action to object to the parties' proposed settlement. See Filing No. 74, Memorandum and Order ("Mem. & O."). Geier was the named plaintiff in a separate purported class action suit against defendant Mobile Messenger in the United States District Court for the Eastern District of Washington. See Geier v. M-Qube, Inc., Case No. 2:13-cv-00354 (W.D. Wash.) (the “Washington Action”). He has now shown that he has voluntarily dismissed with prejudice his claims in the Washington action and no longer has an interest in this action. The court finds Geier's motion to withdraw should be granted and his objections to the proposed settlement will be denied as moot.[1]

         This is a putative class action involving an alleged practice known as “cramming, ” that is, placing unauthorized, misleading, or deceptive charges on a consumer's cell-phone bill. The plaintiff, a law firm in Omaha, Nebraska, alleges that it was billed for unauthorized subscriptions on its wireless telephone bill. Id. at 5. It asserts a claim for violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq., and for tortious interference with a contract and unjust enrichment under state law.

         Defendants Mobile Messenger and M-Qube (hereinafter, collectively, “MM”) are mobile aggregators and application providers who act as intermediaries between third-party mobile content providers (who purportedly “market and sell subscriptions to a variety of mobile text message services”) and wireless carriers. Defendant CF Enterprises, Ltd., (“CF”) owns and operates one such mobile content provider, CellSafari.com.

         This court has twice denied the parties' motion for preliminary approval of class action settlements. Filing Nos. 74 and 97. The facts are set out in those earlier orders and need not be repeated here. See Filing No. 74, Mem. & O. at 2-8; Filing No. 97, Mem. & O. at 1-3. With respect to the parties' first proposals, this court stated it was troubled by numerous aspects of the class action settlement, including the fact that the settlement funds appeared inadequate in view of the size of the class and the magnitude of losses. The court also expressed concerns about the efficacy of the notice process and the extent to which the proposed settlement would actually benefit class members. Filing No. 74, Mem. & O. at 18. On the parties' second proposal, the court remained unable to ascertain the size of the potential class and noted that the notices to the putative class remained inadequate. Filing No. 97, Mem. & O. at 3-4.

         The parties now propose two separate class action settlement agreements, one with defendant CF and one with defendant MM. See Filing Nos. 166-1 and 168-1, Proposed Amended and Restated Settlement Agreements. For the purposes of settlement, the parties agree to certification of the following classes:

         The CF Enterprises Settlement Class is defined as:

         [A]ll current and former Wireless Subscribers Nationwide, who at any time from January 31, 2011, to the Notice Date, received a text message from any Message Claim Shortcode or relating to a Message Claim Program. “Message Claim Shortcode” means the following shortcodes: 25872, 29104, 33288, 44329, 49712, and 70451. “Message Claim Program” means the following programs: searchyourhoroscope.com; tuneztogo.com; hearmemobile.com; myringtonespot.com; cellsafari.com; tonezgalore.com; urzodiachoroscopes.com; and fonezoneportal.com.

         The Mobile Messenger Settlement Class is defined as:

[A]ll current and former Wireless Subscribers Nationwide, who (a) at any time from January 1, 2010, to the Notice Date, incurred any charge, whether paid or not, associated with any of the billing descriptors, shortcodes, and program names set forth on Exhibit B [to the Mobile Messenger Settlement Agreement and posted on the Settlement Website]; or (b) at any time from January 1, 2010, to the Notice Date, received any message from a Premium Short Code registered at the CTIA to (i) any organization recognized as exempt from federal income taxation under I.R.C. § 501(c)(3) or I.R.C. § 501(c)(4), or (ii) federal political committees registered with the Federal Election Commission.[2]

         Under the Amended and Restated Stipulation of Settlement between the plaintiff and MM (“MM Settlement Agreement”), the settlement class consists of consumers who received text messages from any one of hundreds of different short codes. See Filing No. 168-1, Ex. 1, Ex. B. It provides the Settlement Class members will receive $30 per unauthorized charge for claimed unauthorized mobile phone charges associated with the any of the billing descriptors, shortcodes, and program names set forth on Exhibit B to the Settlement.[3] There is no monetary cap on MM's payment of valid claims submitted under this provision. Also, MM will pay all costs of providing Notice of the Settlement to the Settlement Class and the Costs of Claims Administration. MM also agrees to pay Proposed Co-Lead Settlement Class Counsel, subject to Court approval, an amount up to $485, 000 in attorneys' fees and reimbursement of costs and expenses. MM also agrees to pay, subject to Court approval, a Class Representative incentive award to Plaintiff in the amount of $2, 500. Those payments are separate and in addition to the other amounts due the Class under the settlement. The proposed agreement allows MM to challenge claims based on a consent defense only if they present clear and convincing evidence and provides a mechanism whereby the issue of whether a potential claimants had consented can be resolved by a special master.

         In exchange for those benefits, the MM Settlement Agreement includes a release that is tailored to the unique posture of this litigation.[4] It provides that each Settlement Class member who does not submit a valid claim will continue to have the right to pursue litigation against Mobile Messenger or any other Released Party-as described specifically in the Settlement-on an individual basis; only their right to participate in a class action or mass action will be released. The Parties released under the Agreement are Mobile Messenger, as well as their respective predecessors and successors, and their past and present officers, directors, employees, attorneys, representative, agents, and stockholders, with the exception of Darcy Wedd, Erdolo Eromo, Michael Pajaczkowski and Fraser Thompson, who have been named in governmental actions based on or related to the facts and circumstances underlying this Action.

         The Amended and Restated Stipulation of Settlement between the plaintiff and defendant CF (“CF Settlement Agreement”) applies to a subclass of consumers who received text messages from one of six different short codes and provides that class members-persons who received one or more text messages from identified CFE Shortcodes or related to identified CFE Message Programs-will receive $65 per text message claimed, up to 3 messages per CFE Settlement Class member. It provides, however, that if the value of valid claims exceed $1, 000, 000, the claims will be prorated. It also contains provisions substantively similar to those outlined above with respect to the MM Settlement Agreement.

         The claims process requires each class member to provide name, address, telephone number and email address and to state to the best of their knowledge and recollection the wireless number associated with the charge and (a) the date description, and amount of each charge for which a refund benefit for a Subscription Charge Claim is requested; (b) a statement that each such charge was unauthorized; (c) the total amount of the refund benefit requested for the Subscription Charge Claim; and (d) confirmation that the Settlement Class member' did not request or receive a refund from any source for the charges for which a Refund Benefit for a Subscription Charge Claim is requested. However, if the Settlement Class member has no knowledge or recollection, the Settlement Class member may state that he or she does not know. Further the Agreements provide that the Claims Administrator may reject a claim if it is shown and verified that the claimant was previously provided a refund or credit from any source (including, but not limited to Mobile Messenger, a Wireless Carrier, an Aggregator, a Third-Party Content Provider, or through a different settlement) for the charge that is requested for refund in the claim. The Agreements also provide a resolution procedure for challenged or rejected claims and the claim form will disclose the defendants' right to challenge any claims they have reason to believe are invalid. The Agreements also provide procedures whereby settlement class members can opt-out or object to the Settlements.

         The parties, in consultation with the proposed Claims administrator, have designed a notice plan targeted at the smartphone market. The Notice Plan includes: (1) individual direct email notice to any potential Settlement Class members that can be identified from Defendants' records; (2) mobile notice using paid banner notices on targeted website and applications; (3) web-based notice using “keyword” searches displaying banner notices; (4) targeted social media banner notices; (5) a press release distributed nationwide through PR Newswire; (6) a dedicated, informational website dedicated to ...


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