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Shanahan v. Lee Law Offices

United States District Court, D. Nebraska

June 25, 2019

TIMOTHY J. SHANAHAN JR. and MOLLI M. LARSEN, on behalf of themselves and all others similarly situated,, Plaintiffs,
v.
LEE LAW OFFICES, et al., Defendants.

          MEMORANDUM AND ORDER

          John M. Gerrard Chief United States District Judge.

         This matter is before the Court on the parties' Joint Motion for Final Approval of Class Settlement (filing 46) and the plaintiffs' Unopposed Motion for Approval of Plaintiffs' Incentive Awards & Damages and Plaintiffs' Attorneys' Fees and Costs (filing 43). Having heard the statements of counsel at a fairness hearing, and reviewed and considered the entire record, the Court will grant the motions in their entirety.

         BACKGROUND

         This action was filed on March 23, 2018, and the settlement agreement at issue was executed by the parties on October 30, 2018. See filing 1; filing 40-1. The parties filed a joint motion, pursuant to Fed.R.Civ.P. 23(b) and (e), to certify the settlement class, preliminarily approve the settlement agreement, and approve the form and manner of notice to the class. Filing 38. In an order entered February 19, 2019, the Court granted that motion, finding, among other things, that this action could be maintained as a class action; that the prerequisites to class certification under Rule 23(a) had been satisfied; and that certification of the settlement class was superior to other available methods for the fair and efficient resolution of this controversy, satisfying Rule 23(b)(3). Filing 41. The Court designated class representatives, appointed settlement class counsel and a claims administrator, and scheduled a fairness hearing. Filing 41. And the Court reviewed the forms of notice submitted by the parties, approved them as to form, and approved their plan for directing notice to the class members, finding that their plan provided the best notice practicable under the circumstances and was in compliance with Rule 23 and the requirements of due process. Filing 41.

         Notice was mailed to identified class members on April 5, 2019, giving the class members until May 20 to request exclusion from the class or object to the settlement. Filing 48-1 at 2-3. Notices were also sent as required by 28 U.S.C. § 1715. Filing 42. No. objections to the settlement agreement were received by the claims administrator or the Court. See filing 48-1 at 2. On June 4, the present motion to approve the class settlement was filed, along with a brief and index of evidence in support. Filing 46, filing 47; filing 48. The scheduled fairness hearing was held on June 20, at which no objecting class members or other objectors appeared. Filing 49.

         For purposes of the discussion below, when terms are used that are expressly defined in the settlement agreement, they are intended to have the same meaning as in the settlement agreement.

         SETTLEMENT AGREEMENT

         The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the Court's approval. Fed.R.Civ.P. 23(e). Under Rule 23(e) the district court acts as a fiduciary who must serve as a guardian of the rights of absent class members. In re Wireless Tel. Fed. Cost Recovery Fees Litig., 396 F.3d 922, 932 (9th Cir. 2005); In re BankAmerica Corp. Secs. Litig., 350 F.3d 747, 751 (8th Cir. 2004); Grunin v. Int'l House of Pancakes, 513 F.2d 114, 123 (8th Cir. 1975). The Court's role in reviewing a negotiated class settlement is to ensure that the agreement is not the product of fraud or collusion and that, taken as a whole, it is fair, adequate, and reasonable to all concerned. Keil v. Lopez, 862 F.3d 685, 693 (8th Cir. 2017); Marshall v. Nat'l Football League, 787 F.3d 502, 509 (8th Cir. 2015). If the proposed settlement would bind the class members, the Court may approve it only after a hearing and upon finding that it is fair, reasonable, and adequate. Rule 23(e)(2). But a class action settlement is a private contract negotiated between the parties. Marshall, 787 F.3d at 509; In re Wireless Tel. Fed. Cost Recovery Fees Litig., 396 F.3d at 934. And a settlement agreement is presumptively valid. In re Uponor, Inc., F1807 Plumbing Fittings Prod. Liab. Litig., 716 F.3d 1057, 1063 (8th Cir. 2013).

         In this case, the Court finds that the appointed class representatives and their counsel fairly and adequately represented the interests of the class members in connection with the settlement agreement, and that the class representatives and the settling defendants were represented by able and experienced counsel. The settlement agreement was the product of good-faith, arm's-length negotiations by the class representatives, settling defendants, and their respective counsel.

         With respect to notice, the Court reaffirms its earlier finding that the form, content, and method of disseminating notice to the class members was adequate and reasonable and constituted the best notice practicable under the circumstances, satisfying Rule 23(c)(2)(B). By virtue of the fact that an action maintained as a class suit under Rule 23 has res judicata effect on all members of the class, due process requires that notice of a proposed settlement be given to the class. Grunin, 513 F.2d at 120. The notice given must be reasonably calculated, under all of the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. Id. In addition, the notice must reasonably to convey the required information and it must afford a reasonable time for those interested to make their appearance. Id. The contents must fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with the proceedings. Id. at 122.

         The notice given in this case met those requirements; it informed the class members of the action and their options, accurately characterized all the pertinent terms of the settlement agreement (including attorney fees and expenses), and afforded the class members a reasonable opportunity to object. As established in the Court's preliminary order approving notice, notices were sent directly to class members using the best available contact information. In short, the notice satisfied the requirements of Rule 23 and due process.

         The Court also finds that the settlement agreement is fair, reasonable, adequate, and in the best interests of class members. In determining whether a settlement agreement is fair, the Court should consider (1) the merits of the plaintiff's case weighed against the terms of the settlement, (2) the defendant's financial condition, (3) the complexity and expense of further litigation, and (4) the amount of opposition to the settlement. In re Target Corp. Customer Data Sec. Breach Litig., 892 F.3d 968, 978 (8th Cir. 2018); Keil, 862 F.3d at 693; Marshall, 787 F.3d at 508; Uponor, 716 F.3d at 1063. The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement. See Target, 892 F.3d at 978; Keil, 862 F.3d at 695; Prof'l Firefighters Ass'n of Omaha, Local 385 v. Zalewski, 678 F.3d 640, 648 (8th Cir. 2012). If the plaintiff class faced a strong unlikelihood of success, or an initial defeat followed by another round at the appellate level, virtually any benefit inuring to the class would be better than the prospect of an ultimately unsuccessful litigation. DeBoer v. Mellon Mortg. Co., 64 F.3d 1171, 1177 (8th Cir. 1995).

         But the Court has neither the duty nor the right to reach any ultimate conclusions on the issues of fact and law which underlie the merits of the dispute. Grunin, 513 F.2d at 123. In examining a proposed settlement for approval or disapproval, the Court does not try the case; the very purpose of a compromise is to avoid the delay and expense of a trial. Id. at 124; see also DeBoer, 64 F.3d at 1178. So, the Court need not make a detailed investigation consonant with trying the case; it must, however, provide an appellate court with a basis for determining that its decision rests on well-reasoned conclusions, and is not mere boilerplate. Keil, 862 F.3d at 693; In re Wireless Tel. Fed. Cost Recovery Fees Litig., 396 F.3d at 932-33. The views of the parties to the settlement must also be considered; the fact that only a handful of (or no) members object to the settlement weighs in its favor. DeBoer, 64 F.3d at 1178.

         The defendants were sued under the federal Fair Debt Collection Practices Act (FDCPA) and the Nebraska Consumer Protection Act (NCPA) for sending an allegedly misleading debt collection letter. See filing 29. The defendants have agreed to provide a fund of $25, 000 for the settlement class, consisting of $600 for the FDCPA claim and $24, 400 for the NCPA claim, to be divided equally among class members who do not request exclusion. Filing 40-1 at 13. Approximately 110 class members will receive funds ranging in amounts from $221.81 to $235.76 each. Filing 48-4. Any unclaimed funds will be distributed cy pres to Nebraska Legal Aid. Filing 40-1 at 13.

         To begin with, under the FDCPA, the recovery to class members is limited to the lesser of $500, 000 or 1 percent of the net worth of the debt collector. 15 U.S.C. § 1692k(a)(2)(B). The parties represent that information about the defendants' net worth was provided during discovery, and that "informed settlement negotiations" concerning the size of the settlement fund. And under the FDCPA, an individual plaintiff can recover actual damages plus statutory damages "as the court may allow, but not exceeding $1, 000." § 1692k(a)(2)(A). So, the question is, how many members of the settlement class could have proven actual damages and persuaded the Court to award statutory damages in an amount greater than $221.81 to $235.76, and if so, would the amount be sufficiently greater to justify the burdens and hazards of individually litigating their claims? The Court is not persuaded that many (if any) members of the settlement class would have done substantially better as individual plaintiffs. In addition, the statute of limitations under the FDCPA is one year. § 1692(e). Many of the plaintiffs faced a serious statute of limitations obstacle to federal recovery.

         The NCPA also allows statutory damages-of up to $1, 000 for each class member, with no cap on total recovery. See Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567, 572 n.4 (8th Cir. 2015). And it has a 4-year statute of limitations. Neb. Rev. Stat. § 59-1609. But the same question is posed: what would the individual plaintiffs' chances have been of persuading the Court to award more than $221.81 to $235.76, and if so, would that amount be sufficiently greater to justify the burdens and hazards of individually litigating their claims? There is, again, a strong argument that the risks of litigation would outweigh any potentially larger award.

         It's also worth noting that the defendants have agreed to cease the allegedly deceptive practice underlying the lawsuit, which is a positive result of the litigation beyond the pecuniary recovery. And, of course, there are no objections to the settlement.

         Based on the foregoing, the Court finds that the settlement agreement is fair, reasonable, and adequate within the meaning of Rule 23(e)(2), and will approve it. The Court will grant the Joint ...


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