Larson v. AT & T Mobility LLC

Citation82 Fed.R.Serv.3d 1288,687 F.3d 109
Decision Date29 June 2012
Docket NumberNos. 10–1285,10–1477,10–1587.,10–1486,s. 10–1285
CourtU.S. Court of Appeals — Third Circuit
PartiesJudy LARSON, Barry Hall, Joe Milliron, Tessie Robb, Willie Davis, Roman Sasik, David Dickey, Steven Wright, Jane Waldmann, Robert Wise, Jackie Thurman, Richard Chisolm, Mary Pitsikoulis, Debra Lively, Jacqueline Sims, Kisha Orr, Individually and on behalf of all others similarly situated v. AT & T MOBILITY LLC, f/k/a Cingular Wireless LLC; Sprint Nextel Corporation; Sprint Spectrum, d/b/a Sprint Nextel; Nextel Finance Company, Lina Galleguillos; Michael Moore; Antranick Harrentsian, Appellants in No. 10–1285, (Pursuant to FRAP 12(a)) Bramson, Plutzik, Mahler & Birkhaeuser; Law Office of Scott A. Bursor; Franklin & Franklin; Gilman & Pastor; Law Offices of Anthony A. Ferrigno; Reich, Radcliffe & Kuttler; Law Offices of Carl Hilliard; Mager & Goldstein; Law Offices of Joshua P. Davis; Cuneo, Gilbert & LaDuca, Appellants in No. 10–1477 (Pursuant to FRAP 12(a)) Bramson, Plutzik, Mahler & Birkhaeuser; Law Office of Scott A. Bursor; Faruqi & Faruqi, Appellants in No. 10–1486 (Pursuant to FRAP 12(a)) Jessica Hall, Appellant in No. 10–1587 (Pursuant to FRAP 12(a)).

OPINION TEXT STARTS HERE

Scott A. Bursor [argued], Bursor & Fisher, Nadeem Faruqi, Faruqi & Faruqi, Anthony Vozzolo, New York, NY, L. Timothy Fisher, Alan R. Plutzik, Walnut Creek, CA, Sandra G. Smith, Faruqi & Faruqi, Jenkintown, PA, William J. Pinilis, Pinilis Halpern, Morristown, NJ, for Appellants, Lina Galleguillos; Michael Moore; Antranick Harrentsian.

Scott A. Bursor, Bursor & Fisher, Nadeem Faruqi, Faruqi & Faruqi, New York, NY, Joshua Davis, San Francisco, VA, Steven M. Sherman, Sherman Business Law, San Francisco, CA, Anthony A. Ferrigno, San Clemente, FL, L. Timothy Fisher, Alan R. Plutzik, Walnut Creek, CA, J. David Franklin, San Diego, CA, Pamela Gilbert, Cuneo, Gilbert & LaDuca, Washington, DC, Jayne A. Goldstein, Shepherd, Finkelman, Miller & Shah, Media, PA, David Pastor, Boston, MA, William J. Pinilis, Pinilis Halpern, Morristown, NJ, Marc G. Reich, Reich Radcliffe, Newport Beach, CA, David S. Senoff, Caroselli, Beachler, McTiernan & Conboy, Philadelphia, PA, for Appellants, Bramson, Plutzik, Mahler & Birkhaeuser; Law Office Of Scott A. Bursor; Franklin & Franklin; Gilman & Pastor; Law Offices Of Anthony A. Ferrigno; Reich, Radcliffe & Kuttler; Law Offices Of Carl Hilliard; Mager & Goldstein; Law Offices Of Joshua P. Davis; Cuneo, Gilbert & LaDuca.

Jacob A. Goldberg, Faruqi & Faruqi, Jenkintown, PA.

Scott A. Bursor, Bursor & Fisher, New York, NY, Nadeem Faruqi, Faruqi & Faruqi, New York, NY, L. Timothy Fisher, Alan R. Plutzik, Walnut Creek, CA, William J. Pinilis, Pinilis Halpern, Morristown, NJ, Steven M. Sherman, Sherman Business Law, San Francisco, CA, Sandra G. Smith, Faruqi & Faruqi, Jenkintown, PA, for Appellants, Bramson, Plutzik, Mahler & Birkhaeuser; Law Office Of Scott A. Bursor; Faruqi & Faruqi.

Phillip A. Bock, Robert M. Hatch, Bock & Hatch, Chicago, IL, Anthony L. Coviello, Bloomfield, NJ, Robert J. Evola, Bradley M. Lakin, Lakin Chapman, Wood River, IL, for Appellant, Jessica Hall.

James E. Cecchi [argued], Lindsey H. Taylor, Carella, Byrne, Cecchi, Olstein, Brody & Agnello, Roseland, NJ, Scott A. George, Seeger Weiss, Philadelphia, PA, for Appellees, Judy Larson, Willie Davis, Joe Milliron, Tessie Robb, Roman Sasik, David Dickey, Steven Wright, Jane Waldmann, Robert Wise, Jackie Thurman, Richard Chisolm, Mary Pitsikoulis, Debra Lively, Jacqueline Sims, And Kisha Orr.

Andrew B. Joseph, Drinker, Biddle & Reath, Philadelphia, PA, Joseph Boyle [argued], Lauri A. Mazzuchetti, Vincent P. Rao, III, Kelley, Drye & Warren, Parsippany, NJ, for Appellees, Sprint Nextel Corp., Sprint Spectrum DBA Sprint Nextel, Nextel Fin. Co.

Before: McKEE, Chief Judge, FUENTES, and JORDAN, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Until late 2008, Sprint Nextel Corporation (collectively with its operating subsidiaries, including Sprint Spectrum L.P., “Sprint”) included a flat-rate early termination fee (“ETF”) provision in its cellular telephone contracts, which allowed it to charge a set fee to customers who terminated their contracts before the end date stated in the contract. Because many consumers believed that flat-rate ETFs were illegal penalties, various class action lawsuits were brought against cellular phone service providers who charged flat-rate ETFs, including Sprint. In the case before us now (the “ Larson ” action), the plaintiffs entered into negotiations with Sprint, and, after five months of mediation, the parties decided to settle the matter for $17.5 million, pursuant to the terms of their agreement (the “Settlement Agreement”). Over objections lodged by several class members, the United States District Court for the District of New Jersey certified the settlement class and approved the Settlement Agreement. Objectors Lina Galleguillos, Antranick Harrentsian, and Michael Moore (collectively, the Galleguillos Objectors), along with Jessica Hall, appealed.1 Because the District Court did not adequately protect the rights of absent class members, we will vacate its order and remand the matter for further proceedings.

I. BackgroundA. Class Action and Settlement Agreement

A flat-rate ETF is one that does not vary during the term of the contract. 2 At the time the Larson class action was filed, if a Sprint customer terminated a contract prior to the end of the contract term, Sprint would impose a flat-rate ETF of approximately $200. The Larson plaintiffs filed their suit in the District Court on November 5, 2007, alleging that the flat-rate ETFs charged by AT & T Mobility, LLC (AT & T) and Sprint were illegal penalties that violated the Federal Communications Act and state consumer protection laws. The Complaint was amended twice, with the Second Amended Complaint, as discussed in greater detail herein, being filed by five plaintiffs (the “Class Representatives”). Each of the Class Representatives was charged a flat-rate ETF by Sprint.3

Sprint moved to dismiss the Larson action pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure, but before the District Court rendered a decision on that motion, the Class Representatives and Sprint entered into mediation of the dispute, under the guidance of a retired judge of the District Court. After approximately five months of negotiations, on December 3, 2008, the parties agreed to settle the matter for $17.5 million, comprised of $14 million in cash and $3.5 million in activation fee waivers, bonus minutes, and credit forgiveness (collectively, the “Common Fund”).4 In addition to the monetary relief, the Settlement Agreement also enjoined Sprint from entering into new fixed-term subscriber agreements containing flat-rate ETFs for a period of two years, effective January 1, 2009. 5 Along with ending the Larson action, the Settlement Agreement expressly resolved ten other lawsuits pending in various state courts, but it excepted certain claims that were being asserted in a California-only state court class action against Sprint captioned Ayyad v. Sprint Spectrum, LLP (“ Ayyad ”).

The Settlement Agreement provided for four different categories of claimants, three of which are relevant to this appeal: 6

Category I.—Claimants Who Paid an ETF

(Other Than Category III or IV Class Members):

A. Those Claimants who had a two-year term contract and terminated within the first six months of that contract term [or (B.) had a one-year term contract and terminated within the first three months of that contract term], and show sufficient proof that they paid an ETF including signing under penalty of perjury,[7] shall be entitled to a payment of $25 from the Common Fund; or to the extent such Settlement Class Members desire to activate a new service line with Sprint Nextel: (i) a waiver of the approximately $36 activation fee normally charged by Sprint Nextel in connection with obtaining a new two-year contract to become a Sprint Nextel subscriber; and (ii) 100 free bonus minutes per month for the first year of that two-year contract....

....

C. Those Claimants who had a two-year term contract and terminated at any time between the seventh to the twenty fourth month of that contract term [or (D.) had a one-year term contract and terminated within the fourth to twelfth month of that contract term], and show sufficient proof that they paid an ETF including signing under penalty of perjury, shall be entitled to a payment of $90 from the Common Fund; or to the extent such Settlement Class Members desire to activate a new service line with Sprint Nextel: (i) a waiver of the approximately $36 activation fee normally charged by Sprint Nextel in connection with obtaining a new two-year contract to become a Sprint Nextel subscriber; and (ii) 100 free bonus minutes per month for the first year of that two-year contract....

....

E. Those Claimants who cannot show sufficient proof that they paid an ETF, but sign under penalty of perjury that they paid an ETF will receive $25 cash payment; or to the extent such Settlement Class Members desire to activate a new service line with Sprint Nextel: (i) a waiver of the approximately $36 activation fee normally charged by Sprint Nextel in connection with obtaining a new two-year contract to become a Sprint Nextel subscriber; and (ii) 100 free bonus minutes per month for the first year of that two-year contract....

Category II.—Claimants Who Were Charged an ETF But Did Not Pay the ETF:

A. Those Claimants who had a two-year term contract and terminated within the first six months of that contract term [or (B.) had a one-year term contract and terminated within the first three months of that contract term], and show sufficient proof that were charged an ETF, including signing under penalty of perjury, shall be entitled to $25 in credit relief, if the debt owed to Sprint Nextel is still owned...

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