Drazen v. Pinto

• Docket Number: 21-10199
• Decision Date: 13 May 2024
• Citation: 101 F.4th 1223
• Parties: Susan DRAZEN, on behalf of herself and other persons similarly situated, Plaintiff-Appellee, GoDaddy.com, LLC, a Delaware Limited Liability Company, Defendant-Appellee, v. Mr. Juan Enrique PINTO, Movant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

101 F.4th 1223

Susan DRAZEN, on behalf of herself and other persons similarly situated, Plaintiff-AppelleeGoDaddy.com, LLC, a Delaware Limited Liability Company, Defendant-Appellee, v.Mr. Juan Enrique PINTO, Movant-Appellant.

No. 21-10199

United States Court of Appeals, Eleventh Circuit

Filed: May 13, 2024

Appeal from the United States District Court for the Southern District of Alabama, D.C.Docket No. 1:19-cv-00563-KD-B

John R. Cox, John R. Cox, PLLC, Spanish Fort, AL, Robert M. Hatch, David Max Oppenheim, Bock Hatch & Oppenheim, LLC, Chicago, IL, Evan Meyers, Yevgeniy Y. Turin, McGuire Law, PC, Chicago, IL, Kenneth J. Riemer, Riemer Law, LLC, Mobile, AL, Earl Price Underwood, Jr., Underwood & Riemer, PC, Fairhope, AL, for Plaintiff-Appellee.

Robert William Clore, Jason Eric Pepe, Christopher A. Bandas, Bandas Law Firm, PC, Corpus Christi, TX, Thomas Jefferson Deen, III, T. Jefferson Deen, III, Mobile, AL, for Movant-Appellant.

Matthew Brian Criscuolo, Cozen O'Connor, West Palm Beach, FL, Paula Zecchini, GoDaddy.com, LLC, Kirkland, WA, Jeffrey M. Monhait, Cozen O'Connor, Philadelphia, PA, for Defendant-Appellee.

Greg White, Gray Reed & McGraw, Waco, TX, Angela Laughlin Brown, Gray Reed & McGraw, Dallas, TX, for Amicus Curiae ACA International.

Jessica Slatten, Jason Gonzalez, Amber S. Nunnally, Lawson Huck Gonzalez, PLLC, Tallahassee, FL, William Wells Large, Florida Justice Reform Institute, Tallahassee, FL, for Amicus Curiae Florida Justice Reform Institute.

Scott Lawrence Nelson, Allison M. Zieve, Public Citizen Litigation Group, Washington, DC, for Amicus Curiae Public Citizen.

Adam Granich Unikowsky, Jenner & Block, LLP, Washington, DC, for Amici Curiae Florida Retail Federation, Retail Litigation Center Inc.

Before Wilson, Branch, and Tjoflat, Circuit Judges.

TJOFLAT, Circuit Judge:

The consolidated class actions involved in this appeal¹ were brought under the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227.²The Plaintiffs alleged that GoDaddy.com,³ LLC violated the TCPA⁴ by using an automatic telephone dialing system (ATDS)⁵ to make telephone calls or send text messages to their telephone numbers or cell phones and the numbers or phones of the class members they sought to represent.The parties negotiated a settlement: GoDaddy would provide up to $35 million to pay both class members' claims and up to $10.5 million to their lawyers as attorney's fees.Shortly after the Drazen lawsuit was filed and the Bennett case was consolidated, the Plaintiffs moved the District Court pursuant to Rule 23(e)(1) to: (1) certify a Rule 23(b)(3)⁶ class for settlement purposes, (2) approve preliminarily the settlement agreement the parties had negotiated, and (3) approve their draft of the notice of proposed settlement to be directed to the class pursuant to Rule 23(c)(2).⁷

The District Court, presumably applying Rule 23(e)(1), determined that the Plaintiffs had produced evidence sufficient to show that the Court would likely approve the proposed settlement and certify the class for purposes of judgment on the proposal.SeeFed. R. Civ. P. 23(e)(1).Thus, it granted the Plaintiffs' motion and appointed the Plaintiffs' lawyers as Class Counsel.In its order granting the motion, the District Court directed that notice of the proposed settlement be given to the class pursuant to Rule 23(e)(1)(B) and that it contain the information specified in Rule 23(c)(2)(B)(i)-(vii).⁸

On July 9, 2020, the day the Settlement Administrator emailed the Rule 23(c)(2) notice to the class, the U.S. Supreme Court granted certiorari in Facebook, Inc. v. Duguid"to resolve a conflict among the Courts of Appeals regarding whether an autodialer must have the capacity to generate random or sequential phone numbers."592 U.S. 395, 401-02, 141 S.Ct. 1163, 209 L.Ed.2d 272(2021).The issue before the Court was the same as the principal issue in the Plaintiffs' consolidated actions: "whether th[e] definition [of an ATDS] encompasses equipment [like GoDaddy used] that can 'store' and dial telephone numbers, even if the device does not 'us[e] a random or sequential number generator.'"Seeid. at 399, 141 S.Ct. 1163(fourth alteration in original).The Court held that it did not.Id."To qualify as an [ATDS], a device must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a random or sequential number generator."Id.

Class Counsel realized that if the proceedings in their cases were stayed pending the Supreme Court's decision in Facebook, and Facebook was decided in a way that favored GoDaddy, the $2,267,570 of class members' claims⁹ would likely be worthless and the attorney's fees would not be forthcoming.To avoid that scenario, Class Counsel would have to persuade the District Court to enter a final judgment that approved the settlement agreement and granted their motion for attorney's feesbeforethe Supreme Court decided Facebook.So, once the time for class members to file claims expired, Class Counsel moved the District Court to hold a Rule 23(e)(2) final hearing to certify the class, approve the settlement agreement as "fair, reasonable, and adequate," approve the Rule 23(c)(2) notice, and grant their motion for attorney's fees.

Class Counsel moved the District Court to do that in the nick of time.The District Court heard their motion six days after the Supreme Court heard argument in Facebook.¹⁰The District Court issued its final judgment and order approving the proposed settlement agreement, class, and attorney's fees three months before the Supreme Court decided Facebook, which was favorable to GoDaddy as Class Counsel anticipated.¹¹

The District Court granted Class Counsel's motion over the objection of Juan Pinto, the appellant here.Pinto made a couple of arguments.First, he argued that the District Court ruled on the motion for attorney's fees prematurely because it was before the deadline for objections, a violation of Rule 23(h) and due process.Second, Pinto's main objection was that the District Court's order approving the settlement agreement should be vacated as an abuse of discretion because the fees awarded Class Counsel were far in excess of what the class members would receive.This breached the District Court's fiduciary duty and made the settlement agreement unfair, unreasonable, and inadequate under Rule 23(e)(2)(C)(iii).If the order was not vacated, he contended that the District Court should be instructed to reconsider the attorney's fees issue because it failed to consider the issue under the heightened scrutiny required by the Class Action Fairness Act (CAFA), 28 U.S.C. § 1712, in cases involving "coupon settlements."

In this appeal,¹²we consider whether the District Court abused its discretion in approving the proposed settlement agreement, certifying the class, granting Class Counsel's motion for attorney's fees, and entering the final judgment.We conclude that it did in several ways.First, it failed to consider the 2018amendments to Rule 23(e)(2).The District Court also overlooked evidence indicating that the settlement agreement was the product of collusion, such as the overbroad release provision and inadequate relief provided to the class relative to what Class Counsel and GoDaddy received.Next, the notice of the proposed settlement the District Court ordered failed to inform the absent class members of the "claims, issues, or defenses" in the Plaintiffs' cases as required by Rule 23(c)(2)(B)(iii), fundamental due process, and the Court's fiduciary obligation to the absent class members.Finally, the District Court erred in three ways when it calculated attorney's fees because it: (1) misapplied Rule 23(h), (2) treated the settlement as a common fund when it was claims-made, and (3) determined that this was not a settlement involving coupons under CAFA and thus declined to examine Class Counsel's motion for attorney's fees with CAFA-mandated scrutiny and procedures.

In concluding that the District Court abused its discretion and that its judgment must be vacated, we are not unmindful that Class Counsel contributed to the abuse.As officers of the court, they should have reminded the District Court that Rule 23(c)(2)(B)(iii) required that the notice of settlement sent to the class members inform them about Facebook.They knew that the Supreme Court's Facebook decision would decide the dispositive issue in their clients' cases: whether systems like what GoDaddy used here came under the definition of an ATDS in the TCPA.

In deciding this appeal, we must go back to 2016 when the present litigation with GoDaddy started.Some of the lawyers acting as Class Counsel here sued GoDaddy under the TCPA in the District of Arizona on behalf of John Herrick—a class member in these consolidated actions.¹³They were unsuccessful; the District Court there granted GoDaddy summary judgment because the system GoDaddy used to send text messages to Herrick and potential GoDaddy customers was not an ATDS.So, after appealing the judgment to the U.S. Court of Appeals for the Ninth Circuit, they joined forces with the remaining Class Counsel and made another go of it in the Southern District of Alabama, in the cases here.Thus, before we discuss the reasons for vacating the final judgment in the cases here, we must look at Herrick's case in the District of Arizona and what took place in the Southern District of Alabama thereafter in the consolidated cases now before us.

We split our opinion into four parts.Part I describes the background of how this case came to be before us.Part II establishes the general legal standards applicable to our review.Part III discusses why the District Court's judgment must be vacated and the cases remanded for further proceedings because the Court failed to follow those standards.And Part IV concludes with a summary.

Table of Contents

I. Background...1235

A. Herrick's TCPA Case in the ...