In re Trans Union Corp.

• Citation: 741 F.3d 811
• Decision Date: 23 January 2014
• Docket Number: No. 13–1613.,13–1613.
• Parties: In re TRANS UNION CORP. PRIVACY LITIGATION. Appeal of: Dawn A. Wheelahan.
• Court: U.S. Court of Appeals — Seventh Circuit

741 F.3d 811

In re TRANS UNION CORP. PRIVACY LITIGATION.

Appeal of: Dawn A. Wheelahan.

No. 13–1613.

United States Court of Appeals,Seventh Circuit.

Argued Sept. 23, 2013.

Decided Jan. 23, 2014.

Joy A. Bull, Attorney, Robbins Geller Rudman & Dowd LLP, San Diego, CA, Cory S. Fein, Attorney, Caddell & Chapman, Houston, TX, for Plaintiffs.

Dawn A. Wheelahan, Attorney, Dawn A. Wheelahan LLC, New Orleans, LA, for Appellant.

Michael C. O'Neil, Attorney, DLA Piper U.S. LLP, Chicago, IL, Amy Lee Stewart, Attorney, Rose Law Firm, Little Rock, AK, for Defendant–Appellee.

Before BAUER, KANNE, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge.

This appeal arises from an unusual class settlement for an estimated 190 million class members. Class settlements usually aim to impose a final and definitive resolution of a dispute, but this one did not. It offered class members certain benefits, including cash, in return for giving up only their right to sue the defendant through class actions or other collective actions. But the settlement left the door open for the vast majority of class members to file individual suits against the defendant, the credit reporting company Trans Union.

One key detail has led to this appeal. The settlement created a fund of $75 million for class members' claims. It also allowed Trans Union itself to draw money from the fund as reimbursement for the cost of settling individual follow-on suits, termed “post-settlement claims” or “PSCs.” There have been many more of these PSCs than anyone expected. Trans Union has settled them, and the district court has authorized Trans Union to reimburse itself from the fund. One of the class counsel, Dawn Wheelahan, has appealed. We affirm the district court's actions in all respects.

I. Factual and Procedural BackgroundA. The Trans Union Litigation and Settlement

Beginning in 1998, a number of consumer class actions were filed against Trans Union alleging that it had violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., by selling lists of consumer credit reports to target marketers (the “target marketing” claims) and sharing prohibited consumer information with companies that wanted to use the lists to extend offers of credit or insurance (the “firm offer” claims). In 2000, the Judicial Panel on Multidistrict Litigation transferred the cases to Judge Gettleman in the Northern District of Illinois for consolidated pretrial proceedings. A detailed account of the litigation's course over the following decade is not necessary here. We focus on the settlement and later disputes over the post-settlement claims or PSCs.

After preliminary rulings allowed the claims to go forward, Judge Gettleman asked Magistrate Judge Mason to mediate the entire dispute. To make a long story short, with his help the parties eventually reached an agreement that the district court approved as fair and reasonable. Trans Union agreed to give all class members “basic” in-kind relief in the form of credit monitoring services. In addition, class members could either claim cash from a $75 million settlement fund established by Trans Union or claim “enhanced” in-kind relief consisting of additional financial services. Trans Union agreed to provide roughly $35 million worth of enhanced relief. Five attorneys, including Wheelahan, were named as settlement class counsel.

While the deal gave significant relief to class members, court approval under Federal Rule of Civil Procedure 23(e) remained uncertain because the claims being settled had potential value far beyond what Trans Union proposed to pay. See Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 654 (7th Cir.2006) (courts evaluating fairness of settlements generally must compare the value of the relief offered to the expected value of class claims before approving the deal); Reynolds v. Beneficial Nat. Bank, 288 F.3d 277, 284–86 (7th Cir.2002) (same); American Law Institute, Principles of the Law of Aggregate Litigation § 3.05(a) & cmt. b (advising the same).

Class counsel sought to represent every consumer whose credit Trans Union had tracked since 1987. The class was estimated to include 190 million people, although that figure surely must have grown in the years since it was cited with alarm in a related case. Trans Union LLC v. FTC, 536 U.S. 915, 917, 122 S.Ct. 2386, 153 L.Ed.2d 199 (2002) (Kennedy, J., dissenting from denial of certiorari in FTC enforcement action against Trans Union). The Fair Credit Reporting Act authorizes statutory damages of between $100 and $1000 per consumer for willful violations, 15 U.S.C. § 1681n, meaning that Trans Union faced at least the theoretical possibility of $190 billion in liability. Trans Union, 536 U.S. at 917, 122 S.Ct. 2386. There are many reasons, starting with Trans Union's net worth, why that astronomical number may not have been meaningful, but the stakes were far greater than the $75 million in cash that Trans Union was putting on the table.

As part of their effort to persuade the district court to approve the settlement and to narrow the gap between what Trans Union was offering and what it might owe, the parties agreed to an unusual feature that preserved class members' substantive claims even after settlement. Instead of releasing outright their claims against Trans Union, class members who did not ask for cash or enhanced in-kind relief would give up only their ability to sue as part of either a “Class Action” or an “Aggregated Action.” Both terms were defined in the settlement, as explained below. These class members retained the right to bring their modest individual claims separately.

In exchange for class members agreeing not to proceed further on a class basis, Trans Union offered online credit monitoring to everyone in the class. Even those who accepted this “basic” in-kind relief were free to head straight back to court to file their claims, so long as they filed individually. We set aside for a moment whether it would make economic sense for them to do so.¹ The statute of limitations, at least, would be no bar. Trans Union agreed to waive that defense for pending PSCs and those commenced within two years. Class members who pursued the additional option of claiming either monetary damages or enhanced in-kind relief, however, had to release their substantive claims against Trans Union.

Class members were not the only ones authorized to draw from the $75 million cash fund. The critical feature for purposes of this appeal is that the settlement authorized reimbursements from the fund—to Trans Union itself—“equal to any amounts paid to satisfy settlements or judgments arising from Post–Settlement Claims, not including any defense costs.” Thus, Trans Union would bear any costs of defending PSCs but not the cost of settling them since it could reimburse itself for settlements from the $75 million it had already paid into the fund. The settlement put no restrictions on Trans Union's ability to settle these claims, expressly granting it the “option to settle any suit or pre-suit demand, or litigate any suit, involving Post–Settlement Claims.” A committee of representatives selected in equal parts by Trans Union and class counsel would monitor PSC reimbursements, although any disputes would ultimately be settled by the court. Any money left in the fund after two years would be distributed among class members who had submitted timely claims for cash relief. (Approximately 450,000 class members did so.) The district court granted final approval of the settlement in September 2008.

B. Post–Settlement Claims

Enterprising lawyers not previously involved in the case then found an economically viable way to bring individual post-settlement claims against the $75 million fund. They solicited class members who had not sought money damages or enhanced in-kind relief and thus retained their target marketing and firm offer claims against Trans Union. These lawyers eventually gathered more than 100,000 PSCs. The more than 70,000 that were not merely informal demands to Trans Union were filed as substantially identical but formally separate individual lawsuits. Most were filed in Nueces County, Texas—presumably the jurisdiction with the lowest filing fee the lawyers could find. The remaining PSCs were filed in other low-fee jurisdictions.

The terms of the class settlement gave Trans Union little reason to fight these claims. It could settle them without paying one additional net dollar. The company struck deals with the post-settlement claimants and then sought to reimburse itself from the fund. Class counsel objected. They argued that the PSCs filed in volume in low-fee jurisdictions like Nueces County were in fact “Aggregated Actions” prohibited under the settlement. The theory might have had some appeal under the term's ordinary meaning, but the settlement expressly defined “Aggregated Action.” Its agreed meaning was “any action in which two or more individual plaintiffs assert claims relating to the same or similar alleged conduct.” While the district court conceded that it “never contemplated such mass actions when it approved the settlement,” it ruled that the high-volume PSCs were not covered by the settlement's definition because each claim was filed as a separate action on behalf of just one plaintiff. The claims were therefore not barred by the terms of the settlement. In re Trans Union Corp. Privacy Litig., 2011 WL 918396 (N.D.Ill. Mar. 14, 2011).

For their efforts, the PSC attorneys received contingency fees of between 45 and 50 percent. In mid–2011, class counsel other than Wheelahan asked the district court for a share of the PSC attorney fees under the common-fund doctrine. See generally Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980). Wheelahan did not join that request because she had already successfully pursued her own appeal for more fees based on her role in negotiating the original settlement. Se...