McAdams v. Robinson

• Citation: 26 F.4th 149
• Decision Date: 10 February 2022
• Docket Number: No. 21-1087,21-1087
• Parties: Pia MCADAMS, Appellant, v. Demetrius ROBINSON; Tamara Robinson, Plaintiffs – Appellees, v. Nationstar Mortgage LLC, Defendant – Appellee. National Consumer Law Center; Mountain State Justice, Inc., Consumers League of New Jersey ; Connecticut Fair Housing Center; Northwest Consumer Law Center, Amici Supporting Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

26 F.4th 149

Pia MCADAMS, Appellant,

v.Demetrius ROBINSON; Tamara Robinson, Plaintiffs – Appellees,

v.Nationstar Mortgage LLC, Defendant – Appellee.

National Consumer Law Center; Mountain State Justice, Inc., Consumers League of New Jersey ; Connecticut Fair Housing Center; Northwest Consumer Law Center, Amici Supporting Appellant.

No. 21-1087

United States Court of Appeals, Fourth Circuit.

Argued: October 28, 2021

Decided: February 10, 2022

Amended: February 10, 2022

ARGUED: Michael T. Houchin, LAW OFFICES OF RONALD A. MARRON, APLC, San Diego, California, for Appellant. Jonathan K. Tycko, TYCKO & ZAVAREEI LLP, Washington, D.C.; Erik Wayne Kemp, SEVERSON & WERSON, San Francisco, California, for Appellees. ON BRIEF: Ronald A. Marron, LAW OFFICES OF RONALD A. MARRON, APLC, San Diego, California; Thomas J. Minton, GOLDMAN & MINTON, P.C., Baltimore, Maryland, for Appellant. Dia Rasinariu, TYCKO & ZAVAREEI LLP, Washington, D.C., for Appellee Tamara Robinson. Jan T. Chilton, SEVERSON & WERSON, San Francisco, California, for Appellee Nationstar Mortgage LLC. Scott C. Borison, BORISON FIRM LLC, Baltimore, Maryland; Jennifer S. Wagner, MOUNTAIN STATE JUSTICE, Morgantown, West Virginia, for Amici Curiae.

Before DIAZ and THACKER, Circuit Judges, and Thomas T. CULLEN, United States District Judge for the Western District of Virginia, sitting by designation.

Affirmed by published opinion. Judge Diaz wrote the opinion, in which Judge Thacker and Judge Cullen joined.

DIAZ, Circuit Judge

This case arises from a class action alleging that Nationstar Mortgage LLC violated federal and state consumer-protection laws in servicing the class members' mortgage loans. Following protracted litigation, Nationstar, and the Robinsons negotiated a $3,000,000 settlement. Pia McAdams, a class member, objected to the settlement, arguing that the class notice was insufficient; the settlement was unfair, unreasonable, and inadequate; the release was unconstitutionally overbroad; and the attorneys' fee award was improper. A magistrate judge (acting on a referral by the district court) overruled McAdams's objections. On appeal, McAdams raises those same challenges and questions the magistrate judge's jurisdiction. We affirm.

I.

A.

Demetrius and Tamara Robinson filed a class action against Nationstar in the District of Maryland in 2014. The Robinsons claimed Nationstar violated federal and state law by, among other things, failing to timely acknowledge receipt of class members' loss mitigation applications,¹ respond to the applications, and diligently obtain documents to process them.

The parties litigated the case for nearly six years. In 2020, the Robinsons and Nationstar filed a notice of settlement and a joint motion to proceed before a magistrate judge. The magistrate judge (who had mediated the settlement), granted a motion for preliminary approval of the settlement and scheduled a fairness hearing before final approval.

The negotiated settlement created a relief fund of $3,000,000. In order of priority, the parties proposed that the fund pay for (1) administrative expenses up to $300,000, (2) attorneys' fees, (3) a service award to the class representative—Demetrius Robinson, and (4) class claims. Any remainder would go to a nonprofit that advocates for consumers.

The administrative expenses included the cost of providing class members with notice of the settlement. The settlement proposed three types of notice—Email, Postcard, and Longform. Both the Email and Postcard Notice informed class members of the amount of the settlement fund, how to submit a claim, how to opt out of the class, and where to find the Longform Notice. The Longform Notice notified class members of the attorneys' fee arrangement. The notices didn't estimate the recovery for each class member.

As for attorneys' fees, Nationstar agreed (in a so-called "clear sailing" provision) not to oppose class counsel's fee request so long as it didn't exceed $1,300,000. Class counsel submitted records accounting for over 3,000 billable hours. Using the District of Maryland's presumptively reasonable rates, the records supported $1,261,547.50 in fees. Class counsel also submitted proof of $217,657.26 in unreimbursed expenses, for a total of $1,479,204.76 in costs and fees. But counsel requested only a $1,300,000 award.

The value of a class member's claim is determined by a points system. Class members receive points for answering two questions—the first about Nationstar's treatment of their mortgage account and the second about expenses the class member incurred. The settlement funds remaining, after deducting administrative expenses, attorneys' fees, and the class representative's service award, are divided by the number of points claimed. That number is then multiplied by a class member's points to arrive at the settlement share for each claimant.

The proposed settlement also includes a release of claims. It provides:

Upon entry of the Final Approval Order and Judgment, each Settlement Class Member ... will be deemed to have completely released and forever discharged the Released Parties, and each of them, from all actions ... that were or could have been asserted by the Class Representative or Class Members in connection with the submission of loss mitigation applications during the Class Period.

J.A. 186.

B.

McAdams, an absent class member² who had sued Nationstar in California state court,³ objected to the settlement. She argued that the class notice was insufficient; the settlement was unfair, unreasonable, and inadequate; the release was unconstitutionally overbroad; and the attorneys' fee award was improper.

The magistrate judge overruled McAdams's objections. The judge found that the distribution of the notice was sufficient because over 97% of the nearly 350,000 class members received notice. He also found that class members "had information to make the necessary decisions and ... the ability to even get more information if they so desired." J.A. 815. In support of that finding, the judge noted the low number of objectors (2), the low opt-out rate (.04%), and the high claims rate (13.8%).⁴

Turning to the settlement terms, the magistrate judge found them fair, reasonable, and adequate. The judge considered the three relevant criteria under Federal Rule of Civil Procedure 23(e)(2)(C) and addressed the five adequacy factors from In re Jiffy Lube Securities Litigation , 927 F.2d 155, 159 (4th Cir. 1991). The judge found: (1) "plaintiffs ha[d] viable claims"; (2) "Nationstar had very strong defenses"; (3) litigating the case to trial "would have likely been lengthy and it would certainly be quite, quite expensive"; (4) "Nationstar can pay the 3 million dollars"; and (5) "[o]nly 137 class members have opted out of the settlement, which is about 0.04 percent of the settlement class." See J.A. 810–14.

The magistrate judge also addressed the breadth of the settlement's release. He found the release was "not too broad" because a class settlement can release "claims based on the identical factual predicate[,] even if those claims" aren't presented. J.A. 816. But he didn't opine whether the release would bar class members' pending claims in other jurisdictions, including McAdams's California lawsuit.

Finally, the magistrate judge approved the proposed $1,300,000 attorneys' fee request. The fee, he said, was based on a presumptively reasonable rate, and using that rate, counsel had shown that their actual costs and fees exceeded their request. The judge noted that concerns over Nationstar's agreement not to object to the settlement were misplaced. And he found "no collusion" between the parties because they negotiated the settlement "at arm's length in the midst of contentious litigation." J.A. 812, 817.

This appeal followed.

II.

McAdams first attacks the magistrate judge's jurisdiction to approve the class action settlement, alleging that she didn't consent to have a magistrate judge hear her case. There's no dispute that the magistrate judge could approve the class action and enter judgment only by consent of the parties. 28 U.S.C. § 636(c). McAdams asserts that "parties" for purposes of § 636(c) include absent class members, like her. This is a question of first impression in this circuit. But every other circuit to address the issue has concluded that absent class members aren't parties. Koby v. ARS Nat'l Servs., Inc. , 846 F.3d 1071, 1076 (9th Cir. 2017) ; Day v. Persels & Assocs., LLC , 729 F.3d 1309, 1316 (11th Cir. 2013) ; Dewey v. Volkswagen Aktiengesellschaft , 681 F.3d 170, 181 (3d Cir. 2012) ; Williams v. Gen. Elec. Cap. Auto Lease, Inc. , 159 F.3d 266, 269 (7th Cir. 1998). We now join them, holding that the magistrate judge had jurisdiction to approve the settlement.

A.

We review questions of law de novo, including questions of statutory interpretation. In re Lumber Liquidators Chinese-Manufactured Flooring Prods. Mktg., Sales Pracs. & Prods. Liab. Litig. , 952 F.3d 471, 483 (4th Cir. 2020). Similarly, "[w]e review ... a lower court's determination of its subject-matter jurisdiction[ ] de novo." Barlow v. Colgate Palmolive Co. , 772 F.3d 1001, 1007 (4th Cir. 2014) (en banc).

B.

"We begin, as always in deciding questions of statutory interpretation, with the text." Othi v. Holder , 734 F.3d 259, 265 (4th Cir. 2013). 28 U.S.C. § 636(c) authorizes magistrate judges to "conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case .... [u]pon the consent of the parties." Congress didn't define "parties" in § 636. Nor has the Supreme Court said whether absent class members are parties in this context. See Devlin v. Scardelletti , 536 U.S. 1, 9–10, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002) ("Nonnamed class members, however, may be parties for some purposes and not for others. The label ‘party’ does not indicate an absolute characteristic, but rather a conclusion about the applicability of various procedural rules that may differ based on context.").

"We give...