Ward v. Flagship Credit Acceptance LLC

• Decision Date: 13 February 2020
• Docket Number: CIVIL ACTION NO. 17-2069
• Parties: ROBERT WARD, on behalf of himself and all others similarly situated v. FLAGSHIP CREDIT ACCEPTANCE LLC
• Court: U.S. District Court — Eastern District of Pennsylvania

ROBERT WARD, on behalf of himself and all others similarly situated
v.
FLAGSHIP CREDIT ACCEPTANCE LLC

CIVIL ACTION NO. 17-2069

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

February 13, 2020

MEMORANDUM RE: MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT

Baylson, J.

Table of Contents

I. Introduction ............................................................................................................... 2

II. Background ................................................................................................................ 3

A. Procedural History ..................................................................................................... 3

B. Preliminary Approval ................................................................................................ 3

C. Response from Class ................................................................................................. 5

D. The Court's May 9, 2019 Memorandum ................................................................... 6

E. Recommendation of Master ....................................................................................... 6

F. Final Approval Hearing ............................................................................................. 7

III. Legal Standard ........................................................................................................... 7

IV. Considerations Under the Telephone Consumer Protection Act ("TCPA") ........... 10

A. Statutory Damages under TCPA ............................................................................. 12

B. Unsettled Areas of TCPA Litigation ....................................................................... 15

1. Unsettled Definition of "Automatic Telephone Dialing System" .................... 15
2. Impending Supreme Court Review of Constitutionality of TCPA's "Government-Debt Exception" ........................................................................ 17

C. TCPA Settlements ................................................................................................... 17

1. Features of Pro Rata Settlements ..................................................................... 18
2. Incorporating a "High-Low" Model ................................................................. 20

V. Discussion ................................................................................................................ 22

A. Initial Presumption of Fairness ................................................................................ 23

B. Girsh Factors ............................................................................................................ 24

1. Complexity, Expense and Likely Duration of Litigation ................................. 24
2. Reaction of the Class to the Settlement ............................................................ 25
3. Stage of Proceedings and Amount of Discovery Completed ........................... 26
4 & 5. Risks of Establishing Liability and Damages ............................................ 28
6. Risks of Maintaining the Class Action Through Trial ..................................... 30
7. Ability of Defendant to Withstand a Greater Judgment ................................... 31
8 & 9. Range of Reasonableness of Settlement Fund in Light of the Best Possible Recovery and All the Attendant Risks of Litigation .................... 34

a. Reasonableness in Light of Best Possible Recovery ............................... 34

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i. Comparison to Snyder v. Ocwen ................................................... 35
ii. Consideration of Other TCPA Settlements .................................... 37
iii. Plaintiff's Potential Damages ......................................................... 38
iv. Per Claimant Recovery of $35.30 is De Minimis .......................... 39

b. Reasonableness in Light of Risks if Case Went to Trial ......................... 41

C. Prudential Considerations ........................................................................................ 42

D. Baby Products Considerations ................................................................................. 45

VI. Conclusion .............................................................................................................. 47

Appendix ............................................................................................................................. 49

I. Introduction

Settlement class representative Robert Ward ("Plaintiff") brought suit on behalf of himself and others similarly situated against Flagship Credit Acceptance LLC ("Flagship") alleging that Flagship violated the Telephone Consumer Protection Act by illegally calling class members' cell phones with an automatic telephone dialing system. After a mediation, Plaintiff and Flagship agreed to the terms of a class settlement, which the Court preliminarily approved. Plaintiff's Motion for Final Approval of Class Action Settlement and Motion for An Award of Attorneys' Fees and Expenses and an Incentive Award to the Named Plaintiff is now pending.

When, as here, parties reach a class action settlement agreement that conclusively terminates the claims of all class members (except those who have opted out, which is almost zero in this case), a judge may be inclined to approve the settlement. However, the recently amended Rule 23 provisions on judicial inquiry into class action settlements require careful scrutiny of the terms of the settlement to ensure they are fair, reasonable and adequate, and require a critical and independent review of the settlement provisions. It is now mandatory for the judge to examine the settlement agreement to protect the interests of the class members and ensure that they receive compensation that is fair in view of the statutory purposes.

For the reasons that follow, Plaintiff's Motions will be denied. The confluence of a number of negative factors motivates the decision to deny the settlement agreement that Class Counsel

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presented. This Memorandum will describe the background of the case, discuss unique considerations implicated by the Telephone Consumer Protection Act, and analyze the proposed settlement under the Third Circuit's Girsh factors, the Third Circuit's Prudential considerations, and the Third Circuit's Baby Products inquiry.

II. Background

A. Procedural History

Plaintiff filed his Complaint in this Court on May 5, 2017, alleging that Flagship, a subprime lender that provides financing to car buyers who would not have access to credit through traditional debt markets, placed automated and prerecorded phone calls in violation of the Telephone Consumer Protection Act. (ECF 1.) The parties immediately entered into arm's-length settlement discussions before the Honorable Joel Rosen, a retired United States Magistrate Judge in the District of New Jersey, and reached agreement on terms in February 2018. (ECF 25-3, Memorandum in Support of Motion for Final Approval of Class Action Settlement at 1 ("Plaintiff's Final Approval Memorandum").) On July 12, 2018, Plaintiff moved for preliminary approval of the class action settlement, (ECF 20), which the Court granted on September 18, 2018, (ECF 21.)

B. Preliminary Approval

The discussion of the settlement in the memorandum accompanying Class Counsel's motion for preliminary approval focused on whether it fell within the range of other approved TCPA settlements such that disseminating notice to the class was justified. (ECF 20-2, Plaintiff's Preliminary Approval Memorandum at 17-20.) The Court granted the motion and preliminarily approved a class of "[a]ll persons whom Flagship called on their cellular telephone through the use of any version of a TCN, LiveVox or Aspect dialing system and/or with an artificial or

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prerecorded voice at any time from May 5, 2013 to the date of preliminary approval [September 18, 2018]." (ECF 21, Preliminary Approval Order ¶ 4.)

Based on this class definition, the Settlement Administrator identified 327,924 class members.¹ (Plaintiff's Final Approval Memorandum at 4.) Notice was provided to the class members, who had the opportunity to make claims, object, or request to opt out of the settlement. Claimants who wished to file a form were directed to provide the following information: their claim number, name, address, city/state/zip, cell phone number at which they received the call, phone number (optional), and email (optional). (ECF 20-3, Ex. 3 Post Card Notice.) Class members also had access to a website, FlagshipTCPASettlement.com, that contained general information including a copy of the Motion for Attorney's Fees and an Incentive Award to the Named Plaintiff.

The settlement that was preliminarily approved provided that each class member who submitted a valid claim would receive an equal amount of the $4 million settlement fund,² entitling each claiming class member to "the same pro rata share." (Plaintiff's Preliminary Approval Memorandum at 16.) The pro rata distribution scheme was fully disclosed in both the post card notice and the long form notice. (ECF 29, Supplemental Submission Regarding Final Approval of Class Action Settlement and Attorney Fee Award at 2-3 ("First Supplemental Submission").)

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The preliminary approval settlement papers also proposed an attorney's fee award of one-third of the settlement fund (or $1,333,333.33) and a $10,000 incentive award for the class representative. (Plaintiff's Preliminary Approval Memorandum at 5.) Class Counsel requested that Jump$tart Coalition for Personal Financial Literacy be approved as the cy pres recipient, and that (a) the fraction of a penny due to a claiming class member and (b) any uncashed checks be distributed to cy pres. (Plaintiff's Final Approval Memorandum at 16.)

The final breakdown of these proposed payments is as follows:³

Expense	Amount
Total Value of Settlement Fund	$4,000,000.00
Attorney's Fees	$1,333,333.33
Named

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