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Unprecedented Settlement Rejection: Court Refuses to Approve $17.5MM TCPA Settlement on Current Record–Says “Good Chance” that Class Counsel “Sold the Case Short”

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Oh dear. Oh dear me.

The Hon. Matthew Kennelly has already made quite the mark on TCPAland. He  handed down the big Aranda ruling that turned Spokeo-based TCPA arguments into minced meat. And he recently prevailed over the largest TCPA settlement in history in the Birchmeier settlement–a $76MM resolution that saw Edelson PC singing all the way to the bank.  

Perhaps it was just the bad luck of having drawn the same judge that had just approved the largest TCPA class settlement in history. Or perhaps it was the rather extraordinary back-story of the case–which included a preliminary injunction having been entered on a classwide basis before the settlement was reached.  Or maybe it was the humongous 16% claims rate–generated by a spirited online advertising campaign?–that drove down the per-class member recovery following the notice period.  Whatever it was, the Court in Snyder v. Ocwen Loan Servicing, Case No. 14 C 8461 Case No. 16 C 8677, 2018 U.S. Dist. LEXIS 167471 (N.D. Ill. Sept. 28, 2018) just handed down the most remarkable rejection of a class settlement in TCPA history.

The Court found that a $17.5MM check was not big enough–at least not on the record before it–to compensate class members. And, in the most extraordinary of rebukes, the Court suggested that class counsel may have sold the class short:

On the record before the Court, it is fair to say that there is a good chance that class counsel have sold the case short-at least, the Court cannot determine otherwise on the present record.

Snyder at * 19.

Holy smokes.

The strangest part of all this is that the resolution looked good on paper. Really good. At  least as compared to other settlements in the TCPA class settlement “market.” $17.5MM to resolve the claims of 1.7MM class members is big money. That’s over $10.25 a class member–well above market value for these cases. And when recognizing that the settlement was struck while ACA Int’l was pending–and when further recognizing that a court in Michigan just found that Ocwen’s dialer is not even an ATDS–this settlement seemed downright favorable to the class. Indeed, the Godfather of TCPA class actions is on record opining that Ocwen “overpaid.”

But Judge Kennelly disagreed, to say the least. His decision does not mention Keyes, but it does rely on the record created as part of the earlier preliminary injunction proceeding to suggest that the defendant’s record keeping may not have been up to snuff. And while the Court (somewhat reluctantly it seemed) concedes that 23(b)(3) certification was far from assured owing to the potential for individualized consent inquiries, the Court was utterly unimpressed with Class Counsel’s showing respecting the Defendant’s purported inability to pay the billion dollar judgment that was possible in this case. (Quick background–Class Counsel in TCPA class cases seeking settlement approval commonly remind the court, without irony, that if the case were to proceed to trial the defendant wouldn’t be able to pay the full amount of the judgment anyway.) The Court was also concerned with the seemingly “gratis” dismissal of two related bank defendants–although the decision strongly implies that their calls were wrapped within the class settlement amount as part of an indemnity deal with the primary defendant.

And while Class Counsel had urged that the $17.5MM represented a good resolution for the class, the Court reminded everyone why that representation could not be taken for granted:

Class counsel strongly urge that the settlement represents a reasonable resolution of the claims when one balances the strengths and weaknesses of the claims of the class. And their opinion is worthy of consideration. But the Court cannot simply defer to them, particularly when they stand to gain millions of dollars from the proposed settlement.

Snyder at *19.

Wow.

It is important to note, however, that the Court did not find any funny business between class counsel and defense counsel. Although the settlement was rejected, the Court was careful to find that the settlement negotiations were “arm’s length” and that “[t]here is no indication of any side deals.”  So this isn’t a situation where the Court thought that the fix was in–just that Class Counsel failed to present sufficient evidence to justify the settlement amount that was negotiated between the parties.

At bottom, the settlement was sunk and deemed insufficient by the Snyder Court–at least on the present record– and the parties are now in the most extraordinary of positions. Does Class Counsel take the opportunity and try to pig out on an (even more) massive settlement?  Or do they act prudently and try to salvage the current settlement by flipping a copy of Keyes to the Court and otherwise supplementing the record (and/or accepting a fee cut?) Does Ocwen refuse to play ball at all and now fight certification and–perhaps–even try the case on the merits one day with Keyes in their pocket?  How does the calculus surrounding the FCC’s pending TCPA Public Notice proceeding factor in?

This is completely unprecedented territory for all involved and just a truly remarkable turn of events.  No TCPA settlement of this size has ever been rejected by a court. It will be very interesting to see what happens next.

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