“All-For-Lawyer And Zero-For-Class” Settlement was Far From Fair, Reasonable, or Adequate

In a move that likely left plaintiffs’ class attorneys feeling less confident, the United States District Court for the Northern District of Illinois declined to approve a proposed class action settlement, finding it was “all-for-lawyer and zero-for-class.” In Grok Lines, Inc. v. Marshall Truck Lines, Inc., a company purchased a list of fax numbers and sent an unsolicited junk marketing-fax to approximately 180 numbers.  This fax was a one-time marketing experiment which proved to be quite costly, as sending unwanted advertisements by fax is prohibited by the Telephone Consumer Protection Act (“TCPA”) unless certain conditions are met (such as prior express consent by the recipient).  Violators of the TCPA are liable for $500 in damages per violation and knowing or willful violations can treble damages to $1500 per violation.  Since the named plaintiff never provided its prior express consent, a class action lawsuit was filed.

After litigation and negotiation, both plaintiff and defendant asked the Court to approve a settlement agreement for the class action.  The proposed agreement amounted to $100,000 in monetary damages plus injunctive relief enjoining defendant from practices which violate the TCPA.  The problem for the court, however, was that of the monetary relief: $98,500 went to the plaintiff’s attorney, $1500 to the named plaintiff, and $0 to the remaining class.

The Court highlighted that a settlement under these circumstances must be fair, reasonable, and adequate for the proposed class.  While injunctive-only relief may be appropriate at times, the Court found it lacked substance in this case.  Indeed the defendant “promised” to do what it was already obligated to do – avoid violating the TCPA.  Coupled with the fact that the fax giving rise to this lawsuit was a one-time marketing experiment, there was little-to-no-risk that it would commit the same mistake.  Thus, the injunctive benefit for the case really had no value to the class members.  As such, the Court rejected the settlement proposal and sent the parties back to the drawing board to come up with an agreement that is fair, reasonable, and adequate to the remaining class members.  It is likely safe to assume that the fee to the fee plus the benefit to the class ration will not be as lop-sided when the parties present their next settlement proposal.

For more information on the TCPA and its application, please contact Adam Hill at 312-334-3480 or ahill@messerstrickler.com for more information.

 

Further Reading

Window to Apply for FCC’s Retroactive Solicited Fax Opt-Out Waiver Closing