Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: $40M settlement of TracFone “unlimited” data plan litigation receives final approval, (Jul 6, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in San Francisco has given final approval to the settlement of four consumer class action suits brought against TracFone in relation to its advertising of “unlimited” data plans that had undisclosed data usage limits (In re TracFone Unlimited Service Plan Litigation, July 2, 2015, Chen, E.).

TracFone Wireless, Inc., the fifth largest wireless carrier in the U.S., advertised its “Straight Talk” wireless service plan as allowing unlimited data usage. Consumers filed four consolidated class actions against TracFone, alleging that the “unlimited” data plans were not, in fact, unlimited, in violation of California’s Unfair Competition Law, Consumer Legal Remedies Act, and Florida’s Deceptive and Unfair Trade Practices Act. The consumers asserted that, when they exceeded certain data usage caps, TracFone would throttle or suspend their data service, or terminate their phone services entirely.

In January 2015, the FTC filed a separation enforcement action that was related to the consolidated cases, which also alleged that TracFone’s advertising of its unlimited data plans was deceptive. TracFone settled the FTC enforcement action as part of a global resolution of the consolidated cases, in which the FTC will disburse the settlement fund to class members in accordance with an agreed upon payment formula. In February 2015, the court granted preliminary approval to the class action settlement. Before the court was the plaintiffs’ motion for final approval of the settlement, attorneys’ fees, and representative service awards.

Settlement. The court found that the settlement of $40 million was fair, reasonable, and adequate. The proposed settlement offers class members prompt relief in light of the risk, expense, complexity, and likely duration of continued litigation. The plaintiffs would have the burden of showing that the class action could be certified and certification could be maintained through the trial, and there were risks that the plaintiffs would not be able to meet that burden.

In addition to the substantial monetary relief available under the settlement, TracFone agreed to make numerous conduct changes that have significant value to both class members and the general public. The extensive discovery that was undertaken, the skill and experience of class counsel, and the participating of the FTC, weighed in favor of approval of the settlement. The court also noted there was a low opt out rate for the class and the only five objections were filed.

Attorney fees and incentive awards. Class counsel was seeking a fee award of $5 million, which represented 11 percent of the total settlement value. The court found that the award was well below the 25 percent benchmark typically awarded in common fund cases in the Ninth Circuit. The fee request was also justified under the lodestar cross-check since class counsel spent more than 5,000 hours litigating this complex case. Finally, the incentive awards of $2,500 were reasonable since the named plaintiffs were actively engaged in the prosecution and settlement of the cases.

The case is No. C-13-3440.

Attorneys: Daniel Morley Kekoa Hattis (Hattis Law) and Michael W. Sobol (Lieff Cabraser Heimann & Bernstein, LLP) for David Hansell. Steven J. Brodie (Carlton Fields Jorden Burt, PA) and Joel Steven Feldman (Sidley Austin LLP) for TracFone Wireless, Inc. and Wal-Mart Stores, Inc.

Companies: TracFone Wireless, Inc.; Wal-Mart Stores, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews