Antitrust Law Daily Wrap Up, PRIVACY—S.D. Cal.: Settlement preliminarily approved for NutriSystem customers claiming Schwan’s violated TCPA, (Jul 16, 2014)

By Greg Hammond, J.D.

The federal district court in San Diego has preliminarily approved a settlement between Schwan’s Home Service, Inc. and NutriSystem, Inc. customers over allegations that Schwan’s violated the Telephone Consumer Protection Act (TCPA) by placing prerecorded or automated telephone calls to past or present NutriSystem customers who did not provide their prior express consent. In granting the customers’ motion for preliminary approval, the court determined that the proposed settlement was fundamentally fair, adequate, and reasonable. The settlement provides a $20 settlement check and an $80 Schwan’s merchandise voucher as the maximum recovery for each claiming class member (Knutson v. Schwan’s Home Service, Inc., July 14, 2014, Curiel, G.).

Background. Schwan’s delivers frozen foods to residential customers and previously contracted with NutriSystem to deliver weight-loss food products to NutriSystem customers on Schwan’s routes. As part of the relationship, Schwan’s received telephone numbers, addresses, and other information for NutriSystem customers. In the event Schwan’s was unable to make a delivery to NutriSystem customers, it autodialed those individuals and left prerecorded messages stating that their delivery must be rescheduled. NutriSystem customers filed a class action suit, alleging that Schwan’s calls to their phones violated the TCPA. The court granted class certification in September 2013, and NutriSystem customers subsequently moved for preliminary approval of class action settlement, which Schwan’s did not oppose.

Fairness. Before granting approval of a class action settlement, courts (1) assess whether a class exists and (2) whether the proposed settlement is fundamentally fair, adequate, and reasonable. However, because the court previously granted class certification, the only issue it needed to examine was the fairness of the settlement agreement.

In scrutinizing a number of factors, the court determined that fairness weighed in favor of preliminary approval of the proposed settlement, because: (1) there would be significant costs, risks, and delays to both sides if litigation continues; (2) both sides appear to have thoroughly investigated, litigated, and evaluated the factual strengths and weaknesses of the case and have engaged in sufficient discovery to support settlement; (3) counsel on both sides believe the settlement to be fair and reasonable; and (4) the amount of the settlement—up to $1.2 million in cash and approximately $1.34 million in merchandise vouchers—was reasonable.

The case number is 3:12-cv-00964-GPC-DHB.

Attorneys: Abbas Kazerounian (Kazerounian Law Group, APC) for Erik Knutson. Neil R. O'Hanlon (Hogan Lovells US LLP) for Schwan's Home Service, Inc.

Companies: Schwan’s Home Service, Inc.; NutriSystem, Inc.

Cases: Privacy CaliforniaNews