Antitrust Law Daily Wrap Up, PRIVACY—S.D. Ohio: Junk fax settlement agreement approved, (Feb 10, 2014)

By Jody Coultas, J.D.

The federal district court in Cincinnati has granted, in part, approval of a proposed settlement agreement in a Telephone Consumer Protection Act (TCPA) class action filed by fax recipients against WM Healthcare Solutions, Inc. (Michel v. WM Healthcare Solutions, Inc., February 7, 2014, Dlott, S.). The court found that the settlement was fair and adequate, but it reduced the $10,000-per-named-plaintiff incentive award sought.

WM allegedly violated the TCPA by sending advertisements to fax machines in medical professionals’ offices. The TCPA prohibits the use of any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.

The court granted a motion for preliminary approval of a class action settlement and notice to the class. Class counsel for the fax recipients sought final approval of a proposed class action settlement and an award of attorney fees in the amount of 1/3 of the $4,375,000 settlement fund, or $1,458,333.33.

First, the court noted that the class met the certification requirements of Federal Rules of Civil Procedure 23(a) and (b)(3). WM Healthcare sent more than 386,000 fax numbers on at least one occasion. Questions of law and fact common to the class. Despite the individual issues of permission and established business relationships, the predominant factual was the same for each class member. The TCPA entitles a person or entity to receive $500 for each violation and permits treble damages. One of the Class Representatives received four junk faxes, so his interests were aligned with those class members who received more than one junk fax, and would adequately represent other class members. Common factual issues predominated over any individual issues and a class action was the superior method of adjudicating the claims.

The proposed settlement was fair and reasonable except as to the $10,000-per-named-plaintiff incentive award sought, according to the court. In its evaluation of the fairness, reasonableness, and adequacy of a proposed class action settlement, courts look at: “(1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of success on the merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent class members; and (7) the public interest.” The court did not identify a risk of fraud or collusion, and the parties engaged in arms-length negotiations with the assistance of mediators. Despite the relative lack of complexity of the matter, resolving the dispute in a class-wide settlement will result in substantial savings of time for all parties. Although discovery was not substantial, it was adequate. No Class Members filed objections to the proposed settlement, and the settlement was in the best interest of the public.

Because the court did not approve of the incentive award requested, it reduced the amount of the incentive award to $3,000 per named plaintiff and approved the settlement agreement as modified. Courts that have awarded incentives to class representatives to encourage members of a class to become class representatives and to reward class representatives for their “often extensive involvement with a lawsuit.” The proposed settlement would provide each Class Member with a monetary benefit of approximately $190, while each Class Representatives received $10,000. This disparity was prima facie evidence that the settlement was unfair to the class, and class counsel failed to justify the disparity. $3,000 for each Class Representative was more appropriate given that the Class Members would likely never have recovered damages from as their claims, individually, would not have been worth bringing. This amount was not so disproportionate as to create a divergence of interests between the representative and class members.

The court also granted attorney fees to class counsel. Class counsel requested 1/3 of the settlement fund. Based on a review of numerous other cases involving attorney fee awards in common fund class action settlements, an award of 15% of the settlement fund was more appropriate. Case law also supported an award of attorney fees in the amount of 15% of the settlement fund. The court’s award of 15% of the settlement fund would result in each class member receiving nearly half of his or her statutory damages under the TCPA and would fairly compensate Class Counsel for the work done and the results achieved without providing them a windfall.

The case is No. 1:10-cv-638.

Attorneys: George Demetrios Jonson (Montgomery, Rennie & Jonson) for Patrick D. Michel, DDS. Amanda Martinsek (Thacker Martinsek LPA) for WM Healthcare Solutions, Inc.

Companies: WM Healthcare Solutions, Inc.

Cases: ConsumerProtection Privacy OhioNews