Paradigm Shift? Court Approves Unusual Claims Made Settlement in a Common Fund (TCPA)World

It doesn’t take a Telephone Consumer Protection Act (“TCPA”) historian to know that the vast majority of TCPA class settlements are common fund settlements. Such settlements result in an “all in” number that a Defendant pays to be rid of the case and earn a release from all class members. The attorney’s fees, costs of notice, and any other expense of administration is pulled out of the fund, with the remainder paid to class members—usually on a claims made basis.

Indeed, this model of resolution is used so often in TCPA class action settlements that a “market” rate exists for such settlements on a per-class member basis, although some pesky attorneys *ahem* Jay Edelson *ahem* like to buck that trend with per-call settlements on occasion.

With all of that in mind, the recent settlement in Parker v. Universal Pictures, Case No: 6:16-cv-1193-Orl-41DCI, 2019 U.S. Dist. LEXIS 59806 (M.D. Fl. Feb. 28, 2019) is about as unusual as finding sausage wrapped in a banana peel. There the Court approved a true claims made settlement with fees and costs of administration separately paid by the Defendant. And while the settlement fund maxes out at a potential $192MM, it is likely the payment to class members would be quite a bit lower.

To the specifics. In Parker there were 4 settlement classes, one tethered to purported DNC violations but with the bulk of the classes focused on TCPA. A total of 523,544 persons occupied the four classes. Each class member would be entitled to make a claim of either $35.00 or $50.00 depending on the class. The total fund is up to $19.2MM. Out of that fees and costs of administration will be paid. Interestingly, the Plaintiffs’ counsel sought only $200k in fees, likely a recognition that the claims rate will be lowish and the ultimate benefit to the class will not come anywhere near $19.2MM. (Still, even assuming a 5% claims rate I see about $1MM in value to the class so these guys sold themselves a bit short. But more math in a minute.)

So how does this compare to “regular” TCPA class settlements? Well in this sort of “all calls” settlement we’d expect to see a settlement in the $4 per class member range (Plaintiffs’ counsel will disagree). That would net a $2MM deal. And that would be all Defendant would be required to pay no matter what. Class counsel would get their cut—about $600k—and after administration a million bucks or so would be left for the class. Depending on the claims rate claiming class members might receive $100.00 bucks or more. That might seem high (or low) depending on how you look at it, but these settlements recognize that the vast majority of settlement class members lack valid claims and those submitting claims get to receive a check with little effort and with no challenge to their claim.

What the Parker Defendants have chosen to do is gamble a bit. If the claims rate in the settlement comes in at 9% or less, then they “win.”  Their total outlay in that scenario will be below the $2MM threshold of the anticipated “common fund” settlement they presumably could have had. If, however, the participation rate in the settlement is 10% or higher then they “lose”—paying more in this settlement than they would have had they stuck to the TCPA pack and settled on a common fund basis.

Of course if every member of the settlement class submits a claim the Defendant will really get crushed relative to other TCPA settlements, but that is very unlikely.

The key component to making this a successful settlement for the Defendant, therefore, is for the class not to find out about the settlement and make claims. (Cynical, but true.) Interestingly, the Parker settlement contemplates e-mail class notice. Since the class is a bunch of gamers—the “calls” at issue were text messages about Warcraft—you do probably have a better chance of reaching these folks electronically than via their dusty un-opened physical mailboxes. But notably the class notice plan does not call for any public announcement or publication notice—all the better to keep class members in the dark. I’m kidding. Probably.

So will the gamble pay off? We’ll keep an eye out for final approval when the statistics on the settlement will be made public. Until then, be sure to check your AOL mail accounts for a claim form.