A scene from the Troutman Firm retreat…
Well I fully expect this to be the last blog of the year–although I will probably sneak back to my laptop at some point and fire off another one because I am pathological. But I am really going to try not to.
But this is a really cool case to end the year on because it is pretty beefy and esoteric, and that’s just my favorite type of ruling.
In Murrary v. Grocery Delivery E-Services USA, 2022 WL 17729630, No. 21-1931 (1st Cir. Dec. 16, 2022) the First Circuit Court of Appeals refused to overrule an objection made to a big TCPA class action settlement involving Hello Fresh.
The problem for the settlement is that there was a common fund established for members of multiple classes. And members of the classes had different claims–and the strength of those claims varied–so a pro rata distribution from the fund to all members of the different classes equally may or may not be fair. And in the First Circuit’s opinion the members of the different classes had to have SEPARATE COUNSEL to protect the interest of the different groups of class members.
So let’s unpackage this a bit.
First, what is a common fund settlement?
These are VERY common settlement types in TCPA class actions. In a class action the Court must approve the form and amount of any settlement. One way to structure a settlement is for the Defendant to just agree to pay a pool of money–usually based on the number of class members–to be divided between class members and attorneys fees as the court sees fit.
MOST (but not all) common fund settlements are “claims made” settlements. That means that ONLY those members of the class who make a claim against the fund will receive any money. And depending on whether the settlement is reversionary or not the money will either be split evenly across class members (pro rata) or will be returned to the defendant.
Now this process works great where there is just ONE set of class members, but in Murray there were several different classes. And the members of these classes had different claims under different portions of the TCPA. Yet they were all supposed to get an EQUAL share of the settlment.
The First Circuit said this sort of arrangement was potentially unfair because some class members–say the DNC class–have pretty strong claims but others–say the ATDS class–have weak claims.
The Murray court was particularly focused on the weakness of the ATDS class–which the court considered “Extinguished” by Facebook–and seemed uneasy that members of this class would recover money that, in fairness, should have gone to DNC class members, who presumably had stronger claims.
But the First Circuit didn’t have enough information to really parse these issues and decided the proper remedy was for the different classes to have DIFFERENT counsel. That was the interests of all class members can be protected and there won’t be any conflict of interest.
Which raises an interesting point.
On remand and CURRENT class counsel continue to represent ANY portion of the classes or are they completely conflicted out?
Since the First Circuit found, in essence, that a conflict exists between the members of the various classes, and since current counsel was representing all members of all classes, I dont see how any of them can continue to represent any of the classes moving forward. So a whole new panel of lawyers will need to be brought in to litigate the case.
And what if Defendant no longer wants to settle?
With current class counsel seemingly sidelined–maybe I am overreading this, but I dont think I am–the different classes will now have to proceed with different counsel. Seems like a real opportunity for the Defendant to aggressively litigate against counsel unfamiliar with the case.
Really interesting stuff.
Obviously this could all have been avoided had different pools of money been established for the different classes–or if the complaint had not pursued multiple classes in the first place (REAL LESSON there for plaintiffs lawyers.)
For TCPA defendants, this is more of an FYI. No practice change needed necessarily, but you might want to whisper in class counsel’s ear when they try to pursue multiple classes in a single case–“who are you planning to have come in to represent the different classes if this case settles on a classwide basis?”
I wonder what they’ll say?
For now I am off to my long winters’ nap. Here is a picture of the team in our pajamas to reinforce the image for you.
Oh, and be on the look out for our HOLIDAY edition video podcast–yes we recorded a podcast from our retreat mansion yesterday–which I think you all will really enjoy.
See you next year TCPAWorld.