1. law, govt and politics

Case: 1:11-cv-04462 Document #: 146-1 Filed: 03/16/15 Page 1 of 21 PageID #:6216
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Craftwood Lumber Company, an Illinois
corporation, individually and on behalf of all
others similarly situated,
Case No. 11-cv-4462
Hon. Amy J. St. Eve
Plaintiffs,
v.
Interline Brands, Inc., et al.,
Defendants.
Memorandum of Law in Support of Plaintiffs’ Unopposed Motion for Final Approval
of Settlement and Certification of Settlement Class
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Table of Contents
Page
Introduction................................................................................................................................1 Argument ...................................................................................................................................2 I. II. III. The Implemented Notice Plan Satisfies Due Process ....................................................2 A. The Class Notice Program Was Designed to and Did Reach a High
Percentage of the Class .......................................................................................2 B. The Class Notice Provided Thorough Information to Class Members ..............4 The Court Should Grant Final Approval to the Settlement............................................6 A. The Guidelines for Final Approval of Class Settlements ...................................6 B. The Standards Support Final Approval ..............................................................7 1. The settlement’s guaranteed financial benefits for the class are a
better result than continued litigation......................................................7 2. Absent a settlement, intense litigation of this action would have
continued for years ................................................................................12 3. There is strong class support for the settlement ....................................12 4. Opinion of class counsel .......................................................................13 5. Stage of the proceedings .......................................................................14 Certification of the Settlement Class Is Appropriate ...................................................14 Conclusion ...............................................................................................................................15 i
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Table of Authorities
Page(s)
Cases
American Civil Liberties Union v. United States Gen. Servs. Admin.,
235 F. Supp. 2d 816 (N.D. Ill. 2002) .................................................................................13
Americana Art China Co. v. FoxFire Printing & Packaging, Inc.,
743 F.3d 243 (7th Cir. 2014) ...............................................................................................8
Armstrong v. Board of Sch. Directors,
616 F.2d 305 (7th Cir. 1980) ...............................................................................6, 7, 11, 14
In re AT&T Mobility Wireless Data Servs. Litig.,
270 F.R.D. 330 (N.D. Ill. 2010) .......................................................................................2, 7
In re AT&T Mobility Wireless Data Servs. Sales Tax Litig.,
789 F. Supp. 2d 935 (N.D. Ill. 2011) ...........................................................................12, 13
Burns v. Elrod,
757 F.2d 151 (7th Cir. 1985) ...........................................................................................2, 4
Butler v. American Cable & Tel., LLC,
No. 09 CV 5336, 2011 WL 2708399 (N.D. Ill. July 12, 2011) ...........................................7
CE Design Ltd. v. King Architectural Metals, Inc.,
637 F.3d 721 (7th Cir. 2011) .........................................................................................9, 12
CE Design Ltd. v. King Supply Co.,
No. 09 C 2057, 2012 WL 2976909 (N.D. Ill. July 20, 2012) ............................................11
Centerline Equip. Corp. v. Banner Pers. Servs., Inc.,
545 F. Supp. 2d 768 (N.D. Ill. 2008) .................................................................................10
Chapman v. First Index, Inc.,
No. 1:09-cv-05555, 2014 WL 840565 (N.D. Ill. Mar. 4, 2014) ..........................................9
Chapman v. Wagener Equities, Inc.,
747 F.3d 489 (7th Cir. 2014) .............................................................................................12
Cook v. McCarron,
No. 92 C 7042, 1997 WL 47448 (N.D. Ill. Jan. 30, 1997) ................................................11
Eisen v. Carlisle & Jacquelin,
417 U.S. 156 (1974) .............................................................................................................2
ii
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Fauley v. Metropolitan Life Ins. Co.,
No. 14 CH 1518 (Ill. Cir. Ct.) ....................................................................................................8
G.M. Sign, Inc. v. Brinks Mfg. Co.,
No. 09 C 5528, 2011 WL 248511 (N.D. Ill. Jan. 25, 2011) ................................................9
Garner v. State Farm Mut. Auto. Ins. Co.,
No. CV-08-1365 CW (EMC), 2010 WL 1687832 (N.D. Cal. Apr. 22,
2010) ..................................................................................................................................13
Gautreaux v. Pierce,
690 F.2d 616 (7th Cir. 1982) .............................................................................................13
Ira Holtzman, C.P.A., & Assocs., Ltd. v. Turza,
728 F.3d 682 (7th Cir. 2013) .......................................................................................10, 14
Isby v. Bayh,
75 F.3d 1191 (7th Cir. 1996) ...............................................................................................6
Landsman & Funk, P.C. v. Lorman Bus. Ctr.,
No. 08-cv-481-bbc, 2009 WL 602019 (W.D. Wis. Mar. 9, 2009) ....................................10
Lipuma v. American Express Co.,
406 F. Supp. 2d 1298 (S.D. Fla. 2005) ..............................................................................12
Malta v. Federal Home Loan Mortgage Co.,
No. 10-CV-1290 BEN NLS, 2013 WL 444619 (S.D. Cal. Feb. 5, 2013) .......................8, 9
Mangone v. First USA Bank,
206 F.R.D. 222 (S.D. Ill. 2001) ...........................................................................................2
McKinnie v. JP Morgan Chase Bank, N.A.,
678 F. Supp. 2d 806 (E.D. Wis. 2009) ...........................................................................7, 13
In re Mexico Money Transfer Litig.,
164 F. Supp. 2d 1002 (N.D. Ill. 2000), aff’d, 267 F.3d 743 (7th Cir. 2001) .....................13
Murray v. GMAC Mortgage Corp.,
434 F.3d 948 (7th Cir. 2006) .............................................................................................10
In re PaineWebber Ltd. P’hips Litig.,
171 F.R.D. 104 (S.D.N.Y.), aff’d, 117 F.3d 721 (2d Cir. 1997)........................................11
Perez v. Asurion Corp.,
501 F. Supp. 2d 1360 (S.D. Fla. 2007) ..............................................................................13
iii
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In re Prudential Ins. Co. Sales Pracs. Litig.,
177 F.R.D. 216 (D.N.J. 1997) ..............................................................................................4
Redman v. RadioShack Corp.,
768 F.3d 622 (7th Cir. 2014) .............................................................................................11
Reynolds v. Beneficial Nat’l Bank,
288 F.3d 277 (7th Cir. 2002) .............................................................................................11
Saf-T-Gard Int’l, Inc. v. Wagener Equities, Inc.,
251 F.R.D. 312 (N.D. Ill. 2008) ...........................................................................................9
Scott v. Westlake Servs. LLC,
740 F.3d 1124 (7th Cir. 2014) .............................................................................................9
Swift v. Direct Buy, Inc.,
No. 2:11-cv-401, 2013 WL 5770633 (N.D. Ind. Oct. 24, 2013) .......................................11
Synfuel Techs., Inc. v. DHL Express (USA), Inc.,
463 F.3d 646 (7th Cir. 2006) ...............................................................................................7
Torrisi v. Tucson Elec. Power Co.,
8 F.3d 1370 (9th Cir. 1993) ...............................................................................................11
In re U.S. Oil & Gas Litig.,
967 F.2d 489 (11th Cir. 1992) .............................................................................................6
Vandervort v. Balboa Cap. Corp.,
8 F. Supp. 3d 1200 (C.D. Cal. 2014) ...................................................................................8
Statutes and Rules
Class Action Fairness Act, 28 U.S.C. § 1715(b) .................................................................4, 13
Federal Rules Civil Procedures
Rule 23 ....................................................................................................................... passim
Other Authorities
Newberg on Class Actions (3d ed. 1992) ..................................................................................2
Newberg on Class Actions (4th ed. 2002) .................................................................................4
iv
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Introduction
Following three and one-half years of hard-fought litigation, the Court entered an
order preliminarily certifying a settlement class and approving a class-wide settlement. The
settlement commits Interline to pay $40 million, one of the largest TCPA recoveries ever, to
the class of its fax ad recipients. The settlement will automatically distribute net settlement
proceeds to class members, without requiring members to submit claims.
Class representative Craftwood now asks the Court to enter an order that finally
certifies the settlement class and grants final approval to the settlement. The settlement
represents an outstanding recovery for the settlement class, far exceeding baseline standards
for approval:
•
The settlement provides substantial compensation to class members. The
gross settlement, before attorneys’ fees/costs and an incentive award, averages about $71 per
facsimile transmission. Because class members received, on average, almost seven fax
transmissions each, the gross recovery averages $492 per member. And class members will
be compensated today, rather than having to wait years for appeals and assuming the risk of
inability to collect a future judgment.
•
Under this settlement—unlike the vast majority of other TCPA settlements—
settlement checks automatically will be sent to class members. Class members that provided
proof of additional fax advertisements not reflected in Interline’s transmission records will be
paid for those fax ads as well.
•
Following preliminary approval, the claims administrator executed a robust
and informative class notice plan. Based on Interline’s transmission data and several
additional searches by or on behalf of the claims administrator, informative class notice
packages were sent to 95 percent of the 80,824 fax telephone numbers to which Interline had
transmitted the ads. The notice packages were supplemented by three consecutive weekly
publications in the national edition of USA Today. The claims administrator also established
1
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a website, www.ibisettlement.com, at which class members could view and download
numerous documents about the lawsuit and the settlement.
•
The class’s reaction has been overwhelmingly positive. None of the 80,000-
plus class members has objected or even expressed dissatisfaction with the settlement. Only
14 class members have opted out, a miniscule number amounting to .017 percent of the class.
Argument
I.
The Implemented Notice Plan Satisfies Due Process
Rule 23 requires the class receive “the best notice that is practicable under the
circumstances, including individual notice to all members who can be identified through
reasonable effort.” Fed. R. Civ. P. 23(e); accord Eisen v. Carlisle & Jacquelin, 417 U.S.
156, 173 (1974); see also In re AT&T Mobility Wireless Data Servs. Litig., 270 F.R.D. 330,
351 (N.D. Ill. 2010) (AT&T Mobility I) (St. Eve, J.). “Neither Rule 23 nor due process
require ‘receipt of actual notice by all class members;’ rather, ‘notice should be mailed to the
last known addresses of those who can be identified and publication used to notify others.’”
Mangone v. First USA Bank, 206 F.R.D. 222, 231 (S.D. Ill. 2001) (internal citations omitted;
quoting 2 Newberg on Class Actions, § 8.02 (3d ed. 1992)); see also Burns v. Elrod, 757
F.2d 151, 154 (7th Cir. 1985).
A.
The Class Notice Program Was Designed to and Did Reach a High
Percentage of the Class
In its preliminary approval order, the Court approved three forms of notice: (1) direct
notice by facsimile or mailing of a Notice of Class Action and Proposed Settlement; (2)
publication notice in a newspaper of national circulation; and (3) establishment of a
settlement website (ibisettlement.com) containing additional information about the lawsuit
and the settlement. (Dkt. No. 136 ¶ 7.)
To implement the notice plan, Interline delivered a Master Facsimile Transmission
Database (“MFTD”) to the claim administrator, Kurtzman Carson Consultants LLC.
2
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(Declaration of Tony Dang, Senior KCC Consultant in charge of overseeing administration
of the settlement (“Dang Decl.”) ¶ 4.) The MFTD contained some 80,824 unique fax
telephone numbers to which Interline had successfully transmitted fax advertisements and
the number of fax transmissions sent to each. (Id.) For a little over three-fourths of these
numbers, the database included the name and address associated with the recipient’s fax
telephone number. (Id.; see also Dkt. No. 131-5 (Murphy Decl.) ¶ 4.)
KCC sent a notice packet by facsimile to all telephone numbers in the database.
(Dang Decl. ¶ 6.) (The package contents are discussed in depth at pp. 4-5, infra.) KCC was
able to successfully fax notice packets to 57,538 telephone numbers, representing about 71
percent of those in the database. (Id.)
KCC proceeded to deliver notice packets by mail to class members for whom fax
notice was unsuccessful. (Dang Decl. ¶ 7.) In cases where there the MFTD lacked name or
address information, KCC conducted exhaustive searches. The company engaged three
outside search firms to conduct overlapping reverse fax telephone number lookups. (Id. ¶¶ 4,
8.) For numbers for which the search firms could not identify an address, KCC performed
manual Google searches using the known fax telephone numbers. (Id. ¶ 8.) Through these
efforts, KCC mailed notice packets to addresses associated with an additional 19,211 fax
telephone numbers. (See id. ¶¶ 7-10.)
All told, KCC has successfully faxed, mailed or re-mailed notice packets to some
76,749 presumptive class members, representing 95 percent of the class. (Dang Decl. ¶ 11.)1
The direct notice was supplemented by publication notice, as provided in the
settlement agreement and set forth in the preliminary approval order. (See Dkt. No. 128 at
11 (CASA ¶ 8).) A prominent class notice was published in the national edition of USA
Today on three consecutive Wednesdays starting January 7 (the same day as notice packets
1
We are using the 80,824 unique fax telephone numbers as a proxy for class members, recognizing
that there are instances where a name and address is associated with multiple fax telephone numbers.
(See Dang Decl. ¶ 5, n.3.)
3
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were faxed to the class). (Dkt. No. 144, Ex. A, pp. 5-11.)
In addition, KCC established the
settlement website, operational at all times since January 7. Among other things, the website
contains downloadable copies of a more detailed class notice and pertinent court documents,
including motions for preliminary approval, attorneys’ fees/costs and incentive award.
(Dang Decl. ¶ 14.)
Finally, on November 26, 2014, in compliance with the Class Action Fairness Act, 28
U.S.C. § 1715(b), Interline provided notice of the settlement, including required court
documents, to the Attorney General or other appropriate official of each state and U.S.
territory. (Dkt. No. 129.)
Due Process does not require that every class member receive actual notice, as long as
the court selected a means likely to apprise interested parties. See Alba Conte and Herbert B.
Newberg, Newberg on Class Actions, § 11:53 (4th ed. 2002). As one court put it, “Due
Process does not require perfection.” In re Prudential Ins. Co. Sales Pracs. Litig., 177
F.R.D. 216, 234 (D.N.J. 1997). The notice plan here easily satisfies Due Process and Rule
23(e). Notice was provided to all class members that were reasonably ascertainable by
available information. And even though Rule 23(e) does not require parties to “exhaust
every conceivable method of identif[ication],” Burns, 757 F.2d at 154, the claim
administrator did virtually that, retaining three outside search firms and conducting internal
Google searches for name and address information. For the small percentage that could not
be faxed or mailed notice, notice by publication was the best method practicable. See id.
B.
The Class Notice Provided Thorough Information to Class Members
The class notice packets gave class members all information they needed to evaluate
the settlement. The enclosed “Notice of Class Action and Proposed Settlement” provided a
two-page summary of key settlement terms and procedures, stated in plain, easily understood
English. The notice informed class members of, among other things: (1) the Court’s
preliminary certification of a settlement class and approval of settlement; (2) the nature of the
lawsuit; (3) the material terms of settlement; (4) how members’ individual payment amounts
will be calculated, and members’ ability to claim additional transmissions; (5) the amounts to
4
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be sought as attorneys’ fees and incentive award; (6) all options available to class members;2
(7) how members may opt-out of the settlement; (8) how members may object to settlement;
and (9) the date, time and place of the final approval hearing. (Dang Decl. ¶ 6, Ex. A.) The
notice also informed members how to obtain additional information by visiting the settlement
website, by contacting KCC at a toll-free telephone number, and by accessing the Court file
on PACER. (Id. p. 2.)
All notice packets included a Class Member Information Form, an important tool in
this settlement. (Dang Decl. ¶ 6, Ex. B.) The first part of the form asked members to update
or correct their names and addresses with the claims administrator. (Id. Ex. B, p. 1.) The
second part informed members how many fax transmissions Interline had reported for them,
and the specific dates of those transmissions. (Id.) Members were invited to submit proof
they received fax advertisements from Interline, in addition to the ones reported on the form.
(Id.)3 The final section asked members to certify under penalty of perjury that the
information provided was true and correct. (Id. p. 2.)4
All forms of notice informed class members of the settlement website,
ibisettlement.com. (E.g., Dang Ex. A, p. 1.) By visiting the site, members have been able to
access and download: (1) a more detailed notice of the settlement; (2) a complete copy of the
settlement agreement; (3) the First Amended Complaint; (4) the motion for preliminary
approval (and all supporting documents); (5) the Court’s preliminary approval order; (6) the
motion for attorneys’ fees and costs (and supporting documents); and (7) Craftwood’s
motion for an incentive award (and supporting documents). The website has a tab for
2
The first option was to “Do Nothing,” in which case “you will receive a check for the Faxes, if any,
indicated on the Class Member Information Form and the check will be mailed to the address indicated on
the Form.” (Dang Decl. Ex. A, p. 2.)
3
The class notice informed members that the settlement would be based on updated information,
including additional fax transmissions for which the claims administrator determined additional credit
was due.
4
Because this is an automatic distribution settlement, members are not required to return the form.
(See Dkt. No. 128 at 11 (CASA ¶ 9).) All members that were projected to receive in excess of $600 were
asked to complete and submit an enclosed IRS Form W-9. (Dang Decl. ¶ 6.)
5
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Frequently Asked Questions, designed to respond to the most common inquiries. (Dang
Decl. ¶ 15, Ex. F.) Finally, the website informs members that they can telephone the claims
administrator to have their questions answered and obtain additional information about the
case and the settlement. (See www.ibisettlement.com, visited 3/11/15.)
Because the parties have fully complied with the approved notice plan, the Court
should affirm its finding at preliminary approval that the forms and methods of notice were
“compl[y] with Fed. R. Civ. P. 23(e) and due process, constitutes the best notice practicable
under the circumstances, and is sufficient notice to all persons entitled to notice of settlement
of this Action.” (Dkt. No. 136 ¶ 7.)
II.
The Court Should Grant Final Approval to the Settlement
“Federal courts naturally favor the settlement of class action litigation.” Isby v. Bayh,
75 F.3d 1191, 1196 (7th Cir. 1996). “In the class action context in particular, there is an
overriding public interest in favor of settlement. Settlement of the complex disputes often
involved in class actions minimizes the litigation expenses of both parties and also reduces
the strain such litigation imposes upon already scarce judicial resources.” Armstrong v.
Board of Sch. Directors, 616 F.2d 305, 313 (7th Cir. 1980) (citations omitted), overruled on
other grounds, Felzen v. Andreas, 134 F.3d 873 (7th Cir. 1998); see also In re U.S. Oil &
Gas Litig., 967 F.2d 489, 493 (11th Cir. 1992) (settlement is particularly favored in class
actions, where the inherent costs, delays and risks of continued litigation might otherwise
overwhelm any potential class benefit).
A.
The Guidelines for Final Approval of Class Settlements
A proposed class settlement should be approved if the court, after allowing absent
class members the opportunity to be heard, finds that the settlement is “fair, reasonable, and
adequate.” Fed. R. Civ. P. 23(e)(2). In deciding whether to give final approval to a class
settlement, courts in this circuit consider: (1) the strength of plaintiffs’ claims compared to
the terms of the proposed settlement; (2) the likely complexity, length and expense of
continued litigation; (3) the amount of opposition to settlement among affected parties;
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(4) the opinion of competent counsel; and (5) the stage of the proceedings and the amount of
discovery completed. Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 653
(7th Cir. 2006) (citing Isby, 75 F.3d at 1199). In addition, courts consider the defendant’s
ability to pay. Armstrong, 616 F.2d at 314 (citing Manual for Complex Litig., § 1.46, at 56
(West 1977)). And a fairness finding is bolstered where, as in this case, the proposed
settlement was reached only after zealous, arms-length negotiations and acceptance of the
mediator’s proposals. See Butler v. American Cable & Tel., LLC, No. 09 CV 5336, 2011
WL 2708399, at *8 (N.D. Ill. July 12, 2011); McKinnie v. JP Morgan Chase Bank, N.A., 678
F. Supp. 2d 806, 812 (E.D. Wis. 2009).
B.
The Standards Support Final Approval
1.
The settlement’s guaranteed financial benefits for the class are a
better result than continued litigation
As this Court has observed, “[t]he most important settlement approval factor is ‘the
strength of plaintiff’s case on the merits balanced against the amount offered in the
settlement.’” AT&T Mobility I, 270 F.R.D. at 346 (quoting Synfuel Techologies, 463 F.3d at
653). At the same time, however, “[b]ecause the essence of settlement is compromise, courts
should not reject a settlement solely because it does not provide a complete victory to the
plaintiffs.” Id. at 347 (quotations omitted).
The proposed $40 million settlement measures well against any standard. It is the
largest junk fax recovery ever achieved, and ranks among the largest recoveries in any type
of TCPA litigation. (Dkt. No. 131-8 (Zimmermann Decl.) ¶ 27.) The claims administrator
now reports 559,265 fax transmissions to class members during the class period. (Dang
Decl. ¶¶ 5, 19.)5 The gross settlement recovery therefore averages an estimated $71 for each
5
The MFTD originally provided by Interline identified 559,245 fax transmissions. (Dang Decl. ¶ 4.)
This was increased by 20 on the basis of proof submitted by class members on the Class Member
Information Form. (Id. ¶ 19.)
7
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documented fax transmission, or $492 per class member.6
A key feature of the settlement is that class members will be compensated without
having to submit claims or even prove they received any faxes. (See Dkt. No. 128 at 6-7
(CASA ¶ 3(C).) Members will be paid pro rata based on the number of successful fax ad
transmissions to their phone numbers, as reflected in Interline’s transmission records. (Id.)7
And unlike the vast majority of TCPA class settlements, there is no reversion to the
defendants. (See id. ¶ 3(B).)8 All net settlement proceeds will be distributed to class
members at addresses on file with Interline, found by the claims administrator, or reported by
class members.
The ultimate benefit to the class of continued litigation, on the other hand, would have
been highly uncertain. The brief in support of preliminary approval discussed in depth the
potential litigation results if the case had not settled. (See Dkt. No. 131-2 at 28-31.)
Obviously the Court’s August 29 sanctions order placed Craftwood in a position of strength.
Under that order, Interline was precluded from arguing that the faxes were solicited, or were
sent to parties with whom it had an established business relationship. (Dkt. No. 59 at 32.)
6
Claim administration is currently projected to cost $262,000. (Dang Decl. ¶ 22.) The estimates were
made by dividing the $39,738,000 balance by the number of transmissions (559,265) and presumptive
class members (80,824).
7
As noted earlier, although the Class Member Information Form enabled members to obtain credit for
additional Interline fax ads, no class member was required to return the form in order to be paid for the
transmissions reported on the form.
8
Numerous TCPA junk fax class settlements require class members to submit claims, often with
additional documentation, with reversion of all unclaimed funds to the defendant. See Americana Art
China Co. v. FoxFire Printing & Packaging, Inc., 743 F.3d 243, 245 (7th Cir. 2014); see also Fauley v.
Metropolitan Life Ins. Co., No. 14 CH 1518 (Ill. Cir. Ct.) (Mot. Prelim. Approval Class Action Settlement
Agreement, Ex. A, ¶ 4, filed July 30, 2014). Many approved TCPA settlements place arbitrary caps on a
class member’s recovery, further depressing the defendant’s actual payment. See Vandervort v. Balboa
Cap. Corp., 8 F. Supp. 3d 1200, 1204, 1209 (C.D. Cal. 2014) (class members without copies of faxes
limited to $275 total payment, regardless of number of faxes received; court characterizes settlement as
“an exceptional result”); Malta v. Federal Home Loan Mortgage Co., No. 10-CV-1290 BEN NLS, 2013
WL 444619, at *7 (S.D. Cal. Feb. 5, 2013); Fauley Ex. A ¶ 7(a), (b) (class members may recover for no
more than 10 transmissions, regardless of actual number of faxes received). This settlement eschews
these payment-limiting devices in favor of automatic distribution to all class members based on the
number of fax ads received.
8
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This had the dual effect of increasing the likelihood a class would be certified and
establishing a prima facie case for Interline’s liability.
But Interline, demonstrating the tenacity that has been a hallmark of its defense,
sought reconsideration of the sanctions ruling9 and moved to dismiss based on a tactical
“settlement offer” to pick off Craftwood. (See Dkt. Nos. 117-119.) Briefing on these
motions was underway at the time of settlement. As we discussed in the preliminary
approval brief, Craftwood believes it would have defeated both motions and the case would
have progressed.10 (See Dkt. No. 131-2, pp. 28-29.) But nothing in litigation is certain, and
there was some risk Interline would have reclaimed the ability to assert the prior express
permission and established business relationship defenses, or succeeded in derailing the case
on mootness grounds.
Class certification presented additional risks, particularly if Interline had successfully
recovered its consent-based defenses. Supreme Court and Seventh Circuit precedents
instruct district courts to conduct a “rigorous analysis” of the Rule 23 requirements in
deciding contested certification motions (CE Design Ltd. v. King Architectural Metals, Inc.,
637 F.3d 721, 723 (7th Cir. 2011)), and numerous strategies are potentially available to a
TCPA defendant to defeat class certification. Class certification has been denied in this
district where the defendant showed that individualized inquiries surrounding consent
precluded certification (Chapman v. First Index, Inc., No. 1:09-cv-05555, 2014 WL 840565,
at *3 (N.D. Ill. Mar. 4, 2014) (Ellis, J.)); that the court “would have to engage in a classmember-specific inquiry to determine whether each recipient” gave permission or had an
EBR at the relevant time (G.M. Sign, Inc. v. Brinks Mfg. Co., No. 09 C 5528, 2011 WL
9
Interline argued that Craftwood should have filed motions to compel before any sanctions could be
imposed. (See Dkt. Nos. 121-123.) Interline also argued that it did not act willfully or in bad faith and
that lesser, if any, sanctions should have been imposed. (Id.)
10
Craftwood and its counsel believed Interline’s pick-off maneuver would fail because Craftwood had
moved for class certification in May 2011, when the case was pending in state court, long before
Interline’s September 3, 2013, settlement offer. (See Dkt. No. 1.) Craftwood also disputed Interline’s
premise that the pick-off attempt actually offered to satisfy Craftwood’s entire demand, which is required
for the tactic to succeed. See Scott v. Westlake Servs. LLC, 740 F.3d 1124, 1126 (7th Cir. 2014) (the
defendant must “offe[r] to satisfy the plaintiff’s entire demand”).
9
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248511, at *8 (N.D. Ill. Jan. 25, 2011) (St. Eve, J.)); or that fax recipients couldn’t be
identified (Saf-T-Gard Int’l, Inc. v. Wagener Equities, Inc., 251 F.R.D. 312, 315 (N.D. Ill.
2008) (Gettleman, J.)). And other courts have declined to certify TCPA classes on the
ground that a class action is not a superior method of resolving the case. See, e.g., Landsman
& Funk, P.C. v. Lorman Bus. Ctr., No. 08-cv-481-bbc, 2009 WL 602019, at *9 (W.D. Wis.
Mar. 9, 2009).
Craftwood believes there was a high probability class certification would have been
granted, but the risk of non-certification nevertheless was appropriately factored into the
settlement equation.
Given 559,000+ documented fax ad transmissions, Interline’s potential class liability
was obviously huge, in the neighborhood of $280 million.11 But that created another
potential issue. Interline undoubtedly would have contended that a judgment of this
magnitude, in relation to the real “harm” suffered by recipients, did not comport with due
process. See, e.g., Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. 2006)
(after certification “a judge may evaluate the defendant’s conduct and control its total
exposure” to statutory damages). Craftwood, of course, would have vigorously argued the
statutory damages were constitutional—and believes it would have prevailed—but the issue
presented risk. See Centerline Equip. Corp. v. Banner Pers. Servs., Inc., 545 F. Supp. 2d
768, 778 (N.D. Ill. 2008) (Pallmeyer, J.) (“Banner has not satisfied the court that the TCPA’s
statutory damages remedy violates the Due Process clause”). In addition, Interline was
primed to argue that it would have to fund a judgment only to the extent necessary to pay
class members who stepped forward to collect, citing Ira Holtzman, C.P.A., & Assocs., Ltd.
v. Turza, 728 F.3d 682, 689-90 (7th Cir. 2013). Although Craftwood strongly believes that
Turza does not stand for this proposition, this was another risk that factored into settlement.12
11
The $280 million estimate was calculated by multiplying the almost 559,000+ documented
transmissions by the $500 minimum statutory damage.
12
On remand Judge Gettleman ordered Turza to fund the entire judgment. (See No. 08-cv-2014, Dkt.
No. 302, Apr. 10, 2014.)
10
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But perhaps the greatest risk facing Craftwood and the class was not an unfavorable
litigation outcome. If the class had obtained a $280 million judgment against Interline, a
bankruptcy filing almost certainly would have followed. Because of the amount of
Interline’s secured and unsecured debt, and the discounting of assets in a bankruptcy
scenario, the class could have received little, if anything—and certainly far less than the
settlement provides. (Dkt. No. 131-6 (Sherwin Decl.) ¶ 10.)
The practical limits on a defendant’s ability to pay are highly relevant to the fairness
question. See Redman v. RadioShack Corp., 768 F.3d 622, 632 (7th Cir. 2014) (company’s
failure might leave “very little” for class members); Armstrong, 616 F.2d at 314; Torrisi v.
Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993) (a potential “bankruptcy
reorganization...would have left little if anything for class members”); Swift v. Direct Buy,
Inc., No. 2:11-cv-401, 2013 WL 5770633, at *5 (N.D. Ind. Oct. 24, 2013) (fact that
defendant had no unencumbered assets supported $20 per member settlement); Cook v.
McCarron, No. 92 C 7042, 1997 WL 47448, at *7 (N.D. Ill. Jan. 30, 1997) (citing
Armstrong); In re PaineWebber Ltd. P’hips Litig., 171 F.R.D. 104, 129 (S.D.N.Y.) (“the
‘prospect of a bankrupt judgment debtor down at the end of the road does not satisfy anyone
involved in the use of class action procedures.’”), aff’d, 117 F.3d 721 (2d Cir. 1997). Courts
have recognized the defendant’s practical financial limitations in approving TCPA class
settlements. See, e.g., CE Design Ltd. v. King Supply Co., No. 09 C 2057, 2012 WL
2976909, at *3-4 (N.D. Ill. July 20, 2012) (Defendant’s $200,000 settlement payment
warranted, despite $335 million TCPA exposure, because “its ability to pay any judgment
was extremely limited”).
The Seventh Circuit has stressed that “[a] high degree of precision cannot be expected
in valuing a litigation, especially regarding the estimation of the probability of particular
outcomes.” Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 285 (7th Cir. 2002). The
settlement, by contrast, is concrete and measurable—a guaranteed $40 million recovery. As
Craftwood’s expert points out, a $40 million recovery is “in financial terms a superior
solution to the plaintiff class compared with going through trial, appeal and likely a
bankruptcy proceeding.” (Dkt. No. 131-6 (Sherman Decl.) ¶ 13.)
11
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2.
Absent a settlement, intense litigation of this action would have
continued for years
Had this case not settled, litigation would have continued for years. Through
protracted legal battles over discovery sanctions and settlement enforceability, Interline and
its blue-chip legal team have proved to be determined adversaries. If, as Craftwood expects,
the Court would have certified the class, Interline almost certainly would have sought
immediate appellate review under Rule 23(f). See King Architectural Metals, 637 F.3d at
722-23 (granting interlocutory review of TCPA class certification order); see Dkt. No. 131-4
(Cordero Decl.) ¶ 11. Although the Seventh Circuit has stressed that a strong showing is
required for interlocutory review of class certification orders (see Chapman v. Wagener
Equities, Inc., 747 F.3d 489, 491 (7th Cir. 2014)), Interline would have had little difficulty
demonstrating that certification would risk a “catastrophic judgment”—an important Rule
23(f) factor. A detour to the Seventh Circuit would have delayed class relief for a year or
more.
Even after the eventual trial, any recovery could be delayed for years by yet another
appeal and a likely bankruptcy filing. See In re AT&T Mobility Wireless Data Servs. Sales
Tax Litig., 789 F. Supp. 2d 935, 961 (N.D. Ill. 2011) (AT&T Mobility II) (St. Eve, J.)
(recovery of dollars today rather than after appeals supports settlement); Lipuma v. American
Express Co., 406 F. Supp. 2d 1298, 1322 (S.D. Fla. 2005) (likelihood that appellate
proceedings could delay class recovery “strongly favor[s]” approval of a settlement).
3.
There is strong class support for the settlement
The deadline for class members to object to or exclude themselves from the
settlement was March 9.13 Yet no class members have objected to the settlement. (Dang
Decl. ¶ 21; Declaration of Eric Kennedy (“Kennedy Decl.”) ¶ 2.) And of the assumed
13
As noted earlier, the objection deadline was prominently stated in all forms of notice. (See Dang
Decl. Ex. A, p. 2; Ex. E, p. 3.) The settlement website has a prominent tab, “Dates and Deadlines,” which
also informed members of the March 9, 2015, deadline for objections.
12
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80,824 class members, only 14 have excluded themselves—an infinitesimal percentage (.017
percent) of the class. (Dang Decl. ¶ 20.) None of these members expressed any objection to
the settlement. (Id.; Kennedy Decl. ¶ 3.)
The lack of objectors challenging the settlement favors a finding that the settlement is
“fair and reasonable,” American Civil Liberties Union v. United States Gen. Servs. Admin.,
235 F. Supp. 2d 816, 819 (N.D. Ill. 2002), and is “strong circumstantial evidence in favor of
the settlement.” In re Mexico Money Transfer Litig., 164 F. Supp. 2d 1002, 1021 (N.D. Ill.
2000) (Pallmeyer, J.), aff’d, 267 F.3d 743 (7th Cir. 2001). The class’s overwhelming
backing is powerful support in favor of the settlement. See AT&T Mobility II, 789 F. Supp.
2d at 965 (settlement supported by “remarkably low”.01% opt-out percentage and only 10
specific objections); McKinnie, 678 F. Supp. 2d at 812.14
4.
Opinion of class counsel
Courts are “‘entitled to rely heavily on the opinion of competent counsel…’”
regarding settlement. Gautreaux v. Pierce, 690 F.2d 616, 634 (7th Cir. 1982) (quoting
Armstrong, 616 F.2d at 325). And when the settlement is the product of mediation, there is
an additional presumption in favor of settlement. Perez v. Asurion Corp., 501 F. Supp. 2d
1360, 1384 (S.D. Fla. 2007). Class counsel have prosecuted numerous TCPA class claims
and are experienced in the issues and potential defenses. They strongly recommend the
proposed settlement because it ensures substantial compensation to the class in lieu of a
potentially Pyrrhic litigated victory against a defendant who has sought bankruptcy
protection. (See Dkt. No. 131-4 (Cordero Decl.) ¶ 13; Dkt. No. 131-8 (Zimmermann Decl.)
¶ 32.)
14
As discussed earlier (see p. 4, supra), Interline provided proper notice of the settlement to the
appropriate state and federal officials, as required by CAFA. None of these governmental entities
opposed or commented upon the settlement. “Although CAFA does not create an affirmative duty for
either state or federal officials to take any action in response to a class action settlement, CAFA presumes
that, once put on notice, state or federal officials will raise any concerns that they may have during the
normal course of the class action settlement procedures.” Garner v. State Farm Mut. Auto. Ins. Co., No.
CV-08-1365 CW (EMC), 2010 WL 1687832, at *14 (N.D. Cal. Apr. 22, 2010).
13
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5.
Stage of the proceedings
“The stage of the proceedings at which settlement is reached is important because it
indicates how fully the district court and counsel are able to evaluate the merits of plaintiffs’
claims.” Armstrong, 616 F.2d at 325. The Court and counsel have a highly-informed
understanding of this case. Craftwood and class counsel painstakingly probed virtually all
aspects of Interline’s fax advertising program in the course of 11 depositions of current and
former Interline employees, procured key testimony from the company’s two fax broadcasters,
and obtained extensive document discovery. Twice already the Court has delved into the facts
of this case to decide major contested motions, demonstrating a mastery of the facts and
applicable law. The Court and counsel are in an excellent position to evaluate the merits of the
proposed settlement versus continued litigation.
III.
Certification of the Settlement Class Is Appropriate
In its December 8 order, the Court conditionally certified a settlement class of
subscribers of telephone numbers to which Interline sent a fascimile advertisement during the
class period. (Dkt. No. 136 ¶ 2.) The same considerations that supported this order now
warrant final certification. As the foregoing discussion demonstrates, there is a large but
cohesive class of over 80,000 fax ad recipients. All class members were impacted by
Interline’s practices, and identical legal and factual issues are presented for all. These
common questions predominate and, as a clear majority of courts have found, class treatment
is far superior to individualized adjudication. This is reflected in the consistent practice in
this district to certify TCPA junk fax settlement classes.15 Even in contested class
certification proceedings the strong trend line is to certify classes of junk fax recipients. See
Turza, 728 F.3d at 684.16
15
Junk fax settlement classes are regularly certified in this district. Class counsel was able to identify
some 56 settlement classes of junk fax recipients in this district since 2006. (See Dkt. No. 142-2
(Zimmermann Decl.) ¶ 37; Dkt. No. 142-1 at 17-18.)
16
In the preliminary approval brief, we identified nineteen Northern District decisions certifying nonsettlement junk fax classes within the past five years. (See Dkt. No. 131-2 at 9 n.11.)
14
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Conclusion
Craftwood Lumber Company respectfully requests that the Court finally certify the
settlement class and grant final approval to the settlement. A form of Judgment and Order
jointly proposed by the parties will be submitted to the Court in accordance with its Case
Management Procedures.
DATED: March 16, 2015
Respectfully Submitted,
/s/ Darryl Cordero________
One of Plaintiff’s Attorneys
C. Darryl Cordero, Bar No. 126689
PAYNE & FEARS LLP
801 S. Figueroa, Suite 1150
Los Angeles, California 90017
Telephone: (213) 439-9911
Facsimile: (213) 439-9922
One of the Attorneys for the Preliminary
Designed Class Representative/Plaintiff
Craftwood Lumber Company and for the
Preliminary Certified Settlement Class
4810-4664-5794.6
15
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CERTIFICATE OF SERVICE
I hereby certify that on March 16, 2015, I electronically filed the foregoing with the
Clerk of the Court for the United States District Court for the Northern District of Illinois by
using the CM/ECF system. I certify that all participants in the case are registered CM/ECF
users and that service will be accomplished by the CM/ECF system.
/s/ C. Darryl Cordero