Malta v. The Federal Home Loan Mortgage Corporation et al

Filing 144

ORDER Granting Plaintiff's Unopposed Motion for Cy Pres Distribution [Doc. 142 ]. Signed by Judge Roger T. Benitez on 3/25/2019. (anh)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ALBERTO MALTA, individually and on
behalf of all other similarly situated, et al.,

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Plaintiffs,

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ORDER GRANTING PLAINTIFF’S
UNOPPOSED MOTION FOR
CY PRES DISTRIBUTION
[Doc. 142]

v.

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Case No.: 3:10-cv-01290-BEN-NLS

THE FEDERAL HOME LOAN
MORTGAGE CORPORATION, also
known as Freddie Mac, et al.,

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Defendants.

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Before this Court is Lead Plaintiff Alberto Malta’s Unopposed Motion for a Cy Pres

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Distribution from the Residual Settlement Fund. [Doc. 142.] For the reasons set forth

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below, Lead Plaintiff’s Motion is GRANTED.

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BACKGROUND

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Plaintiff filed this action on June 16, 2010 for violations of the Telephone Consumer

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Protection Act (“TCPA”). [Doc. 1.] On May 21, 2013, Co-Lead Plaintiffs Alberto Malta

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and Danny Allen, Jr. filed a First Amended Complaint on behalf of themselves and a

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putative class, alleging Defendants violated the TCPA by sending automated text messages

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to non-customers’ cellular telephones using an automated dialing system without first

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obtaining the non-customers’ express consent. [Doc. 59.]
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3:10-cv-01290-BEN-NLS

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On February 5, 2013, the Court granted preliminary approval of the parties’ Class

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Action Settlement Agreement (“Agreement”).1 [Doc. 48.] On June 21, 2013, the Court

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issued its Final Order Approving Class Action Settlement. [Doc. 91.] On June 28, 2013,

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the Court issued an order to modify the final judgment. [Doc. 96.] Pursuant to the Court’s

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Final Order and Modified Final Order, the claims administrator, ILYM Group, Inc., issued

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settlement checks to each of the 120,700 claimants. Of those checks, 115,144 were cashed,

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leaving 5,556 checks uncashed and a remaining settlement fund balance of $438,832.55.

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ILYM estimated it would cost approximately $85,000 to complete a second distribution of

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the settlement fund.

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On July 31, 2017, the Court ordered a second distribution to be made by ILYM with

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a February 28, 2018 deadline to cash the second settlement checks. As of April 3, 2018,

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56,469 checks remained uncashed from the second distribution, leaving a remaining

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Qualified Settlement Fund of $156,634.38. [Doc. 142, p. 3.] The Court’s July 31, 2017

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Order provided, “If unclaimed funds remain in the Settlement Fund after the second

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distribution, either party may move the Court [for] a cy pres distribution in accordance with

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the Agreement.” [Doc. 140, p. 5.] Plaintiff now moves the Court for approval of a cy pres

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distribution to Samuelson Law, Technology & Public Policy Clinic at the University of

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California, Berkeley School of Law. [Doc. 142.]

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DISCUSSION

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In his unopposed motion, Plaintiff contends (1) that a cy pres award is more

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appropriate than a third distribution and (2) that the proposed cy pres recipient satisfies the

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Ninth Circuit’s factors in Nachsin v. AOL, LLC, 663 F.3d 1034, 1040 (9th Cir. 2011). The

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Court agrees.

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Capitalized terms not otherwise defined herein have the meanings assigned to them
in the Agreement [Doc. 38-3] or the Court’s Final Judgment Order dated June 21, 2013
[Doc. 91].
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1. Appropriateness of a Cy Pres Award

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“Cy pres provides a mechanism for distributing unclaimed funds to the next best

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class of beneficiaries.” In re Easysaver Rewards Litig., 906 F.3d 747, 760 (9th Cir. 2018).

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A cy pres distribution “is most useful when individual stakes are small, and the

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administrative costs of a second round of distributions to class members might exceed the

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amount that ends up in class members’ pockets.” Holtzman v. Turza, 728 F.3d 682, 689

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(7th Cir. 2013). Here, subtracting only an estimated $85,000 in administration costs from

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the current remaining fund of $156,634.38 would leave only $71,634.38 to be distributed

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through a third distribution to 115,144 settlement class members who cashed their initial

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settlement checks. Thus, each individual check would receive approximately $0.62,

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making the third distribution de minimis. See Lane v. Facegbook, Inc., 696 F.3d 811, 821

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(9th Cir. 2012) (“[D]irect monetary payments to the class . . . would be infeasible given

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that each class member’s direct recovery would be de minimis.”). Accordingly, a cy pres

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distribution is more appropriate than a third distribution of the unclaimed settlement funds.

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2. Appropriateness of the Proposed Cy Pres Beneficiary

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Having determined a cy pres distribution is warranted, the Court next considers

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whether the proposed cy pres beneficiary, Samuelson Law, Technology & Public Policy

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Clinic (“SLC”), is an appropriate one. To make this finding, the Court must consider three

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factors:

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(1) the nature of the plaintiff’s lawsuit;

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(2) the objectives of the underlying statute; and

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(3) the interests of the silent class members, including their geographic

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diversity.

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Nachsin v. AOL, LLC, 663 F.3d 1034, 1040 (9th Cir. 2011). Plaintiff proposes SLC as a

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cy pres recipient, with the award to be used for “hands-on training to law students through

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real-world work, with live clients, on cutting-edge policy issues in support of the public’s

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interest in technology and policy.” [Doc. 142, p. 7.] SLC has engaged in a variety of
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projects to help consumers understand legal issues related to their privacy and how to

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control third-party access to their personal lives. The law clinic was also the first in the

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country to provide public interest representation and research on privacy and related

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consumer issues.

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The Court applies the factors and finds SLC is an appropriate cy pres recipient. As

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to the first factor, this lawsuit was brought to obtain statutory damages for alleged

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violations of the TCPA on behalf of the plaintiffs and absent class members whose

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telephones received unsolicited text messages in violation of federal consumer privacy law.

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Thus, providing a cy pres award to SLC to foster the protection of consumer privacy

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interests aligns with the nature of this TCPA lawsuit.

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Regarding the statutory objective factor, the TCPA is designed to protect consumers’

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privacy rights with respect to their telephones. See, e.g., Meyer v. Portfolio Recovery

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Assocs., LLC, 696 F.3d 943, 951 (9th Cir. 2012) (“We agree with Meyer that PRA’s

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violation of the TCPA violated his right to privacy, an interest the TCPA intended to

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protect.”). Here, because the award would be used specifically to protect and promote

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consumer privacy by training law students to proactively address privacy issues in

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emerging technology, this factor is satisfied. Indeed, courts have approved SLC as a cy

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pres recipient in other consumer rights cases involving privacy issues. See, e.g., Marsh v.

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Zaazoom Solutions, LLC, 2012 WL 6522749 (N.D. Cal. Sep. 25, 2014); Parker v. Time

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Warner Entm’t Co., L.P., 631 F. Supp. 2d 242, 250 (E.D.N.Y. 2009).

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Finally, as to the third factor, the proposed cy pres award would directly support

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SLC’s projects and research, and permit SLC faculty, staff, and students to undertake

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privacy work beneficial to American consumers and residents, thereby serving the interests

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of settlement class members. Although the geographic distribution of the settlement class

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members is broad, so too is the reach of SLC’s efforts. Specifically, SLC works to promote

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and preserve privacy rights by training law students who will become members of the legal

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community, not only in California, but also throughout the country. For example, former

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SLC students and teaching fellows are currently employed in positions nationwide related
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to protecting individual privacy rights, including in the public, private, and academic

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sectors.

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CONCLUSION

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For the previous reasons, Plaintiff’s motion, [Doc. 142], is GRANTED. The Court

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directs ILYM Group, Inc., the Settlement Administrator, to distribute the remaining

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balance of the Qualified Settlement Fund as a cy pres award to Samuelson Law,

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Technology & Public Policy Clinic at the University of California, Berkeley School of

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Law.

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IT IS SO ORDERED.

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DATED: March 25, 2019

____________________________
HON. ROGER T. BENITEZ
United States District Court Judge

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