Tennille v. Western Union Company, The

Filing 370

AMENDED ORDER Modifying Magistrate Judge's Recommendation re Attorney Fees* re: 363 Order, by Judge John L. Kane on 10/15/2014 nunc pro tunc to 9/23/2014. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge John L. Kane
Civil Action No. 09-cv-00938-JLK-KMT (consolidated with No. 10-cv-00765-JLK)

JAMES P. TENNILLE, ROBERT SMET, ADELAIDA DELEON and YAMILET
RODRIGUEZ, individually and on behalf of all others similarly situated,
Plaintiffs,
v.
THE WESTERN UNION COMPANY and WESTERN UNION FINANCIAL
SERVICES, INC.,
Defendants.

AMENDED ORDER MODIFYING MAGISTRATE JUDGE’S
RECOMMENDATION re ATTORNEY FEES*
Kane, J.
This nationwide class action was the subject of a global settlement approved on
June 24, 2013. Under the terms of the settlement, Western Union agreed to disgorge all of
the remaining unclaimed wire transfer funds in its possession and deposit them into a
Class Settlement Fund (CSF) for disbursement to class members. Until the settlement,
Western Union’s business practice had been hold onto unclaimed funds for as long as
possible, leveraging them for interest income until customers either discovered the
transfer failure and asked for their money back or the funds escheated under state
unclaimed property statutes. In addition to the creation of the CSF, the settlement also
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wrought wholesale changes to the way Western Union agreed to do business in the future.
Specifically, Western Union agreed that from the date of settlement forward it would no
longer keep mum when attempted transfers failed, but would notify customers within 60
days and facilitate the funds’ return. Finally, Western Union agreed to reimburse class
members for the time value of their unclaimed transfer funds withheld – to the tune of
$19 million – and to pay small incentive awards to individual class representatives.
Victory for class members and current and future Western Union customers worldwide
was virtually complete. At the final approval hearing, I described the settlement as
“remarkable.”
The question of attorney fees was cleaved from the settlement, with the Agreement
providing simply that Class Counsel would “file an application” for reasonable attorney
fees and case expenses within 45 days of the final approval hearing. Stipulation and
Agreement of Compromise and Settlement, ¶ 5A (Doc. 172-2, p. 29/48). The Agreement
specifically provided that Western Union would have the right to object. Id.
Class Counsel filed its Motion for Approval of Attorney Fees, Costs, and Expenses
and for Approval of Incentive Awards on April 30, 2013 (Doc. 195), requesting a fee
award equal to “30% of the Class Settlement Fund as determined by the Court pursuant to
the Settlement Agreement” plus $7500 in incentive awards for individual class
representatives. At the time, the CSF was estimated at a $180 million cash value,

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resulting in a fee request in the in the area of $54 million.1 Because the CSF included
neither the $19 million in interest nor any dollar value for the change in business
practices, Class counsel argued their fee request was both conservative and reasonable.
The request met with opposition, less from individual class members than from
Western Union, which denied the CSF constituted any new “benefit” to the Class because
it was comprised of funds that never lost their character as property of the class and were
always either eventually returned or left to escheat to the state. The only “new” and
quantifiable2 benefit of the settlement, according to Western Union, was the $19 million
in interest income Western Union agreed to refund. Accordingly, Western Union argued
the fee award in this case should be limited to a percentage of the $19 million in returned
interest and nothing more. In addition, Western Union sought to strike the affidavits of
Plaintiffs’ forensic accountant, R. Larry Johnson (Doc. 200), and class action specialist
Brian T. Fitzpatrick (Doc. 197), “and all references in the Fees Motion to either.” See
Motion to Strike (Doc. 208) at 2. Mr. Fitzpatrick’s affidavit supported the use of the CSF

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According to the Settlement Agreement, the actual amount of the CSF would be
calculated as of the “date of Final Approval.” (Doc. 172-2 at 9.) According to Defendants’
letter submission to the Court dated May 28, 2013 (Doc. 219), the actual value of the CSF as of
the date of Final Approval was approximately $133 million. The decrease in the amount of the
CSF was the result of interim escheatment of funds to the state. As a result, Class Counsel’s fee
request of 30% of the CSF results in a requested fee award of approximately $39.9 million.
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The possibility that individual class members might recoup funds that had already
escheated to the states, or might benefit from the prospective relief by remaining Western Union
customers whose transfers may fail to complete in the future, were too tangential and too
speculative, according to Western Union, to constitute quantifiable benefits, conferred by the
settlement, on the existing class.
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as the “common fund” basis for awarding fees in this case and the reasonableness of
Class Counsel’s request given the substantial additional benefits obtained, and Mr.
Johnson’s affidavit provided an economic basis for assigning a present monetary value to
the prospective relief to support the conservative nature of the CSF-based fee request.
I referred the Motion for Fees, the related Responses and Objections, and the
Motion to Strike to Magistrate Judge Tafoya for recommendation. In a written decision
dated December 31, 2013 (Doc. 315), the Magistrate Judge denied the Motion to Strike,
considered the subject affidavits, and recommended a fee award of $22,946,208 – less
than half the amount Class Counsel requested. The decision was lengthy and complex,
reflecting a compromise between the two sides’ positions. The Magistrate Judge adopted
Western Union’s critique that CSF was comprised of funds that “already” belonged to the
Class and was therefore not a benefit “conferred by the Settlement,” but used Mr.
Johnson’s affidavit to assign a $46.5 million value to the prospective relief. Finding
many class members “were likely to remain” Western Union customers, the Magistrate
Judge rejected Western Union’s contention that the prospective relief provided no benefit
to the existing class. The Magistrate added the present value of the prospective relief to
the $19 million in interest, and recommended a fee award equal to 35% of that
combined “common fund.” With the individual incentive awards, the total recommended
fee award was $22,946,208.
Both sides were unhappy with the Recommendation. Plaintiffs challenged the
decision to exclude the CSF from the calculus of benefits conferred by the settlement, and
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Western Union reiterated its position that the only new and quantifiable benefit conferred
by the Settlement was the requirement that Western Return to class members the $19
million in interest on unclaimed transfer funds that Western Union would otherwise have
kept for itself. I set the matter for oral argument on September 3, 2014, expressing
concern at the tenuous nexus on which the Magistrate Judge’s prospective relief present
value calculations depended and disagreeing that the CSF added no “new” or actual value
to the Class. At the conclusion of arguments that day, I took the matter under advisement.
I issue my rulings below.
Standard of Review.
My review of the Magistrate Judge’s Recommendation is de novo under Fed. R.
Civ. P. 72(b) as to the portions of the Recommendation to which written objection is
made, and I may accept, reject, or modify the Recommendation under that standard. I
have thoroughly considered the written and oral arguments of counsel, together with the
divergent opinions and analyses of various experts. I am persuaded by Mr. Fitzpatrick’s
concise and well reasoned analysis and expertise that Class Counsel’s fee request is both
reasonable and appropriate. I therefore GRANT Class Counsel’s Motion for Attorney
Fees and ORDER an award of fees equal to 30% of the CSF.
Background.
The Settlement Agreement provided four specific types of relief for class
members: (1) the placement of all unclaimed transfer funds still in Western Union’s
possession on the date of Final Approval in a Class Settlement Fund (CSF) trust account
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for return to transferors; (2) notification to class members whose unclaimed funds had
already escheated to the state of that fact and the establishment of a Class Counselassisted process for recovering them; (3) a lump sum payment, on submission of a valid
claim form, to individual class members equal to the amount of interest accrued on their
unclaimed moneys; and (4) a change in Western Union’s policies and practices going
forward requiring notice to individual customers within 60-90 days that transfers were not
redeemed. In recognition of their efforts on behalf of the class, the Settlement Agreement
also called for the payment of $7,500 to each of the Class Representative Plaintiffs as an
incentive award. The Agreement provided that any funds remaining in the CSF account
after full payment of all valid claims, fees, incentive awards and attorney fees and
expenses would be placed into a cy pres fund subject to distribution upon court order.
Class Counsel’s original Motion sought an award of 30% of the total value of the
CSF under the theory that the CSF constituted a straightforward and conservative
estimate of the “common fund” of benefits conferred by the settlement through Class
Counsel’s efforts. The Magistrate Judge disagreed, reasoning that unclaimed transfer
funds had always been returnable to customers on demand and that the real benefit of the
litigation was in the recoupment of the interest Western Union earned on those funds
while wrongfully holding onto them and the injunctive relief that will prevent Western
Union from taking advantage of its customers in this manner in the future.
The principal objection at issue is Class Counsel’s assertion that, by excluding the
CSF from the “common fund” of benefits conferred by the Settlement, the Magistrate
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Judge ignored the real and actual value the recoupment of those monies represent and
thereby undervalued Class Counsel’s efforts to a significant degree. Defendants object to
the recommended fee award to the extent it is premised on a speculative valuation of what
the prospective relief means to the former Western Union customers that form the
membership of the Class. Both objections have merit.3
Discussion.
I incorporate the Magistrate Judge’s statement of the case and procedural history at
pages 2-7 of her Recommendation. Briefly recounted, this litigation posed a nationwide
challenge to Western Union’s practice of declining to notify customers when an
attempted wire transfer went unclaimed. Western Union would hold the funds,
generating interest income for itself, returning the principal – for a fee – when the
customer realized the failure or when state unclaimed property statutes required Western
Union to attempt repatriation. When repatriation efforts were unsuccessful, Western
Union allowed unclaimed funds to escheat to the state.
The parties engaged in robust motions practice over a period of years to narrow
their claims and defenses. Class status, jurisdiction, and venue were all challenged.
Settlement was reached while an order denying Defendants’ motion to compel individual
class members to arbitrate their claims was on appeal to the Tenth Circuit. The Plaintiff

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Other objections were received from Class members Paul Dorsey (Docs. 317, 321) and
Albert Bacharach (Docs. 324). I have benefitted from each objector’s thoughts and comments in
making my ruling regarding fees, but neither changes my ultimate decision.
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Class was comprised of thousands of individuals with relatively small individual losses.
But for the creativity and perseverance of Class Counsel, these losses would have gone
unremedied and the way business was conducted at Western Union would have continued
to enrich the company at the expense of their individual, often indigent, customers. The
settlement achieved very real and comprehensive relief for individual Class members and
for all Western Union customers now and into the future. It was, as I characterized it at
the final approval hearing, a “remarkable” result.
While I understand the Magistrate Judge’s view that the CSF included funds that
“always belonged” to Class member transferors and which Western Union would never
ultimately or permanently retain, I do not agree that these funds may not therefore form
the basis for a fee award. While technically correct, the Magistrate Judge’s view fails to
recognize the practical effect of the successful actions taken by Plaintiffs’ counsel. In the
real world, the amounts owed to each member of the class are small, thus detracting from
an incentive to comply with the detailed requirement for refund, and the anticipated
delays in receiving payment. So, too, the transient habits of many customers who actually
use wire transfer services suggest that without notice and assistance developed through
collection efforts, the return of these funds is highly speculative, if not, indeed,
aspirational. The value of the Class Settlement Fund puts the bird in the hand rather than
in the bush. It cannot be demonstrated, as a practical matter, that simply because the
funds are locatable that they can be retrieved without additional, probably preclusive, cost
and effort.
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As stated above, I am persuaded by the Declaration of Professor Brian T.
Fitzpatrick and his view, after thoroughly evaluating the fee request in light of the
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) factors and his
comprehensive empirical study of class action settlement and fee awards, that the fee
request is well within the ambit of reasonableness and propriety. Thirty percent of the
cash portion of the settlement is a lower percent than has been used in other cases and
well within the range accepted by the Tenth Circuit Court of Appeals. This is especially
true where, as here, the cash fund is but one aspect of the settlement and therefore
understates the real and actual value realized. That these benefits are difficult to reduce to
actual or present monetary value does not mean they were not conferred. They were, and
Class Counsel deserves credit for that.
I am also convinced, however, of the folly in attempting to reduce to a dollar
amount the present value of the prospective relief obtained in the Settlement. One look at
the assumptions, regression analyses, probabilities, and caveats employed to attribute a
value, to the Plaintiff Class of past Western Union customers, of a change in business
practices that does not take effect until the date of Settlement and beyond, portends
nothing but further appeal and uncertainty. Class Counsel’s original fee request is the
best and most reliable basis on which to calculate a reasonable fee award in this case, and
I adopt it without reservation. Based on the foregoing, IT IS ORDERED THAT

1. Class Counsel’s Motion for Attorney Fees (Doc. 195) is GRANTED;
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2. Western Union’s Motion to Strike the Affidavits of Messrs. Fitzpatrick and
Johnson and Request for Attorney Fees (Doc. 208) is DENIED;
3. Class Counsel’s Motion to Strike the expert opinions of Professor Shavell and
Michael J. Gallagher (Doc. 350) is DENIED as MOOT.
IT IS FURTHER ORDERED THAT Class Counsel and Western Union shall
CONFER and Class Counsel shall PREPARE a Proposed Order awarding Counsel’s
requested fees, costs, and incentive payments for the Court’s signature. The Proposed
Order shall be filed in the normal course in the Court’s CM/ECF filing system and
submitted in editable formal to the Kane Chambers email account. The Proposed Order is
due on or before October 4, 2014. Counsel are congratulated on jobs exceedingly well

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done.
Dated October 15, 2014, nunc pro tunc to September 23, 2014.

s/John L. Kane
SENIOR U.S. DISTRICT JUDGE

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