Lambeth v. Advantage Financial Services, LLC

Filing 14

MEMORANDUM DECISION AND ORDER. NOW THEREFORE IT IS HEREBY ORDERED, that the motion for preliminary approval of class settlement (docket no. 13 ) is GRANTED. Plaintiff will receive the sum of $1,000.00 in statutory damages from Defendant and, se parately, Defendant has agreed to waive three other accounts assigned to Defendant for collection and alleged to be owed by Plaintiff. The Court shall conduct a telephonic hearing (hereinafter referred to as the final approval hearing) on 8/3/2015, a t 2:30 p.m. (Telephonic Final Approval Hearing [Status Conference] set for 8/3/2015 02:30 PM in Boise Chambers before Judge B. Lynn Winmill). Submissions by the Parties, including memoranda in support of the proposed settlement, petitions for attorne ys fees and reimbursement of costs and expenses by Class Counsel, shall be filed with the Court no later than 14 days prior to the Final Approval Hearing, i.e., no later than 7/20/2015 (Case Management deadline set for 7/20/2015).Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO
Daniel Lambeth, on Behalf of Himself
and Others Similarly Situated,
Plaintiff,

Case No.: 1:15-cv-33-BLW

MEMORANDUM DECISION AND
ORDER

v.
Advantage Financial Services, LLC,
Defendant.

INTRODUCTION
The Court has before it a motion for preliminary approval of a class action
settlement. For the reasons explained below, the Court will grant the motion.
BACKGROUND
Plaintiff Daniel Lambeth brought this lawsuit against Advantage claiming that it
violated the Fair Debt Collection Practices Act (FDCPA). Specifically, Lambeth alleged
that Advantage would leave phone messages to debtors (1) failing to identify itself as a
debt collector; and (2) failing to disclose that any information revealed by the debtor
would be used to collect the debt. Lambeth sued on behalf of a class of those who had
received such phone messages.
The parties eventually reached a settlement in which (1) a class would be certified
under Rule 23(b)(2) of all persons who received the illegal phone messages between
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February 4, 2014, and February 4, 2015 (including about 40,000 persons, the parties
estimate); (2) Daniel Lambeth, the named plaintiff, would be deemed the Class
Representative; (3) the Court would enter an injunction against Advantage requiring that
when it contacts debtors in the future, it will identify itself as a debt collector and disclose
that it is attempting to collect a debt; (4) Advantage would not admit any wrongdoing; (5)
class members would not release their individual claims against Advantage, and would
not receive any forgiveness of any debts that were being pursued by Advantage; (6)
Lambeth would receive $1,000, obtain forgiveness of certain debts Advantage was
attempting to collect, and release his individual claims against Advantage; and (7)
Advantage would pay a cy pres award to Idaho Legal Aid in the sum of $5,000.
Plaintiffs ask the Court to issue a preliminary approval of the settlement, and set
up a hearing where final approval will be considered.
LEGAL STANDARDS
Rule 23(e) requires court approval for class settlements. The Ninth Circuit
maintains a “strong judicial policy” that favors the settlement of class actions. Class
Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir.1992). At the same time,
settlement approval “requires a higher standard of fairness” when the parties reach a class
action settlement prior to class certification, as they did here. Lane v. Facebook, Inc.,
696 F.3d 811, 819 (9th Cir. 2012). “The reason for the more exacting review of class
settlements reached before formal class certification is to ensure that class representatives
and their counsel do not secure a disproportionate benefit at the expense of the unnamed
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plaintiffs who class counsel had a duty to represent.” Id. Courts “must be particularly
vigilant not only for explicit collusion, but also for more subtle signs that class counsel
have allowed pursuit of their own self-interests and that of certain class members to infect
the negotiations.” Lilly v. Jamba Juice Co., 2015 WL 1248027 at *6 (N.D.Cal. 2015).
The process begins with a “preliminary determination.” See Manual for Complex
Litigation, Fourth § 21.632 (FJC 2004). The Court’s task at the preliminary approval
stage is to determine whether the settlement falls “within the range of possible approval.”
Lilly, 2015 WL 1248027 at *6. Preliminary approval of a settlement is appropriate if “the
proposed settlement appears to be the product of serious, informed, non-collusive
negotiations, has no obvious deficiencies, does not improperly grant preferential
treatment to class representatives or segments of the class, and falls within the range of
possible approval.” Id. The Court may consider a number of factors, including:
(1) the strength of plaintiffs’ case;
(2) the risk, expense, complexity and likely duration of further litigation;
(3) the risk of maintaining class action status throughout the trial;
(4) the amount offered in settlement;
(5) the extent of discovery completed, and the stage of the proceedings;
(6) the experience and views of counsel; and
(7) the reaction of the class members to the proposed settlement.
Id. at *7. After preliminary approval, the Court must hold a hearing pursuant to Federal
Rule of Civil Procedure 23(e)(2) to make a final determination of whether the settlement
is “fair, reasonable, and adequate.” Here, the plaintiffs ask the Court to take the first step
in granting preliminary approval to the proposed class and the proposed settlement.

Memorandum Decision – page 3

ANALYSIS
Preliminary Approval of Class Certification
The proposed class appears to meet the requirements of Rules 23(a) and (b). The
estimated size of the class is 40,000 persons, and the class members were all recipients of
the allegedly improper phone messages. The claims of proposed Class Representative
Lambeth are identical to those of the class, and both he and his counsel appear to be
zealous in their representation of the absent class members. The proposed class also
appears to satisfy the requirements of Rule 23(b)(2) because Advantage’s conduct applies
uniformly to the entire class, and plaintiffs are seeking injunctive relief, not monetary
relief.
Nevertheless, the Court has a concern about the need for a class under the
circumstances of this case. In this settlement, the class members (other than Lambeth)
receive nothing of direct value – they get no money, no forgiveness of debt, and no
admission of wrongdoing by Advantage. The injunction merely requires Advantage to
comply with the FDCPA in the future, adding nothing to Advantage’s existing legal
obligations. The cy pres award of $5,000 to Idaho Legal Aid can be deemed a benefit to
the class members only in the most theoretical and tangential sense.
This raises a question: Why is a class necessary? Does the Court need a class to
issue the injunction and award Lambeth his settlement benefits? If the class members are
not getting anything, why sweep them into this litigation at all?

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While these questions raise concerns, the deeper inquiry they require should be
reserved for the final approval stage of class certification. At the moment, the Court is
only considering preliminary approval, and it is enough that without extensive inquiry,
and on its face, the proposed class appears to satisfy the requirements of Rules 23(a) and
(b). Thus, the Court will grant preliminary approval and reserve ruling on these concerns
until the final approval stage. Consequently, the Court will grant preliminary approval
under Rule 23(b)(2) to a class comprised of :
All persons (1) located in Idaho, (2) for whom Advantage Financial
Services, LLC left, or caused to be left, a voice message, (3) in connection
with collection of a consumer debt, (4) from February 4, 2014 through
February 4, 2015.
Preliminary Approval of Settlement Agreement
As discussed above, the class members get nothing from this settlement. In
contrast, Lambeth gets $1,000 and forgiveness of the debts Advantage was pursuing.
This gap between the Class Representative and the class members creates the appearance
that Lambeth sweetened his own recovery at the expense of the class members.
But that appearance may mask a more complicated reality. If the class proceeded
to trial, and prevailed, they might have received a ruling that Advantage was guilty of
wrongdoing, but their damages would have been limited to about three cents per class
member. That damage award would be so low because the FDCPA limits class damages
to the lesser of $500,000 or 1% of the defendant’s net worth. Because Advantage’s net

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worth is so low, the class members had no hope of any real monetary recovery at trial.
And they would risk losing and getting nothing.
In other words, a trial would not promise much more than the settlement. Given
this, the proposed settlement appears to have been reached without collusion and “within
the range of possible approval.” Lilly, 2015 WL 1248027 at *6. Consequently, the Court
will grant preliminary approval of the settlement.
Notice
Rule 23(c)(2)(A) states that the Court “may” direct notice for any class certified
under Rule 23(b)(2). Compare Rule 23(c)(2)(B) (“the court must direct [notice to class
members]”) (emphasis added). The parties allege that it is too expensive and burdensome
to provide any type of notice, and the Court agrees with that assessment. Moreover, there
is no danger that absent class members will be prejudiced by this settlement if it is finally
approved without notice to them – they have not released any of their individual claims
pursuant to the settlement and retain the right to sue Advantage. Under these
circumstances, the Court finds that notice need not be given.
Conclusion
For the reasons expressed above, the Court will grant the motion for preliminary
approval.
ORDER
Pursuant to the Memorandum Decision filed with this Order,
NOW THEREFORE IT IS HEREBY ORDERED, that the motion for preliminary
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approval of class settlement (docket no. 13) is GRANTED.
IT IS FURTHER ORDERED, that pursuant to Fed. R. Civ. P. 23(b)(2), the Lawsuit is
hereby preliminarily certified, for settlement purposes only, as a class action on behalf of the
following class of plaintiffs (hereinafter referred to as the “Class Members”) with respect to the
claims asserted in the Lawsuit:
All persons (1) located in Idaho, (2) for whom Advantage Financial Services,
LLC left, or caused to be left, a voice message, (3) in connection with collection
of a consumer debt, (4) from February 4, 2014 through February 4, 2015.
IT IS FURTHER ORDERED, that
CLASS REPRESENTATIVE AND CLASS COUNSEL APPOINTMENT – Pursuant to Fed.
R. Civ. P. 23, the Court preliminarily certifies Plaintiff Daniel Lambeth as the Class
Representative and Michael L. Greenwald of Greenwald Davidson Radbil PLLC as Class
Counsel.
NOTICE – No notice is required.
INCENTIVE AWARD TO PLAINTIFF – Plaintiff will receive the sum of $1,000.00 in
statutory damages from Defendant and, separately, Defendant has agreed to waive three other
accounts assigned to Defendant for collection and alleged to be owed by Plaintiff.
FINAL APPROVAL – The Court shall conduct a telephonic hearing (hereinafter referred to as
the “final approval hearing”) on August 3, 2015, at 2:30 p.m. The call in number is as follows:
1-877-336-1828 (Access Code: 4685496)(Security Code: 9466). At that time, the Court will
review and rule upon the following issues:
A. Whether a class is necessary, as discussed in the Memorandum Decision
accompanying this Order.
B. Whether this action satisfies the applicable prerequisites for class action treatment for
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settlement purposes under Fed. R. Civ. P. 23;
C. Whether the proposed settlement is fundamentally fair, reasonable, adequate, and in
the best interest of the Class Members and should be approved by the Court;
D. Whether the Final Order and Judgment, as provided under the Settlement Agreement,
should be entered, dismissing the Lawsuit with prejudice and releasing the Released
Claims against the Released Parties; and
E. To discuss and review other issues as the Court deems appropriate.
11.

Submissions by the Parties, including memoranda in support of the proposed

settlement, petitions for attorney’s fees and reimbursement of costs and expenses by Class
Counsel, shall be filed with the Court no later than 14 days prior to the Final Approval Hearing,
i.e., no later than July 20, 2015.
12.

The Settlement Agreement and this Order shall be null and void if any of the

following occur:
A.

The Settlement Agreement is terminated by any of the Parties for cause, or any
specified material condition to the settlement set forth in the Settlement
Agreement is not satisfied and the satisfaction of such condition is not waived in
writing by the Parties;

B.

The Court rejects any material component of the Settlement Agreement, including
any amendment thereto approved by the Parties; or

C.

The Court approves the Settlement Agreement, including any amendment thereto
approved by the Parties, but such approval is reversed on appeal and such reversal
becomes final by lapse of time or otherwise.

13.

If the Settlement Agreement and/or this order are voided per ¶ 12 of this order,

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then the Settlement Agreement shall be of no force and effect and the Parties’ rights and defenses
shall be restored, without prejudice, to their respective positions as if the Settlement Agreement
had never been executed and this order never entered.
14.

The Court retains continuing and exclusive jurisdiction over the action to consider

all further matters arising out of or connected with the settlement, including the administration
and enforcement of the Settlement Agreement.

DATED: June 16, 2015

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

Memorandum Decision – page 9