Lambeth v. Advantage Financial Services, LLC

Filing 19

MEMORANDUM DECISION AND ORDER granting 15 Motion for final approval of class action Settlement; granting 16 Motion for Attorney Fees. Defendant will pay Class Counsel $17,122.50 for attorneys fees and $685.00 as reimbursement of its exp enses. The Court orders Defendant to pay $5,000.00 to Idaho Legal Aid Services as a cy pres distribution. Defendant is further ordered to pay $1,000 to Plaintiff, within five calendar days after this Order becomes final (non-appealable). IT IS FURTHER ORDERED, that the Clerk shall close this case. 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 final approval of a class action settlement and
a motion for attorney fees. The Court held a hearing on August 3, 2015. No objections
were made to the settlement. For the reasons explained below, the Court will grant the
motion for final approval of the settlement and the motion for attorney fees.
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. He defined the class as follows:
Memorandum Decision & Order – page 1

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.
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
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.
On June 16, 2015, the Court issued a preliminary approval of the settlement and
scheduled a hearing to resolve any objections and determine if a final approval should be
granted. That hearing was held on August 3, 2015, and no objections were made. The
Court issues its final approval for the reasons set forth below.
LEGAL STANDARDS

Memorandum Decision & Order – page 2

Rule 23(e) requires court approval for class settlements. The class must meet the
requirements of Rules 23(a) and (b), and must be fair, adequate, and reasonable pursuant
to Rule 23(e)(2). In examining the latter requirement, 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.
Rodriguez v. West Publishing Corp., 563 F.3d 948, 963 (9th Cir. 2009).
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 Court “has a fiduciary duty to
look after the interests of absent class members.” Allen v. Bedolla, 787 F.3d 1218, 1223
(9th Cir. 2015). “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 plaintiffs who
class counsel had a duty to represent.” Lane, 696 F.3d at 819. 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
Memorandum Decision & Order – page 3

members to infect the negotiations.” Lilly v. Jamba Juice Co., 2015 WL 1248027 at *6
(N.D.Cal. 2015).
The Ninth Circuit has identified three such subtle signs: (1) “when counsel
receive a disproportionate distribution of the settlement;” (2) “when the parties negotiate
a ‘clear sailing’ arrangement” (i.e., an arrangement where defendant will not object to a
certain fee request by class counsel); and (3) when the parties create a reverter that
returns unclaimed fees to the defendant. Allen, 787 F.3d at 1224.
ANALYSIS
Requirements of Rules 23(a) & (b)
The proposed class meets 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 are zealous in
their representation of the absent class members. The proposed class also satisfies 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.
The Court in its preliminary approval expressed 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
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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? The parties provided an answer
that addresses the Court’s concern: Class certification is necessary because courts have
held that the FDCPA does not provide for injunctive relief in individual actions. See
Hecht v. United Collection Bureau, Inc., 691 F.3d 218, 224 at n. 1 (2nd Cir. 2012)
(concluding after reviewing case law that “every federal appeals court to have considered
the question has held that [the FDCPA] does not [permit individual plaintiffs to seek
injunctive relief].” Thus, the class is necessary in order to enjoin Advantage from its
conduct complained of here.
Consequently, the Court will grant 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.
Requirements of Rule 23(e)(2)
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.

Memorandum Decision & Order – page 5

But that appearance masks 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
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. The Court cannot find any unfairness here.
Moreover, the injunction does not merely enjoin Advantage from conducting
similar practices but also requires Advantage to designate a monitor to ensure that it is
leaving proper telephone messages for Idaho consumers. Furthermore, this decision –
and the Court’s earlier decision granting preliminary approval – have been published and
are available on the public record. This is important because damages in FDCPA cases
are tied to a company’s history of noncompliance. See Trevino v. ACB Am., Inc., 232
F.R.D. 612, 617 (N.D.Cal. 2006).
Finally, in examining the record for the “subtle signs” of collusion discussed
above, the Court can find none. Advantage has challenged the attorney fees of plaintiffs’
counsel, and there are no reverter fees as part of the settlement. The Court will discuss
the amount of attorney fees below, but it is enough to say here that the request is not
excessive or disproportionate. After examining the entire agreement in the context of this
litigation, the Court finds that it is fair, adequate, and reasonable under Rule 23(e)(2).
Memorandum Decision & Order – page 6

Attorney Fees
Plaintiffs’ counsel seeks $17,122.50 in attorney fees. Lead counsel spent 36.7
hours on the case and another estimated 3 hours on the fee petition and final approval
motion for a total of 39.6 hours. Three of the firm’s other attorneys spent a total of 4.9
hours and local counsel spent 5.5 hours on the case. Thus, the total hours spent on the
case was 50.1 hours.
Advantage objects to the amount of time counsel spent on the case, pointing out
that within weeks of the filing of this law suit, Advantage disclosed its net worth,
revealed that the case was not worth pursuing to trial and prompting a quick settlement.
Advantage argues that because the case settled so early, plaintiffs’ counsel is entitled to at
most $5,000 in fees.
The FDCPA provides that any debt collector who fails to comply with its
provisions is liable “in the case of any successful action ... [for] the costs of the action,
together with a reasonable attorney’s fee as determined by the court.” 15 U.S.C. §
1692k(a)(3). The award of fees is mandatory. Camacho v. Bridgeport Financial, Inc.,
523 F.3d 973, 978 (9th Cir. 2008). Fees are mandatory because Congress chose a “private
attorney general” approach to assume enforcement of the FDCPA. Id. Here, pursuant to
the Settlement Agreement, Advantage agreed to pay reasonable attorney fees and costs
but the parties cannot agree on the fees.
Plaintiffs’ counsel submitted his request for fees in his Declaration. It contains a
summary of the tasks completed and the hours spent but does not contain the typical
Memorandum Decision & Order – page 7

detail where each time segment (down to the minute) is identified. In the typical case, the
Court would interpret Local Rule 54.2 to provide more detail. But in this case the detail
was minimally sufficient to satisfy the Local Rule. One can safely assume that it takes
about 50 hours of work to investigate a consumer fraud case, prepare and file the
complaint, investigate the defendant’s claim of its net worth, and then negotiate and
finalize a class action settlement. This would be a different case if the hours expended
were more than the minimal effort necessary to get this case into a posture for the final
approval of the settlement. But here, they are equivalent, and so the Court will accept as
reasonable the hours expended as stated by counsel.
The Court has examined the other objections to the fees, but finds them without
merit. The hourly fee and the hours expended are reasonable and necessary, and the
overall fee, considering all the required factors, is reasonable. Camacho, 523 F.3d at 978.
Conclusion
For the reasons expressed above, the Court will grant the motion for final approval
and the motion for attorney fees.
ORDER
Pursuant to the Memorandum Decision filed with this Order,
NOW THEREFORE IT IS HEREBY ORDERED, that the motion for final
approval of class action settlement (docket no. 15) is GRANTED.
IT IS FURTHER ORDERED, that the motion for attorney fees (docket no. 16) is
GRANTED.
Memorandum Decision & Order – page 8

IT IS FURTHER ORDERED THAT:
1.

The Court has jurisdiction over the subject matter of the Lawsuit and over

all settling parties hereto.
2.

CLASS MEMBERS – Pursuant to Fed. R. Civ. P. 23(b)(2), this lawsuit is

hereby certified, for settlement purposes only, as a class action on behalf of the following
class:
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

4.

CLASS REPRESENTATIVE AND CLASS COUNSEL – Pursuant to

Fed. R. Civ. P. 23, the Court appoints Daniel Lambeth as the Class Representative and
Michael L. Greenwald of Greenwald Davidson Radbil PLLC as Class Counsel.
5.

NOTICE – No notice is required under Rule 23(b)(2).

6.

FINAL CLASS CERTIFICATION – The Court finds that the lawsuit

satisfies the applicable prerequisites for class action treatment under Fed. R. Civ. P. 23.
7.

SETTLEMENT TERMS – The Settlement Agreement (docket no. 13-1

attached to the Declaration of Greenwald) shall be deemed incorporated herein, is finally
approved and shall be consummated in accordance with the terms and provisions thereof,
except as amended by any order issued by this Court.
D.

ATTORNEY FEES – Defendant will pay Class Counsel $17,122.50 for

attorneys’ fees and $685.00 as reimbursement of its expenses. The attorneys’ fees and
Memorandum Decision & Order – page 9

expenses will be paid by Defendant separate and apart from the cy pres distribution, and
the Payment and Incentive Award to Plaintiff.
13.

RELEASE OF CLAIMS AND DISMISSAL OF LAWSUIT – The

Plaintiff and his successors and assigns are permanently barred and enjoined from
instituting or prosecuting, either individually or as a class, or in any other capacity, any of
the Released Claims against any of the Released Parties, as set forth in the Settlement
Agreement.
14.

No other Class Member, aside from the Plaintiff, is deemed to have

released any claims against the Released Parties, and those absent Class Members’ claims
are tolled through the date of this Final Judgment.
15.

The lawsuit is hereby dismissed with prejudice as to Plaintiff, and without

prejudice as to all other Class Members.
16.

This Order is not, and shall not be construed as, an admission by Defendant

of any liability or wrongdoing.
17.

The Court hereby retains continuing and exclusive jurisdiction over the

parties and all matters relating to the lawsuit and/or Settlement Agreement, including the
administration, interpretation, construction, effectuation, enforcement, and consummation
of the settlement and this order, including the award of attorneys’ fees, costs,
disbursements, and expenses to Class Counsel.
18.

The Court orders Defendant to pay $5,000.00 to Idaho Legal Aid Services

as a cy pres distribution. Defendant is to make the payment to Class Counsel within five
Memorandum Decision & Order – page 10

calendar days after this Order becomes final (non-appealable), and Class Counsel is
ordered to then transmit the cy pres award to Idaho Legal Aid Services within five days
thereafter.
19.

Defendant is further ordered to pay $1,000 to Plaintiff, within five calendar

days after this Order becomes final (non-appealable). Defendant is also ordered to
satisfy, in full, the three accounts it sought to collect from Plaintiff.
20.

Defendant is to pay the attorneys’ fees and expense award to Class Counsel

within five calendar days after this Order becomes final (non-appealable).
IT IS FURTHER ORDERED, that the Clerk shall close this case.

DATED: August 3, 2015

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

Memorandum Decision & Order – page 11