MARCOUX et al v. SUSAN J SZWED PA

Filing 38

DECISION AND ORDER ON CLASS ACTION SETTLEMENT AND ATTORNEY FEES granting 30 Motion for Approval of Settlement; granting 31 Motion for Attorney Fees By JUDGE NANCY TORRESEN. (MMB) Modified on 2/21/2017 to clean up text (mnw).

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
ALFRED MARCOUX and
CHARLENE JONES,
Plaintiffs,
v.
SUSAN J. SZWED, P.A.,

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) Docket No. 2:15-cv-093-NT
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Defendant.
DECISION AND ORDER ON CLASS ACTION
SETTLEMENT AND ATTORNEY FEES
Before me is the Plaintiffs’ unopposed motion for final approval of class action
settlement and the Plaintiffs’ unopposed motion for attorney fees and reimbursement
of litigation expenses. This action involves a standardized initial debt collection letter
sent to consumers by Susan J. Szwed, P.A. The Plaintiffs, Alfred Marcoux and
Charlene Jones, allege those letters violated the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. §§ 1692 et seq., by failing to properly notify Maine consumers
of how they could dispute the validity of the debts they were alleged to owe and how
they could obtain from the Defendant verification of the legitimacy of those debts.
The parties have come to an agreement to settle the case.
Notice of the settlement has been successful, reaching 88 of the 89 consumers
in the class. As part of the settlement, the Defendant has agreed to no longer use the
form initial debt collection letter that was sent to class members. Class members will
receive a modest recovery under the settlement. The proposed incentive payments for
the two named Plaintiffs, the costs of notice and administration of the class

settlement, and attorney fees and expenses will be paid separately from the class
settlement fund.
After conducting a fairness hearing on January 27, 2017, as Federal Rule of
Civil Procedure 23(e) requires, I conclude that the settlement is fair, reasonable, and
adequate and that the incentive awards and attorney fees and expenses are
reasonable.
CLASS ACTION SETTLEMENT
I.

Settlement Class Certification
The analysis of these factors in my October 3, 2016, Order of Preliminary

Certification applies here equally. Marcoux v. Szwed, No. 2:15-CV-093-NT, 2016 WL
5720713 (D. Me. Oct. 3, 2016). No more need be said. I conclude, therefore, that
certification of the proposed class is appropriate.
II.

Settlement and Plan of Distribution
A proposed settlement is subject to the following procedure:
(1) The court must direct notice in a reasonable manner to all class
members who would be bound by the proposal.
(2) If the proposal would bind class members, the court may approve it
only after a hearing and on finding that it is fair reasonable, and
adequate.
(3) The parties seeking approval must file a statement identifying any
agreement made in connection with the proposal.
(4) If the class action was previously certified under rule 23(b)(3), the
court may refuse to approve a settlement unless it affords a new
opportunity to request exclusion to individual class members who had
an earlier opportunity to request exclusion but did not do so.
(5) Any class member may object to the proposal if it requires court
approval under this subdivision (e); the objection may be withdrawn
only with the court’s approval.

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Fed. R. Civ. P. 23(e). Here, class members have received individual notice of the
settlement; there has been a hearing; there are no side agreements; no class members
filed written objections; no class members appeared at the hearing. What remains,
then, is for me to determine whether the settlement is “fair, reasonable, and
adequate.”
I consider the following factors to assess a class settlement: (1) comparison
of the proposed settlement with the likely result of litigation; (2) stage of the litigation
and the amount of discovery completed; (3) reaction of the class to the settlement;
(4) quality of counsel; (5) conduct of the negotiations; and (6) prospects of the case,
including risk, complexity, expense and duration. In re New Motor Vehicles Canadian
Export Antitrust Litigation, 2011 WL 1398485, *2 & n.16 (D. Me. April 13, 2011)
(citing additional sources).
A.

Proposed Settlement Compared to Likely Trial Outcome

The gravamen of the Complaint was that the Defendant’s form letter, which
advised recipients that the Defendant had been retained to collect debts owed to Bank
of America, misstated the rights afforded under the FDCPA. Specifically, the letters
did not inform the recipients that the Defendant “need only have mailed verification
of the debt, or a copy of the judgment, to them if they requested, in writing, that
Defendant do so.” Compl. ¶ 25. The Defendant’s letter stated:
If you notify this firm within thirty (30) days after your receipt of this
letter, that the debt or any portion thereof, is disputed, we will obtain
verification of the debt or a copy of the judgment, if any, and mail a copy
of such verification or judgment to you. Upon your written request
within the same thirty (30) day period mentioned above, we will provide
you with the name and address of the original creditor, if different from
the current creditor.
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Compl. ¶¶ 19 & 22. Because the Defendant was not required to mail verification of
the debt or a copy of the judgment upon an oral request, the Plaintiffs alleged that
the letter violated the FDCPA. Compl. ¶¶ 26 & 28.
The Defendant settled the lawsuit before trial for a total of $3,800 in damages.
Settlement Agreement ¶ 10(A). Comparing the benefits obtained to the likely results
of the litigation, the monetary relief afforded to the class members is approximately
77% of the maximum allowed by statute. The FDCPA limits statutory damages for
the class members to the lesser of $500,000.00 or 1% of defendant’s net worth. See 15
U.S.C. § 1682k(a)(2)(B). The parties in this case agreed that the lesser is 1% of the
Defendant’s net worth. Although the parties apparently disagree about the proper
way to calculate net worth, the Defendant has agreed to pay the class $3,800—
approximately 77% of the maximum statutory damages under the FDCPA. Sanders
v. Jackson, 209 F.3d 998, 1004 (7th Cir. 2000) (“net worth” within meaning of § 1692k
means “balance sheet or book value net worth” of assets minus liabilities). The
Defendant will separately provide full statutory damages of $1,000.00 each to Mr.
Marcoux and Ms. Jones.
The class’ recovery here is reasonable for three reasons. First, there was no
assurance of success on the merits. Although I sustained the Plaintiffs’ class claims
at the motion to dismiss stage, the Plaintiffs faced additional obstacles before
securing judgment in the class’ favor. The Defendant asserted five affirmative
defenses here, including that its actions in preparing and distributing the challenged
collection letters were taken in good faith and that any violation of the FDCPA was

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unintentional and a result of a bona fide error notwithstanding the Defendant’s
maintenance of procedures reasonably adapted to avoid such error. Answer 9 (ECF
No. 7). This “bona fide error” defense, if accepted, would have provided a complete
defense to liability.
Second, assuming liability could be established, the guaranteed recovery
provided by the settlement is reasonable considering that the FDCPA’s damages
provision is not mandatory. Had the Plaintiffs not settled the case and prevailed at
trial, there was still no assurance they would recover full statutory damages of $1,000
for each of the named Plaintiffs, plus 1% of the Defendant’s net worth for the class.
The statute merely provides for awards up to certain amounts, after balancing such
factors as the nature of the debt collector’s noncompliance, the number of persons
adversely affected, and the extent to which the debt collector’s noncompliance was
intentional. 15 U.S.C. § 1692k(b)(2).
Finally, the settlement provides a prospective public benefit in that the
Defendant agreed to change the form of its initial debt collection letter. It is not clear
that this benefit would have been available at trial because courts disagree on
whether the FDCPA allows such injunctive relief. See, e.g., Midland Funding LLC v.
Brent, 644 F. Supp. 2d 961, 977 (N.D. Ohio 2009) (“This Court agrees that declaratory
and injunctive relief are not appropriate under the FDCPA.”). In sum, evaluating the
benefits obtained here to those likely at trial demonstrates the fairness and
reasonableness of the negotiated resolution.

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B.

Stage of Litigation

Also significant is the amount of work completed prior to settlement. Given the
months of contested litigation and discovery efforts that preceded negotiations, the
settlement here was achieved with a clear view as to the strengths and weaknesses
of the case. The parties exchanged discovery concerning the Defendant’s net worth,
class damages, and the class size, so the Plaintiffs could adequately assess the class’s
maximum potential statutory damages recovery at trial. The issues that remained
for determination were the propriety of class certification and the legality of the form
letters at issue.
The parties’ briefing on Defendant’s motion to dismiss provided much insight
on those purely legal issues. See ECF Nos. 6, 8, 10, 12-13. Both sides could assess the
relative strengths and weaknesses of their respective positions at the time they
reached agreement. Therefore, both counsel and this Court are adequately informed
to evaluate the fairness of the settlement presented. At bottom, the Plaintiffs and
their counsel submit that the value of the class’ recovery here, reflects their
confidence in the claims at hand based on the litigation to date.
C.

Class Reaction

The reaction of the class strongly favors approval of the settlement. After a
successful direct mail notice program, not one class member lodged an objection to
the settlement terms or requested to be excluded. Some courts have recognized that
the “practical realities” of consumers contesting class action settlements may mean
that silence does not equate to support. Nonetheless, the complete absence of
objections or exclusions here supports approval. See In re TRS Recovery Servs., Inc.
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and Telecheck Servs., Inc., Fair Debt Collection Practices Act (FDCPA) Litig., No. 13MD-2426, 2016 WL 543137, at *7 (D. Me. Feb. 10, 2016) (citing cases). Accordingly,
the class’ implicit support weighs in favor of the fairness and reasonableness of the
settlement terms.
D.

Conduct of Negotiations and Quality of Counsel

The parties’ arm’s-length settlement negotiations demonstrate the fairness of
the settlement and that it was not a product of collusion or fraud among the parties.
Indeed, this litigation had been pending for over a year before settlement was
reached. During that time, the parties fully briefed the Defendant’s motion to dismiss.
It was only after those dismissal efforts proved unsuccessful that the parties engaged
in any serious settlement discussions.
Counsel for both sides then zealously negotiated on behalf of their clients and
exchanged numerous settlement demands and counteroffers. The negotiations
included multiple telephone conferences among counsel to work through differences
of opinion regarding the value of the Plaintiffs’ and the class’ claims. The result was
a compromise of the claims that took into account the risks of establishing liability
and the statutory limitations on damages.
Both the conduct of the negotiations and the quality of counsel support final
approval of the class settlement
E.

Case Prospects, Including Risk, Complexity, Expense, and
Duration

This action was not without risk. Every class action involves some level of
uncertainty, and here, the parties disagree about the merits of Plaintiffs’ claims,
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whether a class would be certified, and the ultimate outcome of this litigation. And
given that disagreement, absent settlement, this litigation would likely take many
more months to proceed through contested class certification, summary judgment
and, if necessary, trial and appeals.
Liability under the FDCPA was not guaranteed, nor were statutory damages,
even assuming liability. Thus, the immediate relief proposed of more than $42 per
class member is preferable to the uncertainties of continued, protracted litigation.
See id. at 683 (“Because damages are not mandatory, continued litigation presents a
risk to Plaintiffs of expending time and money on this case with the possibility of no
recovery at all for the Class. In light of the risks and costs of continued litigation, the
immediate reward to Class Members is preferable.”). Accordingly, this factor also
supports final approval.
F.

Reasonableness of Settlement

After considering all these factors, I conclude that the proposed settlement is
fair, reasonable and adequate. The assured compensation now is a fair trade-off for
the uncertainties of trial and appeal and the accompanying delay in receiving any
damages. I also find that the plan of distribution to give each class member who
received the letter the same damage award is fair, reasonable and adequate.
III.

Attorney Fees
The Plaintiffs seek attorney fees, apart from the settlement fund, in line with

the settlement agreement. Settlement Agreement 9-10 (ECF No. 26-1). Rule 23(h)
provides that a court may award reasonable attorney fees and costs. Class members
or a party may object to an attorney fees request, a court may hold a hearing, and
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that a court “must find the facts and state its legal conclusions under Rule 52(a).”
Fed. R. Civ. P. 23(h).
The Plaintiffs’ attorneys have requested a total attorney fee and costs award
of $53,000, which is fourteen times of the amount the Defendant is paying to settle
the case. Pls.’ Mot. for Approval of an Award of Attorneys’ Fees and Reimbursement
of Litigation Expenses 1-3 (ECF No. 31). The notice sent to the class members states
that the Plaintiffs’ attorneys will seek fees of no more than $70,000 and litigation
expenses of no more than $2,500. Notice (ECF No. 37-4). I heard the motion at the
final fairness hearing on January 27, 2017, and neither the Defendant or class
members objected to the attorney fees request. I note that had this lawsuit proceeded
to a successful judgment for the Plaintiffs, they could have recovered from the
Defendant reasonable attorney fees and costs under the FDCPA, 15 U.S.C. § 1692k,
on top of any damages they received. I proceed to the findings of fact and conclusions
of law on whether the request is reasonable under the lodestar method.
A.

Reasonable Hourly Rate

The Plaintiffs’ attorneys seeks a rate of $350 per hour for the work of Jessie
Johnson and a rate of $400 per hour for Michael Greenwald, James Davidson, and
Aaron Radbil. In substantiating the reasonableness of their hourly rates, the
attorneys have submitted affidavits detailing their experience in consumer protection
litigation. Aff. of Jessie Johnson (ECF No. 31-1); Aff. of Michael Greenwald (ECF No.
37-1); Aff. of James Davidson (ECF No. 37-2); Aff. of Aaron Radbil (ECF No. 37-3).
The attorneys’ affidavits also detail their experience in FDCPA class actions.

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B.

Hours reasonably expended

The next step in calculating a lodestar figure is determining the number of
hours reasonably expended in pursuit of the judgment. Attorney Johnson seeks
payment for 124.2 hours of work. Attorney Radbil seeks payment for 24.3 hours of
work. Attorney Davidson seeks payment for 11.8 hours of work. Attorney Greenwald
seeks payment for 9 hours of work. In addition, after filing the motion for attorney
fees, Attorney Johnson estimated that he would spend another 20 hours working on
the case. Thus, the total amount of lodestar fees is $68,510. The Plaintiffs’ attorneys
have applied a 22% discount to their fee request, asking me to approve their $53,000
fee request. I have reviewed the attorneys’ time sheets and find that the attorney
fees request is reasonable in this case.
IV.

Incentive Awards
A named plaintiff is a necessary component of any class action, and thus, an

incentive or service award may be appropriate to induce an individual to take part in
the suit. See Scovil, 2014 WL 1057079 at *6 (citing Cook v. Niedert, 142 F.3d 1004,
1016 (7th Cir. 1998)). The FDCPA provides for statutory damages for each named
plaintiff of no more than $1,000. 15 U.S.C. § 1692k(a)(2)(B). In determining whether
an incentive award is called for, courts consider the actions that the named plaintiffs
have taken to protect the interests of the class, the amount of time and effort they
have expended in pursing the litigation, the degree to which the class has benefited
from the named plaintiffs’ efforts, and any negative effects they have risked. Scovil,
2014 WL 1057079, at *6.

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The settlement agreement here proposes a $1,000 fee award for Alfred
Marcoux and Charlene Jones, which is separate and apart from the settlement fund.
No class member objected to the awards. Although it does not appear that they risked
any negative consequences, the named Plaintiffs in this case assisted with drafting
the Complaint and stayed in touch with Plaintiffs’ counsel throughout the litigation.
I conclude that the awards are reasonable given the named Plaintiffs’ time and
energy commitment.
CONCLUSION
There is no reasonable basis to believe that the Plaintiff class could achieve a
higher settlement amount, and there are significant risks posed by continued
litigation, including risks posed by summary judgment. I therefore finally CERTIFY
the class, and APPROVE the settlement agreement and plan of distribution,
including the incentive awards to the two named Plaintiffs. I also APPROVE the
requested attorney fees.
SO ORDERED.
/s/ Nancy Torresen
United States Chief District Judge
Dated this 21st day of February, 2017.

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