Franklin et al v. Midland Funding, LLC et al
MEMORANDUM OPINION AND ORDER case dismissed with prejudice pursuant to settlement agreement. Judge David A. Katz on 8/12/11. (G,C)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
HOPE FRANKLIN, et al.,
Case No. 3:10 CV 91
-vsMIDLAND FUNDING, LLC,
On March 11, 2011, this Court granted preliminary approval to a nationwide class
settlement in three related cases, Midland Funding v. Brent (No. 3:08-cv-1434), Franklin v.
Midland Funding (No. 3:10-cv-00091), and Vassalle v. Midland Funding (No. 3:11-cv-00096)
(Vassalle Doc. 7). As part of its order preliminarily approving the settlement, the Court
provisionally certified a nationwide class of persons who had been sued by Defendants, Midland
Funding LLC and Midland Credit Management, Inc., Encore Capital Group, Inc., and related
entities (collectively, “Midland”) between January 1, 2005 and the date of the approval order, in
debt collections suits where Midland used affidavits attesting to facts about the underlying debt.
The Court appointed as Class Counsel the law firm of Murray & Murray, counsel for Andrea
Brent, Martha Vassalle, Jerome Johnson, and Hope Franklin, the Named Plaintiffs in these suits,
and approved the proposed form of notice to the class.
This matter is now before the Court on the joint motion of Named Plaintiffs and
Defendants for an order granting approval of the class action settlement they have reached
(Vassalle Doc. 131), and Class Counsel’s motion for an award of attorney’s fees (Vassalle Doc.
134). The Court held a Fairness Hearing regarding the proposed settlement pursuant to Fed. R.
Civ. P. 23(e)(2) on July 11, 2011. The Court has carefully reviewed the memoranda that have
been filed in connection with these motions, as well as the Objections that have been filed. For
the following reasons, the motions will be granted, and the settlement approved..
The settlement here at issue relates to three class action lawsuits arising from similar
factual predicates. The oldest of these, Midland Funding v. Brent (No. 3:08-cv-1434), began life
as a debt collection action filed by Midland Funding LLC against Andrea Brent in the Municipal
Court of Sandusky, Ohio, on April 17, 2008. (Brent Doc. 1, Exh. A). Attached to the initial
complaint in that action was an affidavit signed by one Ivan Jimenez, an employee of Midland
Credit Management, Inc., claiming on personal knowledge that Brent owed a debt to Midland
Funding of $4,516.57. In response, Brent filed an answer as well as a class-action counterclaim
against Midland Funding and Midland Credit Management, asserting claims for violation of the
Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (FDCPA), and for intentional and/or
negligent infliction of emotional distress under the common law of Ohio. Brent’s counterclaim
sought certification of two classes, with one class consisting of “(a) all natural persons (b) sued in
the name of Midland or MCM (c) in an Ohio court (d) where a form affidavit was attached to the
complaint, and (e) the suit was filed on or after a date one year prior to this action,” and the other
class consisting of Ohio debtors who had been sued by Midland beyond the statute of limitations.
Brent’s counterclaim alleged, inter alia, that form affidavits, such as the one attached to complaint
filed by Midland against Brent, were signed by MCM employees who had no personal knowledge
of the facts asserted.
Brent was removed to this Court on the basis of federal question jurisdiction on June 13,
2008. Discovery commenced in August 2008. The discovery process was hard-fought and
extensive, with Class Counsel conducting substantial inquiry into Midland’s debt-collection
procedures. Specifically, Class Counsel investigated the procedures Midland used in printing and
signing the affidavits it used in collection actions; the process by which Midland purchased debts
and received information concerning those debts; the availability of account information in
Midland’s computer system; how that account information was utilized; how accounts were
referred to collection attorneys for suit through the business logic component of Midland’s
computer programming; the role of the affiants in the collection process; and Midland’s
organizational structure generally. As part of this investigation, Class Counsel conducted several
depositions, engaged experts to gain an understanding of Midland’s computer system (at
substantial monetary expense), and propounded extensive written discovery, resulting in Midland
producing over four hundred pages of documents. Class Counsel also researched public filings of
Midland to understand the full extent of prospective damages arising from its alleged practices.
Information gained during discovery resulted in Class Counsel filing an Amended Counterclaim
Complaint with more detailed factual allegations on December 1, 2008. The Amended
Counterclaim Complaint also added a claim alleging violation of the Ohio Consumer Sales
Protection Act, Ohio Rev. Code Ann. § 1345 et seq. (2008) (OCSPA), removed the common-law
negligent and/or intentional infliction of emotional distress claim, dropped the statute-oflimitations class, and added two proposed classes based on the interest rate at which Midland
attempted to collect. The discovery process was hard-fought and contentious, resulting in
numerous discovery disputes. Ultimately, the Court was forced to intervene, holding a discovery
conference on December 5, 2008 to resolve contested issues.
The parties then began extensive motion practice, with both parties filing summary
judgment motions in February 2009. After both motions had been fully briefed, the Court issued
its decision in a memorandum opinion on August 11, 2009. Midland Funding v. Brent, 644
F.Supp.2d 961 (N.D. Ohio 2009) (Brent Doc. 50) . In a landmark ruling, this Court became the
first in the country to hold that the practice of “robo-signing” affidavits in debt collection actions
violates the FDCPA. The Court found that Midland generated affidavits for law firms to use in
debt-collection actions by means of a computer system. “Specialists” in Midland’s litigation
support department would sign between 200 and 400 of these automatically-generated affidavits
per day. While the affidavit stated that the statements therein were based on the signer’s personal
knowledge, deposition testimony revealed that Midland’s “specialists” who signed the affidavits
did not have personal knowledge of the accounts at issue. While the Court noted that “the actual
account information is probably either correct or likely thought correct in good faith by Midland”
(Brent Doc. 50 at 12), the Court nonetheless found the affidavit both false and misleading as a
whole for purposes of the FDCPA, “notwithstanding the fact that some of the data in it are
correct,” due to the false attestation of personal knowledge. Id. The Court also found that the
falsehoods were material, as “the fact that the affiant allegedly had personal knowledge that the
debt was valid would effectively serve to validate the debt to the reader.” Id. at 15. The Court
also rejected the notion that the errors in question were “bona fide errors” under the FDCPA.
The Court also held that the practice of “robo-signing” affidavits violates the OCSPA.
While the Court found that declaratory and injunctive relief were not appropriate under the
FDCPA, the Court ordered such relief with respect to the OCSPA. The Court also held that
genuine issues of material fact precluded summary judgment on Brent’s claims involving the
interest rate at which Midland attempted to collect.
Midland then filed a Motion for Reconsideration, challenging this Court’s grant of
injunctive relief under the OCSPA. In response, the Court issued a memorandum opinion
upholding its decision to enter an injunction under the OCSPA but clarifying that the injunction
was limited to Midland’s use of affidavits that falsely claim to be based on the affiant’s personal
knowledge, and not affidavits that may be false in other respects, such as cases where the original
creditor has supplied inaccurate information about the debt.
The Court’s August 11, 2009 memorandum opinion set off a wave of class action
complaints in other states that relied upon and cited this Court’s summary judgment opinion.
Among these cases was one filed on July 7, 2010 in the Eastern District of Virginia, Rubio v.
Midland Funding (No. 3:10-cv-00464). The plaintiff in Rubio was represented by Consumer
Litigation Associates, the same firm that represents Intervenor Ladon Herring, who objects to the
settlement in this case. The complaint in Rubio sought class certification and, inter alia, “an
Order of this Court . . . enforcing the Orders entered in the Northern District of Ohio and
specifically enjoining [Midland] from continuing to file false collection affidavits in the courts of
the Commonwealth of Virginia.” (Brent Doc. 154, Exh. 4). Other subsequent class actions
include Gray v. Suttell & Associates (E.D. Wash. No. CV-09-251), brought by Kelli Gray, an
Objector in this case (Brent Doc. 144, Exh. 1), and Reimann v. Brachfeld (Alameda County, Ca.,
Superior Court, No. 10-529702), brought by a party represented by Charles Delbaum, attorney for
objector Robert Clawson (Brent Doc. 144, Exh.2).
Following issuance of the Court’s August 11, 2009 memorandum opinion, and at
Midland’s request, the parties began mediation with the Hon. Richard McQuade, a retired federal
judge experienced in resolving class action cases. On August 31, 2009, the Court ordered the case
stayed pending the outcome of the mediation (Brent Doc. 53). The parties first met with Judge
McQuade for mediation on October 29, 2009. At the session, which lasted all day and took weeks
to prepare for, the parties engaged in intense discussions and negotiations, but left without settling
the case. Class Counsel reluctantly agreed to continue attempts to resolve the case through
mediation with Judge McQuade, though he filed a Notice of Mediation Status on October 30,
2009, seeking to partially lift the stay in order to litigate class certification issues while still
attempting mediation (Brent Doc. 57). The Court held another status conference on November 9,
2009, and issued an order holding that the stay would continue in force through the parties’ second
scheduled mediation session with Judge McQuade on December 8, 2009 (Brent Doc. 60).
The December 8, 2009 mediation was also unsuccessful, and Brent requested that the
case be restored to active status on the Court’s docket (Brent Doc. 61). The Court held a status
conference on December 15, 2009, at which it lifted the stay and established a new briefing and
discovery schedule (Brent Doc. 63). The Court denied Brent’s motion to file an amended
complaint (which Midland opposed) on timeliness and futility grounds on February 22, 2010
(Brent Doc. 72). The parties engaged in two additional day-long mediation sessions on June 29,
2010, and September 10, 2010, again with Judge McQuade, both of which were unsuccessful.
Brent filed a motion for class certification on March 24, 2010, seeking certification of two
classes: one class that had been sued by Midland in an Ohio court using an affidavit that falsely
claimed to be based on the affiant’s personal knowledge, and another class that had been sued by
Midland in an Ohio court where Midland sought to collect on a higher interest rate than was
allowed by law (Brent Doc. 76). Midland challenged every aspect of the class certification
motion, arguing, inter alia, that the proposed affidavit class could not satisfy any of the elements
necessary for certification under Fed. R. Civ. P. 23(a) or (b) (Brent Doc. 84). Midland also filed a
motion for partial summary judgment on Brent’s claim for actual damages (Brent Doc. 88).
After both motions had been fully briefed, the Court issued a memorandum opinion on
November 4, 2010, granting in part Brent’s motion for class certification and granting Midland’s
motion for partial summary judgment on the issue of actual damages (Brent Doc. 104). The Court
certified the proposed affidavit class, finding that it satisfied each of the requirements of Fed. R.
Civ. P. 23(a) and (b), but found that the proposed class based on the interest rate at which Midland
sought to collect failed on both commonality and typicality grounds. The Court also found that
Brent could not show emotional distress resulting from the aspects of the affidavit that violated the
FDCPA and OCSPA, as opposed to the general stress that accompanies being sued in a debt
collection action, and thus dismissed her claim for actual damages. That holding limited her (and
similarly-situated debtors) to seeking recovery of statutory damages and attorneys fees.
On December 9, 2009, Hope Franklin and Thomas Hyder, represented by Class Counsel,
filed the Franklin v. Midland Funding action in Erie County, Ohio Common Pleas Court, bringing
a claim for common-law misrepresentation against Midland based on their alleged use of
affidavits that falsely claimed to be based on the affiant’s personal knowledge. The action was
removed to this Court pursuant to the jurisdictional provisions of the Class Action Fairness Act of
2005, 28 U.S.C. § 1332(d). Midland moved to dismiss the complaint on the grounds that Hyder’s
claims were subject to binding arbitration, and Franklin had not alleged facts indicating that she
relied on false statements in the affidavit, an element of common-law misrepresentation. On
October 6, 2010, the Court granted the motion to dismiss (Doc. 18), and the Plaintiffs appealed to
the Sixth Circuit. The parties attempted to resolve the Franklin appeal via discussions with the
Sixth Circuit mediator, with sessions beginning on December 22, 2010.
Upon the dismissal and appeal of the Franklin action, Martha Vassalle and Jerome
Johnson, represented by Class Counsel, filed the Vassalle v. Midland Funding action with this
Court on January 17, 2011, bringing claims against Midland on behalf of a nationwide class for
common-law fraudulent misrepresentation, negligence, and unjust enrichment, again based on
Midland’s alleged practice of filing affidavits that falsely claimed to be based on the affiant’s
With motion practice in Brent concluded, the parties agreed to participate in a settlement
conference with the Court. The Court conducted settlement conferences beginning on January 28,
2011, and continuing for two weeks. After much hard-fought negotiating, the parties finally
reached an agreement in principle to resolve the litigation on February 11, 2011. Even then, the
parties required an additional month of negotiations, including further assistance from the Court,
to finalize the agreement. The parties finally presented their agreement to the Court on March 9,
2011, with the filing of joint motions for preliminary approval of the class proposed settlement
(Brent Doc. 107) and for entry of an order enjoining parallel litigation of claims to be released by
the proposed settlement (Brent Doc. 108).
In the settlement agreement, which applied to the Brent, Franklin, and Vassalle actions,
the parties stipulated to the certification of the following class:
All natural persons (a) sued in the name of Encore Capital Group, Inc., Midland
Funding, LLC, Midland Credit Management, Inc., or any other Encore and/or
Midland-related entity (collectively, “Midland”), (b) between January 1, 2005 and
the date the Order of Preliminary Approval of Class Action Settlement is entered
by the Court, (c) in any debt collection action in any court (d) where an affidavit
attesting to facts about the underlying debt was used by Midland in connection with
the debt collection lawsuit.
(Brent Doc. 107, Exh. A. [“Settlement Agreement”] at 6). In order to settle the case on the basis
of this nationwide class, Midland agreed to pay $5.2 million into an interest-bearing fund for the
benefit of the class. Attorney’s fees of no more than $1.5 million would be paid out of this fund to
Class Counsel, as would the costs of administration. The remainder of the fund would be used to
make payments to class members who timely returned a claim form and were determined to be
eligible by the Class Administrator. All eligible class members were to receive $10 each. Class
Counsel represented to the Court that, if significant funds remained, the amount payable to class
members would increase. In addition, if sufficient funds remained, the Named Plaintiffs would
receive $8,000 collectively, Class Counsel would be reimbursed for out-of-pocket expenses of up
to $9,000, and any funds left over would be awarded cy pres to an organization to be determined
by Class Counsel with approval of the Court. None of the money would revert to Midland. In
addition, if the settlement fund were insufficient to pay each eligible class member $10, Midland
would pay the lesser of the amount necessary to cover a payment of $10 to each eligible class
member, or $500,000.
In fact, the response rate has been such that each eligible class member is now expected to
receive $17.38 if the settlement is approved (Vassalle Doc. 153).
The settlement agreement also included injunctive relief. The parties stipulated to entry of
an injunction mandating that Midland create and implement written procedures for the generation
and use of affidavits in debt collection lawsuits in order to prevent the use of affidavits where the
affiant lacks personal knowledge of the facts set forth in the affidavit. The parties requested that
Judge McQuade be appointed as Special Master to monitor Midland’s compliance with the
injunction, at Midland’s expense. Midland would submit their affidavit procedures to the Special
Master for approval within thirty days of entry of the stipulated injunction. The Special Master
would then make findings as to whether the affidavit procedures are reasonably assured to prevent
the use of affidavits of the sort the Court has found unlawful. If the Special Master finds the
procedures inadequate, Midland would have thirty days to revise the procedures so as to cure any
defects identified by the Special Master. The stipulated injunction would expire at the end of
twelve months; at that time, Midland would be required to submit to the Special Master a
declaration confirming that the affidavit procedures approved by the Special Master have been
implemented. During the twelve-month term of the stipulated injunction, either party would have
the right to seek relief from or modification of the stipulated injunction from the Special Master
based on an “unfair burden on the business” or a change in law.
In exchange for the monetary and injunctive relief noted above, the settlement contained a
classwide release. The classwide release provided that each class member who chose not to opt
out would release Midland, its affiliates, and specified third parties (including attorneys) “from all
causes of action, suits, claims and demands, whatsoever, known or unknown, based on state or
federal law, which the class now has, ever had or hereafter may have against the Released Parties,
arising out of or relating to the Released Parties’ use of affidavits in debt collection lawsuits.”
(Brent Doc. 107 at 11-12).
The settlement also contained a broader release that applied only to the Named Plaintiffs.
The Named Plaintiffs agreed to release Midland, affiliated entities, and specified third parties from
“all causes of action, suits, claims demands, whatsoever . . .under any legal theory,” not just those
based on Midland’s use of affidavits in debt collection lawsuits. (Brent Doc. 107 at 12-13).
Midland also agreed to release the debts owed by the Named Plaintiffs, though it did not agree to
release debts owed by other class members. (Brent Doc. 107 at 13).
The Court granted the motion for preliminary approval of the class settlement on March
11, 2011 (Brent Doc. 111; Franklin Doc. 25; Vassalle Doc. 7), finding that the proposed
settlement was within the range of fairness and reasonableness. The Court also found that the
proposed nationwide class met all the requirements for class certification, and it approved the
form of notice, finding that it met the requirements of due process and Fed. R. Civ. P. 23(c)(B).
The Court gave class members until June 1, 2011 to submit a claim form, request for exclusion, or
an objection to the proposed settlement, and scheduled a Fairness Hearing for July 11, 2011. The
Court also granted the motion for a preliminary injunction against parallel litigation (Brent Doc.
110; Franklin Doc. 24; Vassalle Doc. 6).
The Court appointed Class Action Administration (“CAA”) as Claims Administrator.
Pursuant to the Preliminary Approval Order, CAA sent a copy of the Class Notice and Claim
Form to the last postal address of each class member, as updated through the United States Postal
Service National Change of Address Service. Class members could return a postage-paid claim
form if they wished to file a claim or opt out of the settlement. Out of a class of approximately 1.4
million, more than 133,000 class members, or about 9.2% of the class, have filed claims, while
4,262 (about .3%) opted out and 61 (about .004%) filed objections. Of the opt-outs, almost six
hundred submitted form letter-type opt-outs (presumably generated by their attorney). Over half
of these form opt-outs were submitted by parties represented by Consumer Litigation Associates,
the firm that was pursuing the Rubio case in the Eastern District of Virginia.
A copy of the Class Notice was published in the legal section of USA Today on April 18,
2011, and in the USA Today’s marketplace section on April 21, 2011. In addition, a website was
established to provide class members with information at www.BrentSettlement.com. Under
Class Counsel’s supervision, CAA established a toll-free interactive voice response system to
provide answers to frequently asked questions. Callers could also speak to a live operator. Class
members who wanted additional information could contact CAA through an email box on the
settlement website, and Class Counsel responded to questions from Class Members via telephone,
email, and U.S. Mail, over 100 calls and emails in total.
The Court subsequently clarified the scope of its preliminary injunction in a memorandum
opinion and order issued on May 17, 2011. (Brent Doc. 156; Franklin Doc. 28, Vassalle Doc. 8).
The Court also denied motions to dissolve the preliminary injunction, granted a motion to
intervene filed by Ladon Herring, and granted a motion to dismiss the Brent action for lack of
jurisdiction. That jurisdictional defect was technical in nature: the federal question that formed
the basis for Brent’s claims was found in a counterclaim, not the original complaint filed by
Midland. Neither the Court nor the parties were aware of the jurisdictional error until it was
pointed out in a motion filed by putative class members Kelli Gray and Marla Herbert, and the
Court will consider the course of the Brent action in determining the fairness of the proposed
settlement. The various opinions issued by the Court and efforts undertaken by the parties in the
Brent action have created important precedent that would guide this Court and others in dealing
with the claims both of the Named Plaintiffs and similarly-situated parties.
II. Pending Motions
Now pending before the Court are: the joint motion of Midland and the Named Plaintiffs
for an order granting approval to the class settlement (Vassalle Doc. 131); a motion for attorneys’
fees and reimbursement of expenses filed by Class Counsel (Vassalle Doc. 134); and a motion to
strike (Vassalle Doc. 135) the declaration of Stephen Gardner (Vassalle Doc. 26), filed by Robert
Clawson and Ladon Herring in support of their Objection to the settlement (Vassalle Doc. 25).
Clawson and Herring have also filed joint memoranda in opposition to the motion for an
order approving the class settlement (Vassalle Doc. 148) and in opposition to the motion to strike
Gardner’s affidavit (Vassalle Doc. 147). Putative class member Elaine Pelzer has filed a joinder
in Clawson and Herring’s memorandum in opposition to the class settlement (Vassalle Doc. 149),
as well as an Objection of her own (Vassalle Doc. 42).1 Putative class member Kelli Gray has
filed an Objection to the settlement (Vassalle Doc. 32), as well as a response to the joint motion
for approval of the class settlement (Vassalle Doc. 150). In addition to the aforementioned
Objections, 61 individuals have filed Objections to the settlement (Vassalle Docs. 57-117), one of
which was subsequently withdrawn (Vassalle Doc. 140).
The attorneys general of 38 states have filed a brief amicus curiae opposing the settlement
(Vassalle Doc. 27), as has the Federal Trade Commission (FTC) (Doc. 55).
Midland has filed a memorandum in response to the Objections of Clawson, Herring, Gray
and Pelzer (Vassalle Doc. 133), and a memorandum in response to the Objections of putative class
members Lutchmin Persaud, Sarai Ossers, Christopher Guest, Manuela Rivera, Sylvia Yeado, and
Ada Carter (Doc.130). Midland has also filed memoranda in response to the amicus briefs of the
state attorneys general (Vassalle Doc. 124) and the FTC (Vassalle Doc. 125). The Named
Plaintiffs have joined in Midland’s response to the attorneys general (Vassalle Doc. 126), and
Pelzer has appealed from the partial denial of her motion to intervene (Doc. 157). But her appeal
concerns an ancillary matter, and does not affect this Court’s jurisdiction to determine matters not
involved in the appeal. See Shevlin v. Schewe, 809 F.2d 447, 451 (7th Cir. 1987).
have filed their own response to the Objections (Doc. 127). Objectors Guest (Vassalle Doc. 145)
and Rivera (Vassalle Doc. 146) have filed replies to Midland’s response to their Objections.
III. Positions of the Parties
The Objections to the settlement filed with the Court contain several common themes. The
Objections interpret the class release as applying to any claim of falsity in an affidavit used by
Midland, not just false attestations of personal knowledge. Thus, the Objectors see the class
release as barring class members from contesting statements in a Midland affidavit as to the
amount of a debt, even if the amount is false, or as to service of process, even they were never
properly served. In Objectors’ view, then, the release is overly broad, in that class members who
do not opt out are giving up their rights to defend themselves in debt collection actions, to vacate
improperly obtained default judgments against them, or to seek potentially lucrative monetary
relief under state debt collection statutes.
The monetary relief to the class, the Objectors argue, is paltry and incommensurate with
the scope of the release. The Objectors criticize the incentive payments and broader release
afforded to the Named Plaintiffs, contending that the debts of all class members should be vacated.
The Objectors also decry the attorney’s fees agreed to by the parties as excessively high. While
acknowledging that putative class members may opt out if they wish to avoid these consequences,
the Objectors argue that they will be deterred from doing so because they will not want to provide
Midland with their current address, which Midland would then use in its debt-collection activities.
Midland deserves much harsher punishment for its practices than the settlement provides for, in
the view of the Objectors.
In addition, the Objectors contend that the settlement was collusive, not the product of
arms-length negotiations. Some of the Objectors argue that their attorneys should have been
included in the settlement negotiations, but were purposefully kept in the dark. The Objectors
contend that Midland engineered a “reverse auction,” whereby they cherry-picked “the most
ineffectual class lawyers” with whom to negotiate a settlement, apparently finding them in the
Northern District of Ohio (Vassalle Doc. 57 at 13).
The Objectors also take issue with the adequacy of the injunctive relief contained in the
settlement, taking issue with the fact that it lapses after one year, and that Midland may petition
the Special Master to modify the injunction. Finally, they take issue with the notice provided to
the class, contending that it failed to inform putative class members that they would be forfeiting
all rights to challenge affidavits filed by Midland (based on their interpretation of the release).
Midland and the Named Plaintiffs respond that the release is not as broad as Objectors
suggest. They point out that the release only applies to claims “arising out of or relating to the
Released Parties’ use of affidavits in debt collection lawsuits.” (Settlement Agreement at 6). That
is, the release, by its plain terms, only bars class members from asserting claims against the
Released Parties where the basis for relief is the affidavit itself, as opposed to some other issue–
that the class member did not owe the debt sued upon, or was not validly served. Midland and the
Named Plaintiffs thus argue that the Class Notice was adequate based on this understanding of the
release. They contend that, while the settlement does not address all the harms associated with
alleged practices of Midland, it was not designed to, and is a fair and adequate means of
addressing defects in affidavits used by Midland that falsely claimed to be based on personal
knowledge. They further argue that a mass vacatur of judgments would only result in needless
time and expense to the court system as Midland sought to relitigate formerly closed cases.
Midland and the Named Plaintiffs point out further that statutory damages under the
FDCPA are capped at $1000 per individual and $500,000 in class actions like this one, where the
Defendant’s net worth exceeds $50,000,000. Moreover, pursuant to this Court’s earlier ruling,
actual damages resulting from unlawful aspects of Midland’s affidavits would be very difficult to
prove. That holds true as well for state-law claims, where class members would face a difficult
challenge proving they were damaged by an affidavit that contained accurate information about
the debt but was not based on the affiant’s personal knowledge. Therefore, Midland and the
Named Plaintiffs argue that the monetary provisions of the settlement are fair and adequate, given
the small potential individual recovery and the fact that the class settlement in this case far
exceeds the FDCPA class action damages cap. Further, they point out that any class member who
believes he or she can obtain a greater recovery on an individual claim can opt out of the class.
Class Counsel argues that his attorney’s fees are justified by value of the settlement and the
amount of work he has done in this case over three years on a contingency-fee basis.
Pointing to the multiple attempts at settlement and extensive motion practice in these
cases, as well as the participation of Judge McQuade as a third-party mediator during settlement
talks, Midland and the Named Plaintiffs assert that the settlement was the result of arms-length
negotiations between adversaries, and was not collusive. They defend the incentive payments to
the Named Plaintiffs as reasonable considering the efforts they expended in pursuing these cases,
as well as the broader scope of the release to which they have agreed.
Regarding injunctive relief, Midland and the Named Plaintiffs assert that the one year term
is reasonable and comparable with injunctive relief approved in other debt-collection cases, and
point out that Judge McQuade would have to approve any modification.
Finally, with regard to the use of class members’ current addresses, Midland and the
Named Plaintiffs point out that the settlement is being administered by an independent class action
administrator; the address information used in this case came from Midland’s own existing
records; and that Midland has access to the U.S. Postal Service’s National Change of Address
Data. Moreover, Midland has stipulated that none of the information obtained through the claims
process will be used for the purpose of collecting debts of the class members. (Vassalle Doc. 125
A. Class Certification
In order to approve the class settlement in this case, the Court must grant certification of
the proposed nationwide class. In determining whether to grant certification, the Court must find
that the class satisfies each of the four requirements set forth in Fed. R. Civ. P. 23(a):
(1) the class must be so numerous that joinder of all members is impracticable;
(2) there must be questions of law or fact common to the class;
(3) the claims or defenses of the representative parties must be typical of the claims
or defenses of the class; and
(4) the representative parties must fairly and adequately protect the interests of the
Also, class certification implicitly requires both that there be an identifiable class, and that the
named representative falls within the proposed class. In re A.H. Robins Co., Inc., 880 F.2d 709,
728 (4th Cir. 1989). Once the prerequisites are satisfied, an action may be maintained as a class
action if “the court finds that the questions of law or fact common to class members predominate
over any questions affecting only individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P.
In this case, the court finds that the proposed nationwide class meets the standards for
certification. The class, which contains more than 1.4 million members, is sufficiently large that
joinder would be impracticable. All class members seek resolution of a common legal question:
whether Midland’s use of affidavits purporting to be based on the personal knowledge of the
affiant is an unfair and deceptive debt collection practice. Resolution of this common question
will affect the class as a whole, and can be most efficiently resolved in the context of a class
action. The claims of the class representatives are typical of those of the class, as their claims
arise from the same factual predicate (being sued by Midland using an affidavit falsely claiming to
be based on the affiant’s personal knowledge) as those of the rest of the class.
In considering whether the class representatives will “fairly and adequately protect the
interests of the class,” Fed. R. Civ. P. 23(a)(4), the Court looks to two factors: “(1) The
representative must have common interests with unnamed members of the class, and (2) it must
appear that the representatives will vigorously prosecute the interests of the class through qualified
counsel.” Senter v. General Motors Corp., 532 F.2d 511, 525 (6th Cir. 1976). The Court finds
both factors satisfied in this case. The class representatives share with the putative class members
a desire to recover from Midland for the use of false affidavits in debt collection actions, and a
desire to prevent Midland from employing such deceptive practices in the future. Further, the
Court finds that Class Counsel is qualified and has vigorously pursued this action.
The Court also finds that the Rule 23(b)(3) factors (whether common questions
predominate over questions particular to each class member, and whether a class action is a
superior means of adjudicating the controversy) are satisfied. “The Rule 23(b)(3) predominance
inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by
representation.” Beattie v. CenturyTel, Inc., 511 F.3d 554, 565 (6th Cir. 2007). “To satisfy the
predominance requirement in Rule 23(b)(3), a plaintiff must establish that the issues in the class
action that are subject to generalized proof, and thus applicable to the class as a whole . . .
predominate over those issues that are subject only to individual proof.” Id. (internal quotation
marks omitted). In addition, “[a]n action in which both injunctive relief and money damages are
sought may be certified as a class under Rule 23(b)(2), as long as money damages do not
constitute the predominate type of relief requested.” Hoffman v. Honda of America Mfg., Inc., 191
F.R.D. 530, 536 (S.D. Ohio 1999) (emphasis omitted).
The question of whether affidavits used by Midland were deceptive and unlawful lies at
the heart of this litigation, and is susceptible to classwide proof. As the Court found in its
previous opinion on class certification in Brent, “ the unlawful aspects of the form affidavits here
at issue were a result of the process by which they were produced pursuant to Midland and
MCM’s general business practices. Liability questions are thus amenable to class-wide proof.”
Midland Funding v. Brent, 2010 WL 4628593 (N.D. Ohio Nov. 4, 2010) (Brent Doc. 104 at 9).
Moreover, the request for monetary relief does not predominate over the request for injunctive
relief, while the affidavit issues do predominate over any claims subject only to individual proof.
In determining whether a class action is superior to other methods of resolving the
controversy, the Court may look to: (1) the interest of members of the class in individually
controlling the prosecution or defense of separate actions; (2) the existence of pending litigation
concerning the same controversy ; (3) the desirability of concentrating the litigation of the claims
in this forum; (4) the difficulties likely to be encountered in the management of the class action.
Fed. R. Civ. P. 23(b)(3).
Given the limited resources of the typical class member and the meager monetary relief
they could expect to recover, there is a strong interest in litigating these claims in a single forum.
In addition, this case is far more procedurally advanced than the other actions bringing similar
claims, ensuring that the class members may obtain relief more speedily than if the litigation were
permitted to proceed piecemeal.
Thus, the Court finds that the proposed nationwide class meets all the requirements of Fed.
R. Civ. P. 23(a) and 23(b), and certifies same.
B. Standard of Review of the Class Settlement
“[T]he law favors settlement, particularly in class actions and other complex cases where
substantial judicial resources can be conserved by avoiding formal litigation.” 4 Alba Conte &
Herbert Newberg, Newberg on Class Actions, § 11.41 (4th ed. 2002); accord Int’l Union, United
Auto, Aerospace, and Implement Workers of America v. General Motors Corp., 477 F.3d 615, 632
(6th Cir. 2007) (noting “the federal policy favoring settlement of class actions”). The Sixth Circuit
has recognized that complex litigation is “notoriously difficult and unpredictable.” Granada
Investments, Inc. v. DWG Corp., 962 F.2d 1203, 1205 (6th Cir. 1992) (quoting Maher v. Zapata
Corp., 714 F.2d 436, 455 (5th Cir. 1983). Thus, “[a]bsent evidence of fraud or collusion, such
settlements are not to be trifled with.” Granada, 962 F.2d at 1205.
“In evaluating a proposed settlement of a class action, the district court is required to
examine the terms of the settlement and the process by which the settlement was arrived at, to
make sure that the terms are reasonable and that the settlement is not the product of fraud,
overreaching, or collusion.” Priddy v. Edelman, 883 F.2d 438, 447 (6th Cir. 1989). Fed. R. Civ. P.
The Court may approve a settlement, voluntary dismissal, or compromise that
would bind class members only after a hearing and on finding that the settlement,
voluntary dismissal, or compromise is fair, reasonable, and adequate.
The typical process for approving class action settlements in federal court is: 1) preliminary
approval of the proposed settlement at an informal hearing; 2) dissemination of mailed and/or
published notice to all affected class members; and 3) a formal fairness hearing at which interested
parties may comment on the proposed settlement. Williams v. Vukovich, 720 F.3d 909, 920-921
(6th Cir. 1983). All three of these steps have now taken place in this case.
In considering whether the settlement is fair, reasonable, and adequate, the trial court
considers the following factors: (1) the risk of fraud or collusion; (2) the complexity, expense and
likely duration of the litigation; (3) the amount of discovery engaged in by the parties; (4) the
likelihood of success on the merits; (5) the opinions of class counsel and class representatives; (6)
the reaction of absent class members; and (7) the public interest. Int’l Union, 497 F.3d at 631. A
class settlement is presumptively reasonable upon preliminary approval, and an individual who
objects consequently has “a heavy burden” of demonstrating that the settlement is unreasonable.
Vukovich, 720 F.2d at 921. In general, a reviewing court’s task “is not to decide whether one side
is right or even whether one side has the better of these arguments. . . . The question is rather
whether the parties are using settlement to resolve a legitimate legal and factual disagreement.”
Int’l Union, 497 F.3d at 632.
C. Scope of the Release
Much of the disagreement between the Objectors and the Settling Parties revolves around
the scope of the release. Objectors contend vigorously that the release would effectively prevent
any class member from raising a legal challenge in a case where Midland has used an affidavit,
including cases where Midland has sued upon an incorrect amount, or where the debtor has not
been served. The Court finds that this interpretation is unsupported. By its terms, the release
applies only to claims “arising out of or relating to the Released Parties’ use of affidavits in debt
collection lawsuits.” (Settlement Agreement at 6). Thus, the release is limited to claims where
the basis for relief is the affidavit itself, such as those of the Named Plaintiffs, who sought
damages based upon Midland’s use of an affidavit. Claims that the debtor did not owe the amount
being sued upon, or was not validly served, are not covered, because the factual basis for the claim
is something other than the affidavit. Certainly, nothing in the release prevents a class member
from pointing to evidentiary deficiencies in the proof offered by Midland in defending a debt
collection action. Nor does the release apply to actions being pursued by state attorneys general
against Midland, as it only applies to “class members,” defined as “natural persons” in the release.
See Will v. Michigan Dep’t of State Police, 491 U.S. 58, 64 (1989) (“[I]n common usage, the term
‘person’ does not include the sovereign, and statutes employing the word are ordinarily construed
to exclude it.”) The release simply prevents a deficient affidavit from furnishing the basis for an
independent claim for damages against Midland, be it pursuant to the FDCPA or some state-law
cause of action.
Therefore, the release is properly limited to claims that share a factual predicate with the
claims pled in the complaint: that is, claims based on the allegation that an affidavit used by
Midland falsely purports to be based on the affiant’s personal knowledge. See Moulton v. U.S.
Steel Corp., 581 F.3d 344, 349 (6th Cir. 2009) (“The question is not whether the definition of the
claim in the complaint and the definition of the claim in the release overlap perfectly; it is whether
the released claims share a factual predicate with the claims pled in the complaint”) (internal
quotation marks omitted). The fact that the release does not include language specifically stating
that it will only apply in cases sharing the same factual predicate as those released does not render
it overbroad, nor does the potential that Midland may in some future case urge a broader
interpretation of the release. See In re WorldCom, Inc. Secs. Litig., 388 F.Supp.2d 319, 342 n. 36
(“The Release does not state that its application is bounded by the “identical factual predicate”
doctrine, but the addition of language releasing claims “arising from the same facts,” or similar
formulations, would be unnecessary and redundant. It is, after all, a given that the Release will
only be applied insofar as its application conforms to the law.”).
The Objectors also contend that the release would be overbroad if interpreted to apply to
Midland’s attorneys. The Court finds that the language of the release, which references “agents,”
“representatives,” and “attorneys” of Midland, applies to attorneys who filed Midland’s affidavits
in state court collection proceedings. While the Court held that the preliminary injunction
previously entered in this matter did not apply to third parties such as attorneys, that was due
entirely to concern that tolling would not apply to claims against such persons, based on the rule
that “class action tolling does not apply to a defendant not named in the class action complaint.”
(Vassalle Doc.8 at 9) (quoting Wyser-Pratte Mgmt. Co., Inc. v. Telxon Corp., 413 F.3d 553, 567
(6th Cir. 2005)).
The fact that the release applies to attorneys associated with Midland does not render it
unfair and inadequate. In the Court’s long experience, it is standard to include the defendant’s
agents, assigns, and attorneys within the scope of a release. There is nothing improper about a
class action settlement releasing claims against non-parties where, as here, “the claims against the
non-parties being released [are] based upon the same underlying factual predicate as the claims
asserted against the parties to the action being settled.” Wal-Mart Stores, Inc. v. Visa U.S.A., Inc.,
396 F.3d 96, 109 (2d Cir. 2005), quoting In re Lloyd’s Am. Trust Fund Litig., 2002 WL 31553577
at *11 (S.D.N.Y. Nov. 26, 2002); see also 4 Alba Conte & Herbert B. Newberg, Newberg on
Class Actions § 12:16, (4th ed. 2002) (“A settlement may ... seek to discharge parties who have
not been served with process and are therefore not before the court.”).
Based on the limited scope of the release as outlined above, the Court reaffirms that the
notice provided to class members was adequate. Under Fed. R. Civ. P. 23(e), before ratifying a
proposed settlement agreement, “[t]he court must direct notice in a reasonable manner to all class
members who would be bound by the proposal.” “The contents of a Rule 23(e) notice are
sufficient if they inform the class members of the nature of the pending action, the general terms
of the settlement, that complete and detailed information is available from the court files, and that
any class member may appear and be heard at the [Fairness Hearing].” 3 Alba Conte & Herbert
B. Newberg, Newberg on Class Actions § 8.32, (4th ed. 2002). “Class member are not expected
to rely upon the notices as a complete source of settlement information.” Grunin v. International
House of Pancakes, 513 F.2d 114, 122 (8th Cir. 1975). Upon review, the notice provided to the
class in this case was more than adequate to meet the standards of Fed. R. Civ. P. 23(e) and due
process. It was not necessary for the Court to incorporate the Objectors’ attorneys’ dubious
interpretation of the release into the Class Notice.2
D. Fairness, Reasonableness, and Adequacy of the Settlement
After considering the extensive briefing of the issues and oral presentations at the Fairness
Hearing, the Court finds the settlement to be fair, reasonable, and adequate.
1. The Risk of Fraud or Collusion
Initially, the Court finds that the evidence indicates beyond any doubt that the settlement
was the product of arms-length negotiation. The Objectors concede that they “have no direct
evidence of fraud and collusion between the settling parties.” (Vassalle Doc. 148 [Joint
Memorandum in Opposition to Motion for Approval of Class Settlement] at 9). This lack of
The Court notes additionally that Midland’s stipulation that it will not use any address information
obtained during the claims process, along with the fact that most of the address information used
to identify and contact class members came from Midland’s own files, effectively addresses the
concerns that have been raised about Midland using information gathered from the class
settlement process in order to pursue class members for debts.
evidence alone indicates that the Court should reject the argument that the settlement was
collusive, as “the courts respect the integrity of counsel and presume the absence of fraud and
collusion in negotiating the settlement, unless evidence to the contrary is offered.” 4 Alba Conte
& Herbert B. Newberg, Newberg on Class Actions § 11.51 (4th ed. 2002).
But the history of this litigation, recounted above, positively belies any contention that the
settlement was collusive. The parties reached their agreement only after three years of litigation,
four mediation sessions with Judge McQuade, and several more settlement conferences with the
Court. “The participation of an independent mediator in the settlement negotiations virtually
assures that the negotiations were conducted at arm’s length and without collusion between the
parties.” Hainey v. Parrot, 617 F.Supp.2d 668, 673 (S.D. Ohio 2007). Moreover, the Court notes
that Class Counsel in this case has almost fifty years of experience in litigating class action
matters, and has a track record of integrity and vigorous advocacy on behalf of clients. The
Objectors’ insinuations that the settlement was collusive are entirely unsupported.
The Objectors take issue with both the incentive payments of $8,000 to Named Plaintiffs
and the broader release the Named Plaintiffs have obtained from Midland. But courts have
recognized that incentive payments of a few thousand dollars to class representatives are
appropriate, and have frequently approved class settlements including same where the class
settlement has resulted in the creation of a common fund for the benefit of the class. See, e.g.,
Huguley v. General Motors Corp., 128 F.R.D. 81, 85 (E.D. Mich. 1989) (“Named plaintiffs and
witnesses are entitled to more consideration than class members generally because of the onerous
burden of litigation that they have borne.”); In re U.S. Bancorp Litig., 291 F.3d 1035, 1038 (8th
Cir. 2002) (approving payment of $2,000 to five class representatives). Moreover, the Named
Plaintiffs have agreed to a much broader release than the other class members, agreeing to release
all claims, not just those based on affidavits, that they may have against Midland. (Settlement
Agreement at 12-13). In view of the time, effort, risk, and expense the Named Plaintiffs have
undertaken in pursuing this litigation (including participation in discovery and settlement efforts);
the broader release to which they have agreed; and the substantial common fund that their efforts
have created for the benefit of the class, the Court finds the incentive payments justified.
2. The Complexity, Expense, and Likely Duration of Continued Litigation
“Most class actions are inherently complex and settlement avoids the costs, delays and
multitude of other problems associated with them.” In re Austrian and German Bank Holocaust
Litig., 80 F.Supp.2d 164, 174 (S.D.N.Y.2000). Thus, “[i]n most situations, unless the settlement is
clearly inadequate, its acceptance and approval are preferable to lengthy and expensive litigation
with uncertain results.” 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 11.50
(4th ed. 2002).
In view of its complexity and likely expense, this class action is no exception. “The Fair
Debt Collection Practices Act is a set of complex laws with many components.” Wess v. Storey,
2011 WL 1463609 (S.D. Ohio Apr. 14, 2011) (granting final approval of class settlement of
FDCPA and OCSPA claims). The instant case would be very expensive to fully litigate, and
might take years to finally resolve through the course of trial and appeal, creating additional
attorney’s fees and reducing any potential payout to the class.
3. The Amount of Discovery Engaged in by the Parties
This litigation was commenced in April 2008 with the filing of the Brent action. In the
nearly three years between the filing of Brent and the settlement, the parties undertook extensive
discovery and motion practice, recounted above. The Court has no doubt that, after two rounds of
motion practice that had established the strength of each side’s legal claims and several rounds of
settlement negotiations, the experienced attorneys who negotiated this settlement had an accurate
understanding of the strength of their respective cases.
4. The Likelihood of Success on the Merits
As noted above, Brent prevailed upon her motion for summary judgment on liability
issues. But, in its subsequent partial summary judgment opinion on damages, the Court held that
she could not recover actual damages under the FDCPA, because she could not show that any of
her actual damages resulted from the unlawful aspects of the affidavit (the false attestation that it
was based on the affiant’s personal knowledge), as opposed to the general stress of the debt
collection process. (Doc. 104 at 12-13) (citing Davis v. Creditors Interchange Receivable
Management, LLC, 585 F. Supp. 2d 968 (N.D. Ohio 2008) and Higgins v. Capitol Credit Services,
Inc., 762 F.Supp. 1128, 1135 (D. Del. 1991)). This holding severely limits the damages
obtainable by Brent and similarly-situated persons who had received an unlawful Midland
affidavit. That is, such persons can only recover statutory damages under the FDCPA, capped at
$1000, on an individual claim, along with attorney’s fees. Few debtors could be expected to bear
the cost and uncertainty of litigation in pursuit of such a meager potential recovery, a fact which
weighs in favor of approving the settlement in this case.
Indeed, the class settlement in this case far exceeds the FDCPA statutory damages cap of
$500,000 per class action that would otherwise obtain in this case. See Wright v. Finance Service
of Norwalk, Inc., 22 F.3d 647, 650-651 (6th Cir. 1994) (holding that the FDCPA limits damages to
“per proceeding,” not “per violation” in class actions). While Objectors decry the monetary relief
afforded to the class by the settlement as a “pittance,” “[i]t is well-settled law that a cash
settlement amounting to only a fraction of the potential recovery does not per se render the
settlement inadequate or unfair.” Smith v. Tower Loan of Mississippi, Inc., 216 F.R.D. 338, 369
(S.D. Miss. 2003) (quoting Dunleavy v. Nadler (In re Mego Fin. Corp. Sec. Litig.), 213 F.3d 454,
459 (9th Cir. 2000)). Given the damages cap applicable to FDCPA cases, the monetary relief
provided for in the class settlement here is well in line with that provided for in other FDCPA
class settlements that have been approved. See, e.g., Catala v. Resurgent Capital Services L.P.,
2010 WL 2524158 at *3 (S.D. Cal. Jun. 22, 2010) (approving FDCPA settlement of $35,000
distributed cy pres, with no payment to class members); Cope v. Duggans, 203 F.Supp.2d 650,
653 (E.D. La. 2002) (approving FDCPA settlement where class members who returned claim
forms would receive $11.90 each); Reade-Alvarez v. Eltman, Eltman & Cooper, P.C., 2006 WL
3681138 at *7 (E.D.N.Y. Dec. 11, 2006) (approving FDCPA settlement of $45,000 cy pres, with
no payment to class members); see also Jerman v. Carlisle, 271 F.R.D. 572, 576-77 (N.D. Ohio
2010) (certifying class even though FDCPA damages cap would limit relief to $3.10 per class
While Objectors contend vigorously that they have lucrative claims against Midland
arising from false affidavits under both state and federal law, the Court is unconvinced. Most of
the lawyers who filed affidavit class actions against Midland following this Court’s August 11,
2009 summary judgment opinion included only FDCPA claims which, as noted above, would be
subject to the FDCPA’s statutory damages cap. Even with respect to those claims, success on the
merits is not assured. See, e.g., Myers v. Asset Acceptance LLC, 750 F.Supp.2d 864 (S.D. Ohio
2010) (dismissing FDCPA claim based on false affidavits on summary judgment, and
distinguishing this Court’s August 11, 2009 opinion in Brent); Albritton v. Sessoms & Rogers,
P.A., 2010 WL 3063639 at *7 (E.D.N.C. Aug. 3, 2010) (dismissing FDCPA claim based on
affidavits that falsely claimed to be based on the affiant’s personal knowledge at the pleading
stage, decrying “the absurd results that could come from plaintiff's interpretation, wherein every
de minimis error would render a debt collector liable under the FDCPA and every debt collection
defense would turn into a hunt for the slightest misspelling, mislabeling, or minute technical
The argument that has been submitted with respect to potential state-law affidavit claims
against Midland is speculative and inconclusive. No strong precedent exists that convinces this
Court that class members would be able to recover significant relief under state law with respect to
affidavits that correctly state the amount the debtor owes, but which falsely claim to be based on
the affiant’s personal knowledge. The two cases now pending bringing state-law claims against
Midland based on affidavits, Gray v. Suttell & Associates (E.D. Wash. No. CV-09-251) and
Reimann v. Brachfeld (Alameda County, Ca., Superior Court, No. 10-529702), have not been
litigated to judgment, and the plaintiffs in both face significant hurdles to obtaining their desired
relief. The Court is satisfied that the speculative possibility that certain class members may have
more lucrative claims under state law should not prevent the classwide settlement of this case.
See In re M3 Power Razor System Marketing and Sales Practices Litig., 270 F.R.D. 45, 61 (D.
Mass. 2010) (certifying national settlement class over objections of California plaintiffs; noting
that “California consumer protection laws present differences that are, in the context of this case,
both minimal and speculative); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022-23 (9th Cir. 1998)
(approving nationwide settlement class and explaining that “the idiosyncratic differences between
state consumer protection laws are not sufficiently substantive to predominate over the shared
claims.”). Moreover, any class member who believes he or she can obtain a greater recovery has
been free to opt out of the class.
The settlement is also not defective because it does not vacate all state-court judgments
obtained by Midland using the affidavits. It is unsurprising that such relief was not included in the
settlement agreement, because under the Rooker-Feldman doctrine, a mass vacatur of state court
judgments would be beyond the power of this Court to grant if this litigation proceeded to
judgment. Moreover, such a resolution, if contained in a settlement, would result in needless time
and expense, as Midland would seek to relitigate formerly closed judgments where the debtor was
sued on the correct amount, but the affidavit contained a technical defect.
5. The Opinion of Class Counsel and Class Representatives
The Court gives great weight to the recommendation of experienced counsel for the parties
in evaluating the adequacy of the settlement. See Nat’l Rural Telecomms. Coop. v. DIRECTV,
Inc., 221 F.R.D. 523, 528 (C.D. Cal. 2004). Skilled and experienced counsel in this case
recommend the settlement as a fair, adequate, and reasonable.
6. The Reaction of Absent Class Members
Of approximately 1.4 million total class members, only 61 (about .004% of the class)
objected, and 4,262 (.3%) opted out. By comparison, more than 133,000 class members (9.2%)
filed a claim form. The fact that very few class members opted out or objected indicates that the
settlement is adequate. See In re Delphi Securities Litig., 248 F.R.D. 483, 498-499 (E.D. Mich.
7. The Public Interest
The Court finds, finally, that the settlement is beneficial to the public interest. The
settlement aggregates many claims that would likely not go to trial, resulting in a $5.2 million
common fund that provides relief to the class far above the otherwise-applicable damages cap of
$500,000, while significantly penalizing Midland for its prior unlawful acts. In addition, the
settlement provides substantial injunctive relief, requiring it to submit policies for ensuring the
accuracy of its affidavits to a third-party Special Master, and to implement those policies.
For the foregoing reasons, therefore, the Court finds the settlement fair, reasonable, and
adequate, and approves it.
E. Attorney’s Fees
As stated by the U.S. Supreme Court, “this Court has recognized consistently that a litigant
or a lawyer who recovers a common fund for the benefit of persons other than himself or his client
is entitled to a reasonable attorney’s fee from the fund as a whole.” Boeing Co. v. Van Gemert,
444 U.S. 472, 478 (1980). Such an award may be based “on a percentage of the fund bestowed on
the class.” Blum v. Stenson, 465 U.S. 900 n. 16 (1984). The rationale for such an award is “the
equitable notion that those who benefit from the creation of a fund should share the wealth with
the lawyers whose skill and effort helped create it.” In re Washington Public Power Supply
System Sec. Litig., 19 F.3d 1291, 1300 (9th Cir. 1994). This “common fund doctrine” has been
recognized by the Sixth Circuit. See Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513,
516 (6th Cir. 1993) (“In this circuit, we require only that awards of attorney’s fees by federal
courts in common fund cases be reasonable under the circumstances.”).
In considering the reasonableness of a fee award, the Court looks to six factors: (1) the
value of the benefits rendered to the class; (2) society’s stake in rewarding attorneys who produce
such benefits in order to maintain an incentive to others; (3) whether the services were undertaken
on a contingent fee basis; (4) the value of the services on an hourly basis; (5) the complexity of the
litigation; and (6) the professional skill and standing of counsel on both sides. Ramey v.
Cincinnati Enquirer, Inc., 508 F.2d 1188, 1196 (6th Cir. 1974).
Here, Class Counsel seeks a common fund fee award of $1.5 million, approximately 29%
of the total $5.2 million settlement amount. This amount is in line with percentages approved in
other common fund cases. See, e.g., Dillworth v. Case Farms Processing, Inc., 2010 WL 776933
(N.D. Ohio Mar. 8, 2010) (33% of settlement amount); Clevenger v. Dillards, Inc., 2007 WL
764291 (S.D. Ohio Mar. 9, 2007) (29% of settlement fund); New England Employees Pension
Fund v. Fruit of the Loom, 234 F.R.D. 627, 634) (W.D. Ky. 2006) (25% of the total settlement
fund). Additionally, the Court finds that the reasonableness of Class Counsel’s fee request is
supported by a review of the six Ramey factors.
Class Counsel’s efforts have rendered a substantial benefit to the class. The settlement
amount is nearly ten times the applicable FDCPA class-action damages cap, and the injunctive
relief reasonably ensures that the class will not again be subjected to Midland’s unlawful
practices. The award is also supported by society’s stake in providing an incentive for other
attorneys. Class Counsel took this case on a contingency-fee basis, with no guarantee of receiving
anything, and has invested more than $1 million of time, unreimbursed fees, and out-of-pocket
expenses over more than 38 months of hard-fought litigation. His efforts have resulted in
substantial relief for low-income debtors, whose claims under the FDCPA for false affidavits
would ordinarily not provide a sufficient monetary incentive to litigate on an individual basis.
The risk Class Counsel undertook in pursuing this litigation militates in favor of the fee award.
Class Counsel’s fee award is also supported by the value of his services on an hourly basis.
The lodestar figure in this case amounts to $939,200. The Court has reviewed the documentation
supporting this figure, and finds the amount reasonable in light of the description of work
undertaken in this case. (Vassalle Docs. 155, 134-1). The requested fee thus constitutes a
multiplier of approximately 1.5, well within an acceptable range. See Barnes v. City of
Cincinnati, 401 F.3d 729, 746-747 (6th Cir. 2005) (upholding multiplier of 1.75). The use of a
multiplier is supported by the substantial risk Class Counsel undertook in prosecuting this matter
so vigorously on a contingency-fee basis, and his efforts in establishing groundbreaking legal
precedent to benefit low-income debtors.
The complexity of the litigation also supports the requested fee award. Class Counsel has
litigated the Brent matter through two rounds of complex motion practice that took over three
years to resolve, involving novel FDCPA issues. Finally, the award is supported by the
professional skill and standing of counsel for both sides. Both are distinguished practitioners who
have provided competent and skillful representation in this matter.
F. Motion to Strike
Midland moves to strike (Vassalle Doc. 135) the Declaration of Stephen Gardner, an
attorney, which was filed in connection with Objection of class members Clawson and Herring.
The Declaration sets forth Gardner’s opinions about the fairness of the settlemens. The Court has
reviewed the Declaration, and finds that its consideration would not affect the Court’s ultimate
conclusion that the settlement is fair and adequate. Thus, the motion is denied as moot.
The Court hereby grants final approval of the settlement of this class action litigation. The
motions to approve the settlement (Vassalle Doc. 131) and for an award of attorney’s fees
(Vassalle Doc. 134) are granted. The motion to strike the Declaration of Stephen Gardner
(Vassalle Doc. 135) is denied as moot.
The Court hereby dismisses with prejudice the Vassalle v. Midland Funding (No. 3:11-cv00096) and Midland Funding v. Brent (No. 3:08-cv-1434) actions. With respect to Franklin v.
Midland Funding (No. 3:10-cv-00091), which was previously dismissed with prejudice but is now
before the Court on a limited remand, the Court again dismisses the matter. The Court awards
attorney’s fees in the amount of $1,500,000, and reimbursement of unpaid expenses in the amount
of $9,000. The Court retains jurisdiction over the parties, including all members of the class, with
respect to the implementation and enforcement of the settlement.
The Court hereby permanently enjoins and restrains all class members who did not duly
request exclusion from the class in the time and manner provided for in the Class Notice from
commencing or prosecuting any action, suit, claim or demand against any of the parties released
by virtue of the Settlement Agreement arising out of or related to the released parties’ use of
affidavits in debt collection lawsuits.
The Court enjoins Midland as follows, based on the factual predicate stipulated as between
the parties. (Vassalle Doc. 151 at 1-3). Midland, throughout the United States, will create and
implement written procedures for the generation and use of affidavits in debt collection lawsuits
(the “Affidavit Procedures”). These procedures shall be reasonably assured to prevent the use of
affidavits in debt collection lawsuits where the affiant does not have personal knowledge of the
facts set forth in the affidavit. Midland shall appoint a person responsible for ensuring compliance
with the Affidavit Procedures.
The Court hereby appoints the Hon. Richard McQuade as Special Master to monitor
Midland’s compliance with this injunction. Within thirty (30) days of entry of this injunction,
Midland shall submit its Affidavit Procedures to the Special Master for review.
Upon review of the Affidavit Procedures, the Special Master shall make findings as to
whether the Affidavit Procedures are reasonably assured to prevent the use of affidavits in debt
collection lawsuits where the affiant does not have personal knowledge of the facts set forth in the
affidavit. In the event that the Special Master finds that the Affidavit Procedures are not
reasonably assured to prevent the use of affidavits in debt collection lawsuits where the affiant
does not have personal knowledge of the facts set forth in the affidavit, Defendants shall have
thirty (30) days to revise procedures so as to cure any defects identified by the Special Master.
This injunction will lapse and expire twelve (12) months after the Effective Date, as
defined in Section V.-A of the Settlement Agreement. At the end of the twelve month injunction,
Midland shall submit to the Special Master a declaration from the responsible person confirming
that the Affidavit Procedures approved by the Special Master have been implemented. A copy of
such declaration shall be filed with this Court.
During the 12-month term of this injunction, both parties have the right to seek relief from,
or modification of, this injunction based on an unfair burden on the business, or a change in the
law. Any request for alteration or modification of the injunction shall be made to the Special
Master. Any alteration or modification of the injunction shall not extend or contract the length of
its 12-month term. Any alteration or modification shall only apply prospectively for the
remainder of the 12-month injunction. The Court shall retain jurisdiction to enter further orders as
may be necessary to implement and/or enforce the provisions of this injunction.
IT IS SO ORDERED.
s/ David A. Katz
DAVID A. KATZ
U. S. DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?