United States District Court, N.D. Illinois, Eastern Division
MICHAEL WILKINS and KENNETH MILLS, on behalf of themselves and others similarly situated, Plaintiffs,
HSBC BANK NEVADA, N.A. and HSBC CARD SERVICES, INC., Defendants.
MEMORANDUM OPINION AND ORDER
JAMES F. HOLDERMAN, District Judge.
This is the second multi-million dollar class action settlement this court has reviewed and addressed in the last three weeks in which the plaintiff class has sued credit card companies for violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, et seq. See In re Capital One Tel. Consumer Prot. Act Lit., No. 12 C 10064, 2015 WL 605203 (N.D. Ill. Feb. 12, 2015) (" Capital One ").
On January 10, 2014, plaintiff Michael Wilkins ("Wilkins") filed the initial class action complaint in this case against defendants HSBC Bank Nevada, N.A. and HSBC Card Services, Inc. (collectively, "HSBC"), alleging that between 2010 and 2012, HSBC repeatedly contacted Wilkins on his cellular telephone with an automated message "at all hours of the day." (Dkt. No. 1 ¶¶ 16-17.) Wilkins, an HSBC credit card holder, did not elaborate on the content of HSBC's alleged messages other than to allege that HSBC made the calls for non-emergency purposes in violation of the TCPA. (Id. ¶¶ 14, 25.)
On March 7, 2014, Wilkins and another plaintiff, Kenneth Mills ("Mills"), filed an amended class action complaint ("Amended Complaint") (Dkt. No. 27 ("Am Compl.")). Wilkins, in the Amended Complaint, alleges the same conduct he alleged in his original complaint. (Am. Compl. ¶¶ 14-20.) Mills, also an HSBC cardholder, alleges that HSBC repeatedly called his cell phone with an automated message between April 2012 and March 7, 2014, the date of the Amended Complaint's filing. (Id. ¶ 24.) Both plaintiffs allege that they never consented to HSBC calling them on their cell phones or calling them using an automated message. (Id. ¶¶ 16, 23.) Wilkins and Mills further allege that between 2010 and 2014, HSBC contacted "tens of thousands" of other cardholders on their cell phones through the use of an automatic telephone dialing system or an artificial or prerecorded voice, in violation of the TCPA (collectively, along with Wilkins and Mills, the "Plaintiffs"). (Id. ¶¶ 36-37.) On March 24, 2014, both HSBC defendants filed their respective answers (Dkt. Nos. 31, 32) to the Amended Complaint.
On July 25, 2014, the court granted Plaintiffs' unopposed request for preliminary approval of class settlement (Dkt. No. 53) and entered an Order (Dkt. No. 59) conditionally certifying a settlement class, preliminarily approving the class action settlement, approving the notice plan, and appointing a claims and notice administrator. Since then, Plaintiffs have filed memoranda in support of Plaintiffs' motion (Dkt. No. 79) for final approval of the class action settlement. Class Counsel, consisting of the attorneys who collectively represent the class, have also filed a motion for approval of attorneys' fees and for service awards to Wilkins and Mills as the class representatives. (Dkt. No. 68.) Nine people out of approximately 9 million settlement class members filed briefs or statements in opposition to the Amended Settlement Agreement and Release ("Settlement Agreement") (Dkt. No. 53 Ex. A) and Class Counsel's requested fee award. On November 21, 2014, after the Garden City Group, Inc. ("GCG") provided notice of the settlement to class members, the court conducted a fairness hearing to allow any class members who expressed the desire to address the court regarding the settlement to do so. (Dkt. Nos. 94, 95.) None of the nine objectors appeared to address the court on November 21, 2014.
For the reasons explained below, the court grants the motion for final approval of the class action settlement (Dkt. No. 79) because under the circumstances and the law the settlement reached in this class action case is fair, reasonable, and adequate. The court grants in part and denies in part Class Counsel's motion for approval of attorneys' fees, and grants Class Counsel's requested incentive awards to Wilkins and Mills in the amount of $5, 000 each. (Dkt. No. 68.)
I. History of the Litigation
On July 30, 2012, Mills filed a class action complaint against HSBC in the United States District Court for the Northern District of California, alleging HSBC called cardholders' cell phones for non-emergency purposes in violation of the TCPA. See Mills v. HSBC Bank Nevada, N.A., No. 12 C 4010 (N.D. Cal.) (Tigar, J.). The parties spent the bulk of the next year disputing the scope of Mills's interrogatories and document requests, see No. 12 C 4010 (Dkt. No. 53), which were complicated by HSBC's May 2012 sale of its credit card portfolio to Capital One Financial Corporation ("Capital One")-itself no stranger to TCPA litigation. See Capital One, 2015 WL 605203. On July 12, 2013, U.S. Magistrate Judge Joseph Spero of the Northern District of California held a meet and confer in his chambers to assist the parties in resolving their discovery disputes. No. 12 C 4010 at Dkt. No. 61. The parties resolved their pending discovery disputes and, on October 24, 2013, informed Judge Tigar they had scheduled a private mediation of the case with retired U.S. Magistrate Judge Edward Infante. Id. at Dkt. No. 69. U.S. District Judge Jon Tigar extended the parties' class certification deadline until March 14, 2014 to permit the mediation, but stated that he would be "very unlikely to continue that date." Id. at Dkt. No. 71.
On January 10, 2014, as stated earlier in this opinion, Wilkins filed this class action case against HSBC alleging HSBC made calls to Wilkins' and other cardholders' cell phones in violation of the TCPA between 2010 and 2012. (Dkt. No. 1.)
On January 14, 2014, four days later, the parties in the Mills action participated in a one-day mediation session with Judge Infante. The mediation session did not produce a settlement. It did, however, result in a consolidation of the two TCPA class actions pending against HSBC. Class counsel in the Mills action represented class members in three consolidated TCPA class actions against Capital One, which were also pending before this court and being mediated by Judge Infante. Capital One also held the HSBC cardholder data necessary to proceed with both the Mills and Wilkins actions. With the March 14, 2014 class certification deadline in the Mills action-which Judge Tigar had stated he was not inclined to extend-drawing near, Mills voluntarily dismissed his case in the Northern District of California on March 6, 2014, see No. 12 C 4010 at Dkt. No. 73, and joined Wilkins' lawsuit as a class representative the next day, March 7, through the filing of the Amended Complaint in this case. (Dkt. No. 27.)
Plaintiffs' Amended Complaint alleges that between 2010 and 2014, HSBC contacted class members on their cell phones for non-emergency purposes using an "artificial or prerecorded voice" or an "automatic telephone dialing system." (Am. Compl. ¶ 28.) Plaintiffs do not state the purpose of HSBC's "non-emergency calls, " but because Wilkins and Mills are both HSBC credit cardholders, the court infers from the allegations that a good number of the calls allegedly related to class members' credit card account balances. The TCPA is clear that it prohibits callers from using an "automatic telephone dialing system or an artificial or prerecorded voice" to make any non-emergency calls to cell phones unless the callers have the "prior express consent of the called part[ies]." 47 U.S.C. § 227(b)(1)(A)(iii). The TCPA imposes statutory damages of $500 per call, which can be trebled if the court finds the violation to have been willful or knowing. 47 U.S.C. § 227(b).
On March 24, 2014, counsel again had a mediation session with Judge Infante. (Dkt. No. 53 Ex. 3 ¶ 20.) On April 29, 2014, the parties informed this court that they had agreed to a settlement in principle, were in the process of negotiating a final settlement agreement, and were conducting confirmatory discovery, including a deposition of HSBC's chosen 30(b)(6) witness. (Dkt. No. 39.) On July 1, 2014, after the parties resolved a dispute related to the notice plan- HSBC unsuccessfully sought to exclude any form of internet notice (Dkt. No. 43)-Plaintiffs filed a motion for preliminary approval of the class action settlement (Dkt. No. 53) and attached a copy of the final Settlement Agreement. The court conducted a hearing in open court on July 22, 2014 and, on July 25, 2014, issued an order (Dkt. No. 59) granting Plaintiffs' motion (Dkt. No. 53). That order (1) conditionally certified the class for settlement purposes, (2) preliminarily approved the class action settlement, (3) approved the notice plan (including internet notice), and (4) set a fairness hearing on final approval of the settlement for November 21, 2014. (Dkt. No. 59.)
Beginning on August 1, 2014, GCG implemented the parties' direct notice plan, which entailed: (1) sending 6, 586, 221 summary notices via email to all potential class members who had email addresses reflected in HSBC's (or Capital One's) records; (2) mailing paper notices to 667, 698 class members whose records did not contain an email address; (3) mailing paper notices to 744, 658 class members with undeliverable emails; and (4) re-mailing paper notices with updated address information where the original mailings were returned undeliverable. In total, GCG provided direct notice of the Settlement Agreement to 7, 184, 872 of the approximately 9, 065, 262 class members, or about 79.2% of the class. GCG also published a summary notice in single issues of USA Today and People magazine, and ran internet banner advertisements on Xaxis, an online digital network. GCG estimates that combined the internet, print publication, and direct notice programs reached about 86% of "HSBC users with credit card balances and who own a cell phone." ( See Dkt. No. 71-1 (summarizing notice efforts).) On October 3, 2014, GCG estimated that its total bill for notice and administration of the settlement would be approximately $1, 270, 339. (Id. ¶ 27.) No updated figures have been provided to the court as of the date of this opinion.
II. The Settlement Agreement
The important provisions of the Settlement Agreement define the settlement class and provide for monetary relief to class members and are summarized below.
The settlement class is defined as follows:
All persons within the United States to whom, on or after May 31, 2008 through May 1, 2012, a non-emergency telephone call was attempted by defendant HSBC Card Services Inc., or any other entity on behalf of defendant HSBC Finance Corporation, successor by merger to HSBC Bank Nevada, N.A., to a cellular telephone through the use of an automatic telephone dialing system or an artificial or prerecorded voice. Excluded from the Settlement Class are HSBC and any affiliate or subsidiary of HSBC, along with any employees thereof, and any entities in which any of such companies have a controlling interest, as well as all persons who validly opt out of the Settlement Class.
(Settlement Agreement § II.X.) The parties estimate that the class includes 9, 065, 262 members and that HSBC made 344, 351, 123 phone calls in alleged violation of the TCPA. (Dkt. No. 71-1 ¶ 16; Dkt. No. 64 at 1.)
The Settlement Agreement requires HSBC to establish a non-reversionary settlement fund of $39, 975, 000. (Settlement Agreement §§ II.W, III.C.) After subtracting notice and administration costs ($1, 270, 339), Class Counsel's requested service awards for class representatives Wilkins and Mills ($10, 000), and Class Counsel's requested fee award ($11, 992, 500)-all of which will be paid out of the settlement fund-the value of the settlement to class members is $26, 702, 161. See Pearson v. NBTY, Inc., 772 F.3d 778, 780-81 (7th Cir. 2014) (citing Redman v. RadioShack Corp., 768 F.3d 622, 630 (7th Cir. 2014) (holding notice costs, administration costs, and attorneys' fees are not part of the value received from the settlement by class members). If all 9, 065, 262 class members had filed a claim, they would each have received $2.95. In this case, however, only 286, 433 class members, or 3.16% of the class, filed a timely claim, so they will each receive at least $93.22. (Dkt. No. 90 at 3.) The settlement checks become void 180 days after issuance, at which time the Settlement Agreement provides for two alternative payouts. If, after 180 days, the combined amount of uncashed checks exceeds $50, 000, the settlement administrator will make a second pro rata distribution to timely claimants. (Settlement Agreement § III.G.) If the combined amount of the uncashed checks does not exceed $50, 000, then the administrator is to distribute the uncashed proceeds cy pres to the Equal Justice Works ("EJW") "to fund fellowships designed to protect consumers against unfair debt collection practices." (Settlement Agreement §§ III.F.5, III.G.) By the court's calculation, under the terms of the Settlement Agreement in its current form, if 536 or fewer claimants are delinquent in depositing their settlement checks, there will be a cy pres distribution to EJW; if 537 or more class members are delinquent, however, there will be a second pro rata distribution to the timely claimants.
At the November 21, 2014 final approval hearing (Dkt. No. 95), the court heard from Class Counsel and counsel for HSBC. Although the court invited specific objectors by name and anyone else present in the courtroom to speak, no objector addressed the court. Even though two objectors-Laura Fortman and Dawn Weaver-had previously indicated their desire to address the court (Dkt. Nos. 72, 75), they did not do so.
I. Approval of a Proposed Settlement in Class Actions
A court may approve a settlement that would bind class members only if, after proper notice and a public a hearing, the court determines that the proposed settlement is "fair, reasonable, and adequate." Fed.R.Civ.P. 23(e)(3). Under Seventh Circuit law, a district court must, in evaluating the fairness of a settlement, consider "the strength of plaintiffs' case compared to the amount of defendants' settlement offer, an assessment of the likely complexity, length and expense of the litigation, an evaluation of the amount of opposition to settlement among affected parties, the opinion of competent counsel, and the stage of the proceedings and the amount of discovery completed at the time of settlement." Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 653 (7th Cir. 2006) (quoting Isby v. Bayh, 75 F.3d 1191, 1199 (7th Cir. 1996)).
"The most important factor relevant to the fairness of a class action settlement' is the first one listed: the strength of plaintiff's case on the merits balanced against the amount offered in the settlement.'" Synfuel, 463 F.3d at 653 (quoting In re Gen. Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1132 (7th Cir. 1979)). Furthermore, "[i]n conducting this analysis, the district court should begin by quantifying the net expected value of continued litigation to the class.' To do so, the court should estimate the range of possible outcomes ...