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Wright v. Nationstar Mortgage LLC

United States District Court, N.D. Illinois, Eastern Division

August 29, 2016

HEATHER WRIGHT, et al ., individually, and on behalf of all others similarly situated, Plaintiffs,


          Honorable Edmond E. Chang United States District Judge

         Heather Wright, Carole Stewart, Jeanette Childress, Robert Jordan, Sean Halbert, Dana Skelton, Vanessa Ruggles, and Rose Somers[1] filed this class action in December 2014, alleging that Nationstar Mortgage LLC called them and other class members in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq.[2] In October 2015, the Plaintiffs moved for preliminary approval of a settlement; the Court granted the motion and appointed a Settlement Administrator to notify the settlement class and process claims. The deadline for responding to the settlement notice passed in April 2016, and the Plaintiffs now move for final approval of the Settlement Agreement, attorneys' fees and expenses, and incentive awards for each of the eight class representatives. For the reasons explained below, the motion for fees is granted in part and denied in part. The Court approves a $5, 000 incentive award for each class representative but reduces the attorneys' fees from 36% to 30% of the common fund, net of fees and expenses. The Settlement Agreement is adjusted to reflect the fee change, but is otherwise approved in its entirety.

         I. Background

         Nationstar is a mortgage lender and servicer. R. 15, Am. Compl. ¶¶ 1, 24.[3]This means that in addition to making its own loans, Nationstar also handles the day-to-day tasks of managing loans for other lenders by sending bills, collecting and processing payments, managing escrow, and foreclosing. Id. ¶ 24. The Plaintiffs allege that they received prerecorded debt collection calls from Nationstar despite giving neither Nationstar nor third party lenders any consent to call. Id. ¶¶ 2, 4, 25, 39. In making the calls, Nationstar allegedly used an “automatic telephone dialing system.” Id. ¶¶ 4, 28-32, 39. Commonly referred to as an autodialer, this system “has the capacity to generate and store random numbers, or receive and store lists of telephone numbers, and to dial those numbers, en masse, in an automated fashion without human intervention.” Id. ¶ 28. These calls allegedly violated the TCPA, which makes it unlawful “to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice … to any telephone number assigned to a … cellular telephone service.” 47 U.S.C. § 227(b)(1)(A); Am. Compl. ¶¶ 4, 20, 28. Among other relief, the Plaintiffs sought statutory damages and an injunction on behalf of themselves and members of the proposed class. Id. at 27-28.

         The Plaintiffs' lawsuit was one of five proposed TCPA class actions filed against Nationstar around the country. R. 107, Balabanian Decl. (Final Approval) ¶ 3. The parties in these separate cases ultimately coordinated efforts, filed an amended complaint in this consolidated action, and moved for class certification. Id. ¶¶ 7-8; R. 15; R. 17. The Court entered and continued the class-certification motion pending discovery and appointed Edelson PC and the Paradis Law Group as interim co-lead class counsel. R. 21. Shortly after, the parties began settlement talks and went to mediation twice. Balabanian Decl. (Final Approval) ¶ 10. Discovery proceeded throughout mediation, id. ¶ 14; R. 35, 4/27/15 Minute Entry, and paused when the parties informed the Court of a potential settlement, R. 38, 6/24/15 Minute Entry. After further negotiations, the parties presented an agreement to this Court for preliminary approval in October 2015. Balabanian Decl. (Final Approval) ¶ 13; R. 51, Pls.' Mot. for Preliminary Approval.

         The Court preliminarily approved the settlement and certified the settlement class, which was defined as “[a]ll persons in the United States for whom Nationstar Mortgage, LLC had in its records a cellular telephone number as of the date of this Order [October 14, 2015].” R. 60, Preliminary Approval Order ¶ 3. Epiq Systems, Inc. was appointed as Settlement Administrator to notify the class and process responses. Id. ¶ 7. To carry out notice, Nationstar gave Epiq names and contact information for 3, 160, 291 potential class members. R. 107-1, Exh. 1, Bithell Decl. ¶ 5. After updating addresses, removing duplicates, and eliminating incomplete records, Epiq sent postcard notices to 2, 343, 988 addresses. Id. ¶¶ 7-8. 28, 045 postcards were undeliverable, which means that there was no forwarding address with the post office and no updated address on Lexis Nexis. Id. ¶ 9. In total, the postcard notices reached 98.8% of the settlement class. Id. ¶ 10.[4]

         The postcard notices directed settlement class members to a settlement website ( where class members could submit claims, read the Settlement Agreement, and find additional information about the litigation. Bithell Decl. ¶ 12; R. 67-5, Exh. 4, Proposed Postcard Notice; R. 68, 1/27/16 Minute Entry (approving proposed postcard notice). The notice also directed class members to a toll-free number to ask questions, request a claim form to submit through regular mail, and learn more about the settlement. Bithell Decl. ¶ 11. Each class member who submitted a claim form in writing or though the website had to affirm that she “[was] the subscriber or primary user of the cellular telephone number(s) listed above and that [she] received one or more non-emergency automated or artificial or prerecorded voice calls from Nationstar … .” R. 67-3, Exh. 2, Proposed Claim Form; 1/27/16 Minute Entry (approving proposed claim form). The class could also submit a revocation request (to stop receiving calls from Nationstar) on the website, by mail, or by calling the toll-free number. Preliminary Approval Order ¶ 9. Class members could also mail a written request for exclusion to opt out of the settlement class. Id. ¶ 11. All opt-out requests had to be signed and include the individual's name, address, telephone number, case caption, and a statement that the individual is a class member wishing to opt-out. Id. In January, the Court extended the notice deadline to February 2016, and the deadline for exclusions, objections, and claim submissions to April 2016. 1/27/16 Minute Entry. Epiq had processed 82 requests for exclusion[5] from the settlement class as of August 1, 2016 and 147, 476 validated claim forms as of April 4, 2016. Bithell Decl. ¶¶ 13-15. Six objections have been filed (on behalf of seven individuals), R. 69, 79, 80, 82, 83, 93, one of which has been withdrawn, R. 79, 86.

         In April 2016, the Plaintiffs moved for final approval of the Settlement Agreement, R. 103, and for attorneys' fees, R. 70. The final Settlement Agreement provides for a $12.1 million fund. R. 107-2, Final Settlement Agreement ¶ 1.32. Each settlement class member with an approved claim[6] will receive a pro rata share of the fund after administration expenses, incentive awards, and attorneys' fees have been deducted. Id. ¶ 2.1(b). The Plaintiffs have requested a $5, 000 incentive award for each of the eight class representatives, id. ¶ 8.3, and $3, 690, 000 in attorneys' fees, R. 116, Pls.' Fee Br. If the Settlement Agreement and fees are approved, the Plaintiffs estimate that each settlement class member with an approved claim will receive around $45. R. 117, Pls.' Final Approval Br. at 10 n.10. Any remaining unclaimed funds or uncashed checks will be further distributed to the settlement class members. Final Settlement Agreement ¶ 2.1(e). In return, Nationstar will receive a full release of claims by settlement class members (that is, those who have not opted out, id. ¶ 1.31) for calls made by Nationstar (or any third party acting on its behalf) using an autodialer or prerecorded voice, id. ¶ 1.33.

         II. Analysis

         A. Settlement Class Certification

         Before turning to the substance of the Settlement Agreement, the Court must certify the class for settlement purposes. See Fed. R. Civ. P. 23(e) (“The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval.” (emphasis added)); Fed.R.Civ.P. 23(h) (“In a certified class action, the court may award reasonable attorney's fees and nontaxable costs … .” (emphasis added)).

         A certified class must meet all the requirements of Rule 23(a): “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a). If Rule 23(a) is satisfied, then the next question is whether the class falls into one of three categories under Rule 23(b). The pertinent category here is a damages action, where certification is appropriate if “the questions of law or fact common to class members predominate over any questions affecting only individual members, and … a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Rule 23(b)(3) (emphases added). Four factors relevant to predominance and superiority are “(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.” Fed.R.Civ.P. 23(b)(3)(A)-(D).

         “Failure to meet any of the Rule's requirements precludes class certification.” Harper v. Sheriff of Cook Cnty., 581 F.3d 511, 513 (7th Cir. 2009) (quoting Arreola v. Godinez, 546 F.3d 788, 794 (7th Cir. 2008)) (quotation marks omitted). In the context of certifying classes for settlement purposes only, the Supreme Court has held that certification must meet the usual requirements of Rule 23(a) and (b), except for the manageability prong of Rule 23(b)(3)(D). See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 619-20 (1997). Rule 23(a) and (b), which “focus court attention on whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives, ” are concerns at settlement just as they are at trial, id. at 621, but “a district court need not inquire whether the case, if tried, would present intractable management problems, ” id. at 620. The Court preliminarily certified the Settlement Agreement in October 2015. R. 59-60. After considering Rule 23(a) and (b) again at the final approval stage, it now reaffirms that certification, as explained next.

         1. Rule 23(a)

         i. Ascertainabilty

         A threshold requirement of Rule 23(a) is ascertainability-whether a class is identifiable and definite. See Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006) (citations omitted). This requirement is “implied in Rule 23(a).” Alliance to End Repression v. Rochford, 565 F.2d 975, 977 (7th Cir. 1977) (citations omitted); Jamie S. v. Milwaukee Pub. Sch., 668 F.3d 481, 495 (7th Cir. 2012) (definiteness means whether there is “[a] way to know or readily ascertain who is a member of the class” (citation omitted)). Indeed, each of the Rule 23(a) prerequisites for class-action certification refers to a “class, ” and thus each prerequisite cannot be evaluated if the class itself is not ascertainable. See Fed. R. Civ. P. 23(a)(1) (numerosity of the “class”), (a)(2) (law or fact questions common to the “class”), (a)(3) (typicality of the named plaintiff's claims or defenses compared to those of the “class”), (a)(4) (adequacy of the proposed class representatives to protect the interests of the “class”). There are three purposes of the ascertainability requirement: first, it prevents vagueness, which “is a problem because a court needs to be able to identify who will receive notice, who will share in any recovery, and who will be bound by a judgment.” Mullins v. Direct Digital, LLC, 795 F.3d 654, 660 (7th Cir. 2015) (citation omitted). So the class definition must “identify a particular group, harmed during a particular time frame, in a particular location, in a particular way.” Id. (citation omitted). Next, ascertainability requires that the class is defined by objective, rather than subjective criteria, or “in terms of conduct … rather than a state of mind.” Id. (citation omitted). Finally, a class should not be “defined in terms of successes on the merits, ” where “a class member either wins or, by virtue of losing, is defined out of the class and is therefore not bound by the judgment.” Id. (citation and quotation marks omitted). Defining a class this way “raises an obvious fairness problem for the defendant, ” who “is forced to defend against the class, but if a plaintiff loses, she drops out and can subject the defendant to another round of litigation” because she is not bound by the adverse judgment. Id. (citation omitted).

         The settlement class here includes “all Persons in the United States for whom Nationstar Mortgage, LLC has in its records a cellular telephone number until the date that the Court enters an order preliminary approving the Settlement Agreement [October 14, 2015].” Final Settlement Agreement ¶ 1.30. This class definition meets all of the ascertainability concerns addressed by Mullins. It is not vague because it defines a particular group of individuals-those whose cell phone numbers are in Nationstar's database-who were harmed by receiving calls that violate the TCPA. Nor is the class “fail-safe” by being defined on the merits-for example, as individuals who received TCPA calls without their consent. The class is also objectively identifiable because “membership within it [can] be determined by application of precise, objective criteria.” Bridgeview Health Care Ctr. Ltd. v. Clark, 2011 WL 4628744, at *2 (N.D. Ill. Sept. 30, 2011). Because members belong to the class if they are on a list in Nationstar's records, it is possible to identify class members without any subjective criteria.

         Mitchell, an objector, argues that the settlement class definition is “poorly defined” because “[c]lass members cannot make an independent determination as to whether they fit within it … [because] only Nationstar [] know[s] its scope.” R. 83, Mitchell Objection at 5. In other words, the class members do not know whether they are in Nationstar's records. Id. But just because the phone numbers are in Nationstar's possession does not mean that determining class membership is a subjective inquiry that depends on Nationstar's state of mind. And as the Court explained during the final approval hearing, the ascertainability requirement does not require class members themselves to objectively know, without further information gathering, whether they are members of the class definition, but only that membership can be objectively determined in general. R. 128, 5/19/16 Fairness Hr'g Tr. at 32:2-14.

         Mitchell also argues that the class definition is too broad because “persons who have never received a telephone call from Nationstar … logically fall within the definition of the Settlement Class.” Mitchell Objection at 5; see also R. 125, Mitchell Objection Reply at 5-6. It is true that “[i]f … a class is defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant's allegedly unlawful conduct, the class is defined too broadly to permit certification.” Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 824 (7th Cir. 2012) (citation omitted). But “determinations [of overbreadth] are a matter of degree, and will turn on the facts as they appear from case to case.” Id. at 825. Here, the class is not overbroad because it is likely that most of the phone numbers in Nationstar's records received a call. Nationstar explained that the majority of the numbers in its records were gathered from credit applications. 5/19/16 Fairness Hr'g Tr. 28:4-12 (“[B]ecause the number is in the system, we believe that there must have been a reason we got that number, and oftentimes, in the majority of cases, it will be through the credit application.”). And the Plaintiffs allege that Nationstar routinely called customers for debt-collection purposes. Am. Compl. ¶¶ 25-26. They also allege that “[Nationstar's] records identify the exact date and time of each and every call made by Nationstar and whether the call was made by Nationstar's ‘Avaya Proactive Contact' automated dialing system.” Id. ¶ 32. So it is reasonable to believe that Nationstar entered a large number of phone numbers into its records for the purpose of making automated debt-collection calls, and did call many of these numbers. This definition is not so broad as to be unascertainable. Cf. Oshana, 472 F.3d at 509 (class of “[a]ll individuals who purchased … fountain Diet Coke in … Illinois” not ascertainable in action alleging that Coke tricked consumers about the ingredients of fountain Diet Coke). In addition, the Court explained during the fairness hearing that “the navigation that always has to occur in [defining a class] is to be objective enough to send notice to a class that is both ascertainable, but then will include those who have a meritorious case or claim.” 5/19/16 Final Approval Tr. 32:6-9. The definition here-all individuals whose phone numbers were in Nationstar's records-is broad enough to provide notice to all those with meritorious claims, but not so broad that it encompasses a significant number of individuals who did not receive a call, and thus could not suffer any TCPA violation.[7]

         ii. Numerosity

         The Plaintiffs have demonstrated that their proposed class is sufficiently numerous for class treatment. To meet this requirement, a plaintiff must show that the proposed class is “so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). Because courts have held that 40 members generally suffice, the 2.3 million members in this class also meet numerosity. E.g., Swanson v. Am. Consumer Indus., Inc., 415 F.2d 1326, 1333 n.9 (7th Cir. 1969) (a proposed class of 40 would be “a sufficiently large group to satisfy Rule 23(a)”); CE Design Ltd. v. Cy's Crabhouse N., Inc., 259 F.R.D. 135, 140 (N.D. Ill. 2009) (numerosity met in TCPA class action because “[t]he joinder of potentially thousands of plaintiffs-or even hundreds of them-would be impracticable” (citation omitted)); Oplchenski v. Parfums Givenchy, Inc., 254 F.R.D. 489, 495 (N.D. Ill. 2008) (“Generally, where class members number at least 40, joinder is considered impracticable and numerosity is satisfied.” (citation omitted)).

         iii. Commonality

         Next, Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” To establish commonality, class members must “have suffered the same injury, ” which “does not mean merely that they have all suffered a violation of the same provision of law, ” but rather that the class members' “claims depend upon a common contention” that “is capable of classwide resolution.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (citations and quotation marks omitted). That, in turn, means “not [just] the raising of common questions-even in droves- but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” Id. (citation and quotation marks omitted) (emphasis in original); see also Suchanek v. Sturm Foods, Inc., 764 F.3d 750, 756 (7th Cir. 2014) (commonality met because the claims “all derive from a single course of conduct by [defendant]: the marketing and packaging of [coffee], ” so “the same conduct or practice by the same defendant gives rise to the same kind of claims from all class members”).

         Commonality is met here, even under the heightened standards announced in Wal-Mart. Here, each class member suffered the same alleged TCPA injury from the same conduct-receiving an autodialed call from Nationstar without consenting to the call. Nationstar's defense-that class members consented to the calls-is a common question that can be resolved for the whole class. According to Nationstar, the majority of the class members' phone numbers came from credit applications with Nationstar or with third party lenders, and Nationstar believes that providing a phone number on a loan application is enough to constitute consent to be called. 5/19/16 Fairness Hr'g Tr. 28:4-12 (“[B]ecause the number is in the system, we believe that there must have been a reason we got that number, and oftentimes, in the majority of cases, it will be through the credit application.”). Thus, the legal question-whether providing a phone number on a credit application constitutes consent-is a common question that can be resolved for the majority of members at once. Another common question is whether Nationstar's dialing system is an autodialer within the meaning of the TCPA. The TCPA prohibits calls made by “equipment which has the capacity-(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1). The Plaintiffs allege that all of Nationstar's calls were made using its Avaya phone system, Am. Compl. ¶¶ 30-32, so whether this system is an autodialer is also a common question for the whole class. Thus, class litigation “will resolve an issue that is central to the validity of each one of the claims in one stroke.” Wal-Mart, 564 U.S. at 350; see also Kolinek, 311 F.R.D. at 492-93 (common question of “whether, as a matter of law, providing a cellular telephone number for verification purposes constitutes prior express consent to receive prescription refill reminder calls”); Hinman v. M & M Rental Ctr., Inc., 545 F.Supp.2d 802, 807 (N.D. Ill. 2008) (common question of consent where “[defendant's] fax broadcasts were transmitted en masse based on the ‘leads' list compiled several years earlier”); Gehrich v. Chase Bank USA, N.A., __F.R.D. __, 2016 WL 806549, *4 (N.D. Ill. Mar. 2, 2016) (common question of consent in suit alleging that defendant sent automated debt-collection calls and texts).

         iv. Typicality

         Typicality requires that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3). “A plaintiff's claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory.” Keele v. Wexler, 149 F.3d 589, 595 (7th Cir. 1998) (citation and quotation marks omitted). As discussed above, the success of the class's TCPA claims will hinge on questions of whether individuals consented to the calls because they provided their phone number on a credit application, and what constitutes an autodialer, and the claims of the eight class representatives depend on the same questions. Am. Compl. ¶¶ 41-113. Because the class representatives' claims “have the same essential characteristics as the claims of the class at large, ” Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584, 597 (7th Cir. 1993) (citation omitted), their claims are sufficiently typical.

         v. Adequacy

         The last Rule 23(a) requirement assures that “representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). “[A]dequacy of representation is composed of two parts: the adequacy of the named plaintiff's counsel, and the adequacy of representation provided in protecting the different, separate, and distinct interest of the class members.” Retired Chi. Police Ass'n, 7 F.3d at 598 (citation and quotation marks omitted). To be an adequate representative, the class representatives must not have “antagonistic or conflicting claims.” Id.; see also Spano v. The Boeing Co., 633 F.3d 574, 586-87 (7th Cir. 2011) (“[A]bsentee members of a class will not be bound by the final result if they were represented by someone who had a conflict of interest with them or who was otherwise inadequate.”). In this case, the class representatives' claims are essentially identical to those of the proposed class members'. And there is no reason to doubt the competency and motives of class counsel. The adequacy requirement of Rule 23(a)(4) is satisfied.

         2. ...

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