$75M Capital One TCPA Class Deal OK'd; Attorneys' Fees Cut From $22M to $15M

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Feb. 13 — A $75 million Telephone Consumer Protection Act consumer class settlement involving Capital One, several debt collection agencies and debtors Feb. 12 won final court approval in a deal that the court said was “slightly deceivingly” hailed by the parties as the largest of its kind under the statute.

But class counsel's attorneys' fee request of $22.6 million—32 percent of the settlement value—exceeds the market rate, Judge James F. Holderman wrote for the U.S. District Court for the Northern District of Illinois, which oversaw the federal multidistrict litigation.

To reach that conclusion, the court analyzed more than 70 fee awards in recent TCPA deals to hold that class counsel had asked for too much in fees, cutting the award to just over 20 percent of the settlement's value. The courtestimated the prevailing market rate for fees in TCPA class cases by considering empirical data sets of class action attorneys' fees in recent cases.

Size of Settlement ‘Slightly Deceiving.'

The plaintiffs alleged that Capital One Bank (USA) NA and three debt collection agencies violated the TCPA, 47 U.S.C. § 227(b)(1)(A), by calling their mobile phones to collect credit card debts using an automatic telephone dialing system or an artificial or prerecorded voice without their prior express consent.

The parties reached a $75.5 million settlement agreement, which was preliminary approved in July 2014.

Notice of the settlement reached almost 16 million known class members, but only 1.38 million—7.87 percent of the estimated class—filed claims, according to the court.

After subtracting notice and administration costs ($5.09 million), class counsel's requested service awards for the five named plaintiffs ($25,000) and class counsel's requested fee award ($22.6 million), the value to class members is $47.7 million, the court said. That works out to $34.60 for each claimant.

Fees in Approved TCPA Class Settlements Since 2010
Recovery Range Mean Fee (%) Median Fee (%) Standard Deviation   # of Cases
Less than $345,000 31.2 31.5 3.1   8
$345,000 $510,000 33.1 33.3 2.8   7
$510,000 $1.1 Million 37.1 33.0 18.1   7
$1.1 million $1.6 million 29.4 33.3 6.3   7
$1.6 million $2.6 million 30.7 30.7 4.1   7
$2.6 million $4.6 million 26.1 33.0 10.2   7
$4.6 million $7.0 million 24.1 25.0 9.8   7
$7.0 million $9.8 million 25.8 25.0 4.6   7
$9.8 million $15.9 million 23.7 25.0 8.6   7
$15.9 million $39.9 million 17.2 17.7 4.8   8

When preliminary approval was granted, the defendants said the settlement was the largest cash sum in the 22-year history of the TCPA.

“That fact, though true, is slightly deceiving because the size of the settlement amount is attributable mainly to the large size of the class—17.5 million people,” the court noted. “The recovery per class member—excluding administrative costs, Named Plaintiff awards, and attorneys’ fees—is a relatively diminutive $2.72.”

The per-claimant recovery of $34.60 “falls within the range of recoveries in other TCPA actions,” the court said.

It concluded that the settlement was “fair, reasonable, and adequate” and therefore met the requirements of Fed. R. Civ. P. 23(e)(2).

Fee Percentage Too High

Class counsel requested a fee award of $22.6 million, which they said constituted 30 percent of the $75.5 million settlement fund.

But the court found that class counsel improperly included administrative and notice costs and the named plaintiff service awards when calculating their fee.

After subtracting these amounts, the court found that the total money to split among the class and counsel is just over $70 million. Counsel's requested fee was slightly above 32 percent of this new total, the court said.

After reviewing several empirical studies on attorneys' fee awards in TCPA and other class settlements, the court concluded that 32 percent exceeds the market rate. It then adjusted the fee percentage down to 20.77 percent, resulting in a fee award of $15.7 million.

The court determined that the money available as a result of its reduction to the requested fee should go to the class members, increasing each claimant's payment to at least $39.66.

Lieff Cabraser Heimann & Bernstein LLP and Meyer Wilson Co. represented the plaintiffs. Faegre Baker Daniels LLP and others represented the defendants.

Full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/In_re_Capital_One_Tel_Consumer_Prot_Act_Litig_v_Capital_One_Fin_C.