November 9, 2017
from the United States District Court for the Southern
District of Illinois. No. 3:16-cv-00488-SMY-RJD - Staci M.
Ripple, Manion, and Sykes, Circuit Judges.
Ripple, Circuit Judge.
Drug Store, Inc., filed this action, on its own behalf and as
a representative of a proposed class, against Cochran
Wholesale Pharmaceutical, Inc. ("Cochran"). Camp
Drug Store alleged that Cochran had violated the Telephone
Consumer Protection Act ("TCPA" or "the
Act"), 47 U.S.C. § 227, by faxing unsolicited
advertisements to the class members. The parties entered into
early mediation and reached a settlement. The district court
approved the settlement on behalf of the class, but reduced
the proposed attorney fee and incentive awards.
Drug Store appeals. It maintains that the settlement created
a common fund against which the reasonableness of the
attorney fee award should be assessed. It also notes that the
proposed incentive awards were commensurate with other awards
to named plaintiffs for claims under the TCPA.
cannot accept Camp Drug Store's characterization of the
settlement as a common fund. Neither our case law, nor that
of the Supreme Court, supports that characterization.
Moreover, given the early stage at which this litigation was
settled, the reductions in the attorney fee and incentive
awards were not an abuse of discretion. We therefore affirm
the district court's judgment.
a small pharmaceutical distribution company in Monroe,
Georgia, obtained a list of approximately 17, 000 pharmacies.
Using the list, it then sent faxes to prospective customers.
It did not have permission from those to whom it sent faxes.
Camp Drug Store was one of the recipients of the faxes and
brought this class action under the TCPA, 47 U.S.C. §
227. Section 227(b)(1)(C) of Title 47 generally prohibits the
sending of unsolicited advertisements by facsimile. Its
complaint was filed on May 2, 2016.
an answer was filed, the parties moved to stay the litigation
for ninety days to explore settlement. In mid-October, the
parties engaged in mediation, which produced a proposed
settlement. According to the agreement, Cochran would
"make up to $700, 000.00 available to settle" the
case, but was not required to create a separate account to
hold the funds or to deposit them with the
court. Each class member could submit a claim for
$125; if the dollar value of the claims exceeded the total
available funds, each timely claim would be subject to a
pro-rata reduction. Any funds that were not claimed by class
members were to be kept by Cochran. The agreement further
provided that each of the representative
plaintiffs was entitled to an incentive award of $15,
000, and class counsel were to be paid "one third of the
Settlement Fund ($233, 333.33)."
December 7, 2016, the district court held a hearing to
consider the preliminary approval of the settlement. At the
outset, the court advised the parties that it had concerns
about some aspects of the proposed settlement: the early
stage of the litigation and the amount of work that had been
done compared to the amount of attorneys' fees; the
reversion of funds to the defendant; and the means and
timeline for notification.The court explored each of these topics
during the hearing. Specifically, counsel advised the court
that no formal discovery had occurred, but that, in
anticipation of mediation, Cochran had provided
plaintiffs' counsel with its financials and a list of
businesses to which it likely had faxed information. Counsel
also informed the court that the action represented an
uninsured risk to Cochran, a small family business. Finally,
counsel clarified for the court that the settlement agreement
did not guarantee plaintiffs' counsel one-third of the
available funds; it simply allowed plaintiffs' counsel to
petition the court for "up to one-third of 700[,
discussing these issues with counsel, the district court
formally appointed counsel and representatives for the class,
elongated the time frame for notice and response, and
preliminarily approved the settlement agreement. The court
directed that plaintiffs' counsel file a motion for final
approval by March 20, 2017, and scheduled a final hearing for
April 19, 2017.
settlement administrator sent the notice of the proposed
settlement and the claim form to all class members, initially
by fax and, if the fax was unsuccessful, by mail. Of the
approximately 17, 000 potential class members, 1, 765 class
members returned claim forms. No class members filed
objections, and only twelve class members requested to be
excluded from the settlement. The total amount of funds that
Cochran paid to claimants was $220, 625.00.
plaintiffs subsequently filed a motion for final approval of
the class settlement. According to the plaintiffs, the
settlement was "fair, reasonable, and adequate," as
required by Federal Rule of Civil Procedure 23(e)(2). With
respect to fees, the plaintiffs requested that class counsel
be awarded one-third of the $700, 000 ($233, 333.33) that had
been made available for the settlement of the claims, as well
as an additional $30, 000 in out-of-pocket expenses
attributable to mediation fees, costs of notice, and
settlement administration. In support of this award, the
plaintiffs noted that "[w]hen a class suit produces a
fund for the class, it is commonplace to award the lawyers
for the class a percentage of the fund." "Here,"
the plaintiffs continued, "the Settlement created a
common fund by agreement of the parties." Consequently, the
plaintiffs maintained that one-third of the settlement fund
was an appropriate fee award.
court considered the propriety of the final settlement at a
hearing held on April 19, 2017. It evaluated the settlement
against each of the factors set forth in Isby v.
Bayh, 75 F.3d 1191, 1199 (7th Cir. 1996), namely:
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.
had in the preliminary hearing, the court expressed concerns
about the requested attorneys' fees "[i]n terms of
the stage of the proceedings and the amount of
discovery." The court observed that "there was no
real litigation in this case. The case was filed. Counsel
entered their appearance. They requested a stay. They began
negotiations … . The case was stayed and then they
announced a settlement."
court also was not persuaded that the $700, 000 represented a
common fund that inured to the benefit of the class. Instead,
the court explained that "it was a security
deposit."The court stated that it would have
agreed with the plaintiffs' argument "if the
defendant plopped down $700, 000 and sa[id], This is it,
now you can divvy this up with claims, attorneys' fees,
costs, however you want to do it, but this is
it." However, the settlement required
reversion back to Cochran of any unclaimed amounts. The
court, therefore, determined that it was more appropriate to
award counsel thirty-three percent of the amount recovered by
the class, or $73, 000. In the court's view, even this
amount was a "windfall" given the early stage of
litigation at which the case had settled.
court also was not convinced by counsel's argument that
the fee award should be higher because "the actual
Lodestar in this case was $156, 000." The court
rejected this argument because, although the lodestar can be
an appropriate cross-check, counsel had provided only a
summary of the number of hours spent on the case; counsel had
not provided details or documentation regarding how the $156,
000 in fees had accumulated given how little work was done on
respect to the incentive award, the court noted that there
were certain factors that it had to consider, including:
"The actions that the plaintiffs have taken to protect
the interests of the class; the degree to which the class has
benefited from those actions; and the amount of time and
effort the plaintiff expended … ." Counsel then
informed the court that the named plaintiffs' involvement
was limited to reviewing the pleadings, discussing
negotiations with counsel, and being available by phone on
the day of the mediation. The court concluded that this
minimal involvement did not justify the requested $15, 000.
The court, therefore, approved an incentive award of $1, 000.
district court's final order reflected these adjustments.
In that order accepting the settlement and dismissing the
action, the court reiterated that a fee of $233, 333.33 was
not appropriate in this case because the settlement did not
create a "common fund." It explained that the
financial arrangement at issue here was not a "true
common fund case" where "fees are awarded based
on a percentage of the fund actually recovered";
instead, fees were determined based on "the maximum
amount of money the defendant has promised to make
available." Additionally, the fee requested by
counsel was not commensurate with the amount of work counsel
actually had expended to resolve the case. The district court
therefore awarded attorneys' "fees in the amount of
$73, 468.13, which represents 33.3% of the $220, 625.00
"[i]n determining whether an incentive award is
appropriate, and … in what amount," the
district court "look[ed] to 'the actions the
plaintiff has taken to protect the interests of the class,
the degree to which the class has benefitted from those
actions, and the amount of time and effort the plaintiff
expended in pursuing the litigation.'" The $15, 000
incentive award did not reflect properly the amount of time
and effort the named plaintiffs had expended in pursuing the
litigation. Consequently, the court reduced the incentive
award to $1, 000 for each of the named
Drug Store timely appealed the court's judgment with
respect to attorney fee and incentive awards.