Fauley v. Metropolitan Life Insurance Co.
2016 IL App (2d) 150236
Ill. App. Ct.2016Background
- Plaintiffs filed a TCPA class action alleging MetLife sent unsolicited fax advertisements and sought statutory damages ($500 per violation); two days after filing they moved for preliminary settlement approval.
- Proposed settlement created a $23 million common fund: ~ $7.6 million to class counsel, $15,000 incentive payments to named plaintiffs, and tiered claimant payments ($250 / $85 / $42.50) with uncashed checks to cy pres recipients.
- Trial court granted preliminary approval, directed direct fax notice, publication notice, and a settlement website. Two objectors (Austin Distributing and Judd Clayton) filed objections challenging notice, counsel adequacy, representative adequacy, the cy pres distribution, and the fee award.
- The court held a fairness hearing, reviewed in camera time records and mediation materials, applied an eight-factor Korshak test, found settlement resulted from arm’s-length negotiations, and approved the settlement and fee award.
- On appeal objectors argued due-process defects in notice and hearing procedures, conflict and inadequacy of class counsel/representatives, and that the fee award was excessive; plaintiffs cross-appealed the denial of a motion to strike an objection.
- The appellate court affirmed final approval, rejected the due-process and adequacy challenges, upheld the percentage-based fee award, and dismissed the cross-appeal as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of notice | Notice and website did not provide easy access to court documents and publication notice omitted opt-out procedure (Clayton raised on appeal) | Notices (direct, publication, website) satisfied due process and §2-803; trial court found best practicable notice | Court: Notice was adequate; appellate review de novo of due-process finding upheld trial court; Clayton forfeited some notice arguments raised first on appeal |
| Requirement to appear to object | Requiring in-person appearance at fairness hearing unreasonably limits absent members’ right to be heard | Court may require presence (in person or by counsel) to present and respond to objections | Court: Requiring appearance did not violate due process; persuasive precedent supports requirement |
| Adequacy of class counsel and conflict allegations | Counsel breached fiduciary duties by settling unrelated fraudulent-transfer case and had close ties to certain named plaintiffs; counsel thus inadequate | No evidence the unrelated settlement or relationships affected arm’s-length negotiations or the settlement terms | Court: Objectors failed to show influence or self-dealing; trial court properly found counsel adequate after in-camera review and consideration |
| Attorney fees method and amount | Trial court should have performed lodestar cross-check; fee (~$7.6M) excessive given risks and records not in appellate record | Trial court permissibly used percentage-of-fund method; court reviewed in-camera lodestar records and the effective multiplier was reasonable | Court: Brundidge allows either method; trial court did not abuse discretion; lodestar cross-check would not necessarily reduce fee; appellant failed to supply complete record to show error |
Key Cases Cited
- City of Chicago v. Korshak, 206 Ill. App. 3d 968 (Ill. App. Ct. 1990) (multi-factor test to evaluate fairness of class settlements)
- Brundidge v. Glendale Fed. Bank, F.S.B., 168 Ill. 2d 235 (Ill. 1995) (trial court may use percentage or lodestar method for common-fund fee awards)
- People ex rel. Wilcox v. Equity Funding Life Ins. Co., 61 Ill. 2d 303 (Ill. 1975) (appellate review standard for class-action settlement approval and forfeiture of issues not raised below)
- Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (U.S. 1985) (due-process requirements for notice to absent class members)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (U.S. 1950) (notice must be reasonably calculated to apprise interested parties)
- Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014) (disapproval of settlement where class counsel had significant ethical/financial problems and possible self-dealing)