In Re AT & T Mobility Wireless Data Services Sales Tax Litigation
789 F. Supp. 2d 935
| N.D. Ill. | 2011Background
- MDL consolidated 28 ITFA-related actions against AT&T Mobility in this court; JPML centralized proceedings.
- Consolidated Master Complaint filed; class certification and preliminary settlement approved; notice plan ordered.
- Settlement terminates challenged Internet Taxes, stops further taxation, and creates escrow for refunds/credits to address state-specific refund procedures.
- Class defined as AT&T Mobility customers charged Internet Taxes from Nov 1, 2005 to the date before billing-system changes; tight exclusions apply.
- AT&T ceases tax collection; refunds processed through state-specific escrow accounts; class releases and waivers include broad mutual releases.
- Final fairness hearing held; objections raised but court granted final approval; separate order on fees/costs/incentives to follow.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the settlement is fair, reasonable, and adequate under Rule 23. | Class members receive substantial refunds and injunctive relief; strong value relative to litigation risk. | Settlement expedites relief, reduces risk, and avoids costly, protracted litigation; fees justified by benefits. | Yes; settlement approved as fair, reasonable, and adequate. |
| Whether the class satisfies commonality, typicality, and predominance for settlement certification. | ITFA violations and common defenses create cohesive class; state variations do not defeat predominance. | Divergent state laws and remedies could complicate common issues; arbitration defenses threaten manageability. | Yes; class certified for settlement; predominance satisfied. |
| Whether the Tax Injunction Act and comity bar federal approval or interfere with state refunds. | Settlement is contractual among private parties; does not enjoin state taxes; preserves state refund mechanisms. | TIA/comity may restrict federal involvement in state tax refunds; settlement risks conflicts with state law. | No; court retains jurisdiction to approve settlement and does not enjoin state tax collection; TIA/comity concerns addressed. |
| Whether notice and objection procedures met due process and Rule 23 requirements. | Notice provided via bill inserts, texts, emails, publications, and website; objection period met. | Some objectors claim notice was insufficient; however, cumulative notice suffices under Mullane/Eisen. | Yes; notice and deadlines deemed adequate and properly administered. |
| Whether the court should approve the separate fee/motion for attorneys' fees and incentives alongside settlement. | Counsel's effort and results warrant a substantial contingency-based fee; separate fee order anticipated. | Fees should be monitored; court may approve settlement while reducing or denying full fee request. | Settlement approved; fee order to be issued in a separate proceeding. |
Key Cases Cited
- Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646 (7th Cir.2006) (five-factor fairness framework for settlements in class actions)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (U.S. 1997) (settlement class certification must ensure predominance and cohesion)
- Isby v. Bayh, 75 F.3d 1191 (7th Cir.1996) (factors for evaluating settlement fairness and discovery sufficiency)
- Mercury Interactive Corp. Sec. Litig., 618 F.3d 988 (9th Cir.2010) (timing of fee applications in class actions and due process issues)
- Re Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277 (7th Cir.2002) (net expected value of continued litigation and discounting considerations)