Miranda L. Day v. Persels & Associates, LLC
2013 U.S. App. LEXIS 18741
| 11th Cir. | 2013Background
- Miranda Day sued several debt-management and legal-service defendants on behalf of a putative Florida class (≈10,000), later expanded by settlement to a nationwide class (≈125,000). Day and the defendants had consented to magistrate-judge jurisdiction under 28 U.S.C. § 636(c).
- The settlement provided injunctive changes to practices, a $100,000 cy pres distribution, administrator costs, $5,000 incentive to Day, and up to $300,000 attorneys’ fees — but no monetary recovery for absent class members; it released most claims by absent members.
- Notice was sent to >98% of class members; 325 opted out; several state attorneys general and five class members (including Raymond Gunn) objected that the settlement gave up valuable claims for no money.
- At the fairness hearing, parties argued collectability concerns; the only evidentiary affidavit addressed the finances of one defendant (Persels & Associates), showing large losses and a secured $14 million obligation.
- The magistrate judge approved the settlement, finding it fair in part because defendants could not pay a meaningful judgment; the Eleventh Circuit affirmed jurisdiction but vacated the approval and remanded, holding the collectability finding lacked adequate evidentiary support.
Issues
| Issue | Plaintiff's Argument (Day / Objectors) | Defendant's Argument | Held |
|---|---|---|---|
| Whether a magistrate judge may enter final judgment in a class action without obtaining consent from absent class members under 28 U.S.C. § 636(c) | Day: consent of named parties suffices; absent class members are not "parties" whose consent is required. Objectors: unnamed class members are parties and must consent. | Defendants: absent class members need not consent; representative litigation lets named plaintiff act for the class. | Held: Absent class members are not "parties" for § 636(c) consent; magistrate had statutory and Article III jurisdiction to enter final judgment. |
| Whether § 636(c) as applied to class actions violates Article III / due process | Objectors / amici: letting magistrate enter final judgment without absent members’ consent raises constitutional concerns and may deprive them of Article III adjudication. | Day/defendants: consent by named parties plus procedural protections and options for absent members (opt-out, intervene, collateral attack) satisfy Article III. | Held: § 636(c) is constitutional facially and as applied to class actions; absent members have procedural means to protect Article III rights. |
| Whether the settlement was fair, adequate, reasonable under Rule 23 and Eleventh Circuit factors | Objectors: settlement gave up valuable claims for no money; cy pres and fee structure inadequate. | Day/defendants: settlement provided meaningful injunctive relief, cy pres, fees reasonable given likely uncollectability. | Held: Vacated — the magistrate abused discretion by finding defendants unable to pay a substantial judgment without adequate evidentiary support (evidence only showed Persels & Associates’ insolvency). |
| Whether record supported the magistrate’s conclusion that "range of possible recovery" justified zero monetary relief | Day/defendants: informal inquiry and representations showed collectability doubtful; relying on counsel affidavits and Persels’ declaration was sufficient. | Objectors: only one defendant’s inability was proven; others’ finances were unproven speculation. | Held: The finding of inability to satisfy judgment was clearly erroneous as to most defendants; it was central to approval, so settlement approval was an abuse of discretion and must be vacated and remanded. |
Key Cases Cited
- Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170 (3d Cir. 2012) (held absent class members are not parties for § 636(c) consent)
- Williams v. Gen. Elec. Capital Auto Lease, Inc., 159 F.3d 266 (7th Cir. 1998) (reasoned named plaintiff may consent for class litigation; absent members not parties for § 636(c))
- Devlin v. Scardelletti, 536 U.S. 1 (2002) (unnamed class members may be parties for some purposes, e.g., appeal when they timely object to settlement)
- Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) (procedural protections — notice and opt-out — permit binding absent class members despite jurisdictional differences)
- Roell v. Withrow, 538 U.S. 580 (2003) (consent to magistrate jurisdiction may be inferred from litigant conduct when made aware of right to refuse)
- Stern v. Marshall, 560 U.S. 462 (2010) (limitations on non-Article III adjudication of certain claims — considered in evaluating magistrate/Article III arguments)
- Bennett v. Behring Corp., 737 F.2d 982 (11th Cir. 1984) (Six-factor test for assessing fairness of class settlements)
- Leverso v. SouthTrust Bank of Ala., Nat’l Ass’n, 18 F.3d 1527 (11th Cir. 1994) (settlement approval requires determination that agreement is fair, adequate, reasonable, and not the product of collusion)