R. Fellen, Inc. v. RehabCare Group, Inc.
1:14-cv-02081-DAD-BAM
E.D. Cal.Sep 21, 2017Background
- Dakota Medical sued RehabCare Group, Inc. and Cannon & Associates under the TCPA for unsolicited advertising faxes sent July 17, 2010–Feb 4, 2014; settlement class preliminarily certified April 19, 2017.
- Settlement: $25,000,000 common fund; notice sent by fax and mail to ~12,867 potential class members; ~12,489 (≈97%) received notice; one opt-out and no objections.
- Settlement administrator identified 12,302 eligible members credited with 2,328,003 "shares" (violations); net class distribution expected ≈ $16.4M (~$7 per violation; average ~$1,300–$1,339 per member after fees).
- Class counsel sought attorneys’ fees of one-third ($8,333,333), expenses (~$136,640 total), and allocation among three firms; used lodestar cross-check (lodestar ≈ $2.8M; multiplier ≈ 3.0).
- Plaintiff requested $15,000 incentive payment for class representative Dakota Medical; court also directed additional TIN-deficiency notices for members owed ≥ $600 and authorized periodic payments under a §468B QSF if counsel elect.
- Court granted final certification, approved the settlement as fair, awarded fees/expenses and incentive payment, approved fee allocation and 3.33% remittances to a referral attorney, and retained jurisdiction for administration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of notice and final class certification | Notices were sent by fax then mail reaching ~97% of class; class meets Rule 23 criteria | Defendants challenged class certification earlier (consent, individualized issues) but raised no new objections to notice | Court found notice "best practicable," affirmed final certification of the settlement class |
| Fairness/reasonableness of pre-certification settlement | Settlement for $25M provides substantial, automatic distributions (no opt-in), avoids litigations risks and collectability issues | Defendants contested class certification and liability; argued defenses (consent, transmission medium) could limit recovery | Applying Churchill/Bluetooth factors and collusion safeguards, court found settlement fair, reasonable, adequate and not a product of collusion |
| Attorneys’ fees (one-third of fund) | Counsel argued result is excellent, substantial risk on contingency, extensive work (≈5,800 hours), benchmark range permits higher award; lodestar cross-check supports 3x multiplier | Implicitly defendants had agreed to fund but did not oppose fee request at fairness hearing | Court approved one-third fee award ($8,333,333), found above-benchmark award justified; lodestar cross-check (≈$2.8M) yielded ~3.0 multiplier and was reasonable |
| Incentive payment to class representative ($15,000) | Dakota Medical (LeVine) performed substantial work (~60–70 hours), assisted discovery/mediation, independent judgment, supported by class members | No defense objection; limited reputational/retaliation risk noted | Court awarded $15,000, finding amount within range of prior approvals and not creating conflict |
Key Cases Cited
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (notice and settlement fairness standards for class actions)
- Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566 (9th Cir. 2004) (factors for evaluating class settlement fairness)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (heightened scrutiny for pre-certification settlements and collusion indicators)
- Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir. 2002) (percentage-of-fund benchmark and lodestar cross-check guidance)
- Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003) (standards for incentive awards and counsel’s interest disclosure)
- Silber v. Mabon, 18 F.3d 1449 (9th Cir. 1994) ("best practicable" notice requirement)
- Rodriguez v. West Publ'g Corp., 563 F.3d 948 (9th Cir. 2009) (fiduciary role of court in fee awards and fairness review)
- In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) (use of factors for settlement approval and lodestar relevance)
- Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012) (clear-sailing arrangements and fee award concerns)
- Van Vranken v. Atl. Richfield Co., 901 F. Supp. 294 (N.D. Cal. 1995) (lodestar multiplier precedents and common fund awards)