Recently, there have been numerous cases dismissed because plaintiffs have treated the Telephone Consumer Protection Act (TCPA) like a business opportunity rather than as a consumer protection statute. Courts also have had to step in over the past several months to reign in plaintiffs’ counsel when it comes to their attorneys’ fees. Such is the case in a recent Seventh Circuit decision, where the court held that the TCPA does not shift attorneys’ fees or create common funds.
The TCPA provides $500 in statutory damages for each violation of the statute (or $1,500 per willful violation). The $500 cap includes both the damages to the plaintiff as well as attorneys’ fees. In Ira Holtzman, C.P.A., & Assocs. Ltd. v. Turza, Nos. 15-2164 & 15-2256, 2016 U.S. App. LEXIS 12594 (7th Cir. July 8, 2016), the court reversed an order that would have resulted in payments of more than $500 per violation plus attorneys’ fees.
The plaintiff in Turza prevailed on its TCPA “junk fax” claim and the trial court ordered the defendant to deposit $4.215 million with the court – $500 in statutory damages for each of the 8,430 faxes found to violate the statute. The court also ordered one-third of the damages to be used to pay class counsel. Class members would be sent a check for $333. If the check was uncashed or undeliverable, class members who had cashed their checks would receive a second distribution of up to $167. If any funds remained after the second distribution, the remainder would revert to the defendant.
The defendant appealed and argued that the order was inconsistent with the American rule – in the absence of a fee-shifting statute or common fund, the plaintiff must pay his own fees from his own recovery. The Seventh Circuit agreed and reversed the trial court. The Seventh Circuit reasoned that, under the TCPA, the members of the plaintiff class must pay their attorneys out of their own recovery. Therefore, for each $500 in damages awarded, counsel are entitled to about $167. If a class member cannot be located or does not cash the check, then counsel are not entitled to be paid for that fax. A different result requiring class counsel to get $167 per fax when class members get nothing would incorrectly turn the TCPA into a fee-shifting statute, and would mean that the defendant would be paying in excess of the $500 statutory damages per violation provided by the Act.
The case was remanded with an order to send each class member a $333 check per fax and $167 to class counsel for each $333 check cashed. The remaining funds are to revert to the defendant. Future litigants should be mindful of this result when they consider the structure of TCPA settlements.
We continue to monitor developments in TCPA litigation. Please see this list of recent TCPA actions.