A debt collection company recently entered into a settlement agreement in the putative class action captioned Jonsson v. USCB, Inc. (C.D. Cal.)(Case No. 13-CV-8166), involving allegations that it violated the Telephone Consumer Protection Act (“TCPA”) and the Fair Debt Collection Practices Act by calling the named plaintiff and thousands of class members using an autodialer and an artificial/prerecorded voice to collect on debts that were not theirs.  The Court has yet to rule on the parties’ motion for preliminary approval of the settlement.

Background

The named plaintiff alleged that the defendant repeatedly called her mobile phone to collect on someone else’s debt using an autodialer and an artificial/prerecorded voice.  Following significant discovery, which included depositions and numerous third party subpoenas to determine the size of the prospective class (i.e., how many wrong numbers were called), the parties entered into the settlement.

Due to the defendant’s insurance policy limit of $3,000,000.00, which the defendant had tapped into for the defense of the action, the parties agreed to create a settlement fund.  If the Court approves the settlement, the settlement fund will receive $2,750,000.00 from the defendant’s insurance carrier to pay the costs of class notice, administration fees, class counsel fees and expenses, an incentive award to the plaintiff and pro ratapayments to class members who file valid claims.

TCPA Class Action Considerations

In analyzing the parties’ motion for preliminary approval of the settlement, this Court may rule similarly to a federal court sitting in Florida, which recently rejected a class action settlement as unfair due to the uncertain recovery to class members.  The settlement agreement here provides for numerous payments in advance of any payment to class members who submit timely and valid claims (i.e., payments out of the settlement fund in excess of $1 million to class counsel and the claims administrator for fees and expenses).