For one company the cost of faxed advertisements with an incomplete opt-out notice could reach $3.3 million, based on a recently approved settlement in a TCPA class action.

A class of plaintiffs filed suit under the TCPA after receiving fax ads from California-based Balboa Capital Corp. that lacked a sufficient opt-out notice. According to the class, the roughly 973,879 faxes sent by the equipment leasing company did not include a fax number in order to send an opt-out request and failed to inform recipients that they needed to include their own fax number in the request. This class, in seeking $500 in statutory damages per facsimile, would thus be seeking in excess of $485 million in statutory damages.

After the trial court certified a partial class and the parties filed dueling summary judgment motions, the court said it would withhold a ruling until a settlement conference was held. The parties then reached an agreement.

Balboa promised to fund a settlement of at least $2.3 million and up to $3.3 million for a nationwide class of recipients who were sent faxes over a four-year period. The fund will also pay for $10,000 class representative incentive payments and attorneys’ fees and costs.

The final dollar amount will depend on the number of class members. If the class claims, incentive awards, and attorneys’ fees and costs are greater than or equal to $2.3 million but less than or equal to $3.3 million, class members will receive a payment between $175 and $275, depending on the number of faxes they received. Claimants who can actually present a copy of the fax they received will be eligible for a $500 payment. However, if the total amount goes over the $3.3 million cap, the payment to each class member will be reduced on a pro rata basis.

Alternatively, if the total payment does not reach $2.3 million, the remaining settlement fund will be distributed in pro rata shares to the class up to a maximum of $1,500 per fax. If money still remains, the parties will agree upon a charity to receive a cy pres distribution. The deal also includes a permanent injunction prohibiting Balboa from fax advertising in violation of the TCPA.

U.S. District Court Judge Josephine L. Staton granted preliminary approval of the deal, with one caveat. Balboa agreed not to object to counsel fees up to $1.1 million. But even if the settlement fund maximizes the agreed-upon $3.3 million, attorneys’ fees and costs would constitute one-third of the total, Judge Staton noted. If the fund doesn’t go above $2.3 million, then the attorneys’ fees and costs would be almost half of the common fund.

While writing that it would be “premature to make any definitive ruling on the reasonableness of class counsel’s fees and costs request at this stage,” the benchmark for reasonable class fees in the Ninth U.S. Circuit Court of Appeals is 25 percent of the common fund, the court said. “Class counsel will have to justify an upward departure from the Ninth Circuit’s fees benchmark,” Judge Staton warned.

To read the order in Vandervort v. Balboa Capital Corp., click here.

Why it matters: As part of the court’s consideration regarding whether the settlement was “fair, adequate, and reasonable under the circumstances,” Judge Staton analyzed the strength of the plaintiffs’ case. Noting that the Ninth Circuit has “yet to address the issue of whether an opt-out notice that substantially complies with the requirements of the TCPA is sufficient under the TCPA even where the notice does not comply with all the specific requirements of the law,” coupled with Balboa’s “vigorous defense,” the class’s decision to settle for $2.3 million to $3.3 million (a tiny fraction of the claimed statutory damages) was reasonable, she concluded.