United States District Court, E.D. Michigan, Southern Division
OPINION & ORDER DENYING WITHOUT PREJUDICE MOTION
FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT
F. Cox Sean F. Cox United States District Judge
one of three TCPA cases that this Court has certified as a
class action. This particular case is currently before the
Court on an “Agreed Motion for Preliminary Approval Of
Class Action Settlement And Notice To The Class” (D.E.
No. 139), filed by Plaintiff's Class Counsel. The motion
states that Plaintiff's Counsel and Defense Counsel have
agreed to settle the case, and this motion asks the Court to
grant the motion and issue a proposed “Preliminary
Approval Order.” The motion is unopposed. It is this
Court's role, however, to carefully scrutinize the
proposed settlement to determine if it is fair, reasonable,
and adequate. This Court shall DENY THE MOTION WITHOUT
PREJUDICE because, as explained below, there are several
aspects of the proposed settlement that give this Court
concern that the settlement is not in the best interests of
case is one of the trio of very similar TCPA cases that were
assigned to this Court around the same time. This case is
another “in a string of ‘junk fax'
cases” under the TCPA “that involves a
fax-broadcasting company named Business to Business Solutions
(B2B).” Bridging Communities Inc. v. Top Flite
Financial Inc., 843 F.3d 1119, 1121 (6th Cir. 2016).
Bridging Communities, Inc., the Sixth Circuit
explained the kinds of damages that are available under the
“The TCPA prohibits the use of “any telephone
facsimile machine, computer, or other device to send, to a
telephone facsimile machine, an unsolicited advertisement,
” unless the sender and recipient have “an
established business relationship, ” the recipient
voluntarily made its fax number available, and the
unsolicited fax contains a notice meeting certain statutory
and regulatory requirements. 47 U.S.C. § 227(b)(1)(C),
(b)(2)(D); 47 C.F.R. § 64.1200(a)(4). The statute
provides a private right of action permitting plaintiffs to
enjoin a violation of the TCPA and/or to recover either
actual money lost from the violation or $500 per violation,
whichever is greater. See 47 U.S.C. §
227(b)(3). Damages may be trebled if a court finds that a
violation was willful or knowing. See id.
Id. at 1121-22. This is one of many “junk
fax” cases under the TCPA that involves Caroline
Abraham and her fax-broadcasting company, B2B. As to the
backdrop of these cases, the Sixth Circuit has explained:
We have explained in prior cases that Caroline Abraham
operated B2B as a fax advertising company that catered to
small businesses. See, e.g., Imhoff Inv., L.L.C.
v. Alfoccino, Inc., 792 F.3d 627, 629-30 (6th Cir.
2015). As one district court put it, for TCPA purposes,
“Abraham functioned as a modern-day ‘typhoid
mary[.]' ” Avio, Inc. v. Alfoccino, Inc.,
311 F.R.D. 434, 437 (E.D. Mich. 2015) (quoting APB
Associates, Inc. v. Bronco's Saloon, Inc., 297
F.R.D. 302, 305 (E.D. Mich. 2013)). B2B purchased a list of
fax numbers from a company called InfoUSA, Inc. See
Id. For a fee, B2B faxed clients' advertisements to
hundreds of numbers from that list, a practice known as
“fax-blasting.” Id. B2B's records
show that it successfully sent thousands of faxes on behalf
of its clients. See Imhoff Inv., L.L.C., 702 F.3d at
629. “Abraham [has] testified that she believed it was
legal to send fax advertising to companies that had an
established business relationship with the sender and
mistakenly thought the companies on the InfoUSA list met that
standard. Abraham did not call the businesses on her fax
lists to seek consent to send them fax advertisements.”
Id. at 1122.
Court initially denied class certification in this case
because, among other things, this Court concluded that there
was not an ascertainable class because only persons or
entities who owned the fax machines had statutory standing to
bring a claim. (See D.E. No. 64). In discussing
statutory standing, this Court addressed an uncertainty that
some other courts had addressed in terms of who can bring a
TCPA claim after an unsolicited fax is sent. That is, this
Court believed it was unclear what is meant by a person
“who was sent” a fax advertisement (i.e., does
that include the person who owns the fax machine, the person
who opened the account or paid the bill for the telephone
line the fax machine used to receive signals, a person to
whom the fax advertisement was addressed, persons who
happened to pick up the fax, or all of the above?). After
examining the legislative history, this Court concluded that
only the owners of the fax machine had statutory standing to
assert a claim under the TCPA. At the time of the Court's
decision, there was a lack of Sixth Circuit authority on the
Opinion & Order issued on April 7, 2016, in light of
several TCPA decisions that had been issued by the Sixth
Circuit following this Court's denial of class
certification, this Court ultimately certified this action as
a class action. This Court certified the following class:
All persons or entities who were sent one or more faxes on
November 28, 2005, November 30, 2005, February 14, 2006, or
February 15, 2006, offering “KFC Catering Prices,
” including “200 HOT WINGS” for $79.99 and
a variety of “KFC's FAMOUS SIDE DISHES, ” and
identifying and [sic] a “Complaint Hotline”
number of (718) 645-2021 Ext. 232 or (718) 360-1330 ext. 232.
(D.E. No. 101 at Pg ID 1900). This Court further ordered as
IT IS FURTHER ORDERED that, pursuant to Fed.R.Civ.P. 23(g),
Jason J. Thompson of Sommers Schwartz, P.C. and Phillip Bock
of Bock & Hatch, LLC are APPOINTED AS CLASS COUNSEL.
IT IS FURTHER ORDERED that, within sixty (60) days of the
date of this Opinion & Order, Class Counsel shall file a
proposed class notification form which complies with
Fed.R.Civ.P. 23(c), together with a statement describing the
method by which the notice will be provided to class members
and a list of persons or entities to whom the notice will be
IT IS SO ORDERED.
(Id. at Pg ID 1900-01).
the body of the Opinion & Order, this Court declined to
appoint Brian Wanca or his firm as class counsel in this
action. (Id. at Pg ID 1891 n.5). The Court appointed
Jason Thompson of Sommers Schwartz and Phillip Bock of Bock
& Hatch as class counsel, but expressly advised class
counsel that they should be aware that any claim for
attorney's fees would be closely scrutinized.
(Id. at n.6) (emphasis added).
Court further noted its concern that the named plaintiffs in
these three actions had agreed not to contest a one-third
contingency attorney fee, but noted that other persons in the
classes would be able to oppose requested attorney fees they
deem excessive, and that the Court would also have a role in
terms of approving any requested attorney fees. (Id.
at Pg ID 1891).
29, 2016, this Court granted a motion for order approving
class notice and setting a date for opt outs. (D.E. No. 106).
That notice advised the recipient: “You are receiving
this Notice because you are a member of the Class
(defined above).” (D.E. No. 104-1 at Pg ID 1918)
(emphasis added). The Class Certification Notice was sent to
each of the fax numbers that Plaintiff identified through
discovery as having been sent a fax by Defendants. In
addition, for those faxes that were not successfully received
by Class members after three (3) attempts, the notice was
sent to them by U.S. Mail. Class members had until August 15,
2016, to opt out.
docket reflects that approximately 20 class members,
consisting of both individuals and entities, opted out.
(See D.E. Nos. 107-130).
March 6, 2017, Plaintiff filed an “Agreed Motion for
Preliminary Approval of Class Action Settlement and Notice to
the Class.” (D.E. No. 139).
motion asserts that “[b]ased upon discovery and
computer analysis of fax transmission records, Plaintiff
determined that 15, 365 of Defendant's form
advertisements were successfully sent to 9, 479 persons in
Michigan who did not opt out of the certified class.”
(D.E. No. 139 at Pg ID 2137).
the proposed settlement, Defendants, by and through their
insurer Argonaut, has agreed to make available a total of $7,
682, 500.00 for the Settlement Fund.
the Settlement Fund, Plaintiffs' Counsel would receive an
attorney fee award equal to one-third of the entire
settlement fund - more than 2.5 million dollars - plus
unspecified “out-of-pocket expenses.”
Administrative costs would also be paid from the Settlement
Fund. Named Plaintiff Shari Machesney would get $15, 000. The
remaining money would be used to pay claims to the class
class member would get a cash payment of the lesser of $500
per fax sent to them or a “pro rata share” of the
Settlement Fund after all the other payments have been made.
addition, under the parties' agreement, “[a]ny
money left in the Settlement Fund after payments to claiming
class members, to the Class Representative, and to the Class
Counsel would revert to and be kept by Argonaut.” (D.E.
No. 139 at Pg ID 2139).
parties' settlement agreement, which is attached to the
motion, contains the following “clear
10. Incentive Award, Attorneys' Fees, and Expenses.
Plaintiff shall be paid an Incentive Award from the
Settlement Amount of Fifteen Thousand Dollars ($15, 000.00)
for representing the Settlement Class, subject to the
Court's approval. In addition, Class Counsel shall be
paid Two Million Five Hundred Sixty Thousand Eight
Hundred Thirty-Three Dollars and Thirty-Three Cents ($2,
560, 833.33) (one third of the Settlement Amount) as
attorneys' fees from the Settlement Amount plus their
reasonable out-of-pocket Attorneys' Expenses,
subject to the Court's approval. Defendants will not
object to a request for these amounts, nor will Defendants
appeal any award of these amounts. The awarded amounts
will be set forth in the Final Judgment and shall be paid
from the Settlement Fund in accordance with paragraph 12
(D.E. No. 139-1 at Pg ID 2168-69) (Emphasis added).
23(e) provides that the claims of a certified class
“may be settled, voluntarily dismissed, or compromised
only with the court's approval.” Fed.R.Civ.P.
district court must find a settlement to be ‘fair,
reasonable, and adequate' for it be approved.”
Pelzer v. Vassalle, 655 F. App'x 352, 359 (6th
Cir. 2016) (citing UAW v. General Motors Corp., 497
F.3d 615, 631 (6th Cir. 2007)). A district court ultimately
“considers seven factors in making this finding: (1)
the risk of fraud or collusion; (2) the complexity, expense
and likely duration of the litigation; (3) the amount of
discovery engaged in by the parties; (4) the likelihood of
success on the merits; (5) the opinions of class counsel and
their representatives; (6) the reaction of absent class
members; and (7) the public interest.” Id.
Plaintiff's Counsel note in their pending motion, a
district court's review is usually a two-step process,
with the first step to hold a preliminary fairness hearing,
prior to notifying the class members about the proposed
settlement. (D.E. No. 139 at Pg ID 2141). The purpose of the
preliminary hearing is for the Court to determine whether the
proposed settlement is “within the range of possible
approval.” (Id. at Pg ID 2142). If the
district court finds that the proposed class action
settlement is within the range of possible approval, the
Court should grant “preliminary approval” and
authorize the parties to notify the class members about the
reasons set forth below, this Court finds that the proposed
settlement suffers from several apparent defects, and is not
within the range of possible approval at this time.
Complexity, Expense And Duration Of Litigation, Amount Of
Discovery Engaged In By The Parties, And Likelihood Of
Success On The Merits
the Court is just at the first stage of the two-step process,
it need not consider all of the above seven factors at this
time. But some of the factors include: the complexity,
expense and likely duration of the litigation; the amount of
discovery engaged in by the parties; and the likelihood of
success on the merits.
case is very unusual in that it is one of many incredibly
similar cases, litigated by the same Plaintiff's
Counsel, that involves the very same claims and defenses, and
even the same factual issues. This is one of many “junk
fax” cases under the TCPA that involves Caroline
Abraham and her fax-broadcasting company, B2B. As in all of
these “B2B Junk Fax” cases, Abraham sent a fax ad
that advertised defendants' products and/or services.
Abraham, B2B's sole employee, never obtained from the fax
recipients permission to send the ads.
for the businesses that Abraham offered her services to,
“[t]he TCPA is essentially a strict liability
statute” which imposes liability upon senders of
unsolicited faxes. Alea v. London Ltd. v. American Home
Sys., Inc., 638 F.3d 768, 776 (11th Cir. 2011). In
addition, the recipient ...