United States District Court, W.D. Kentucky, Louisville Division
WILBUR MACY and PAMELA J. STOWE, on behalf of themselves and others similarly situated, Plaintiffs,
GC SERVICES LIMITED PARTNERSHIP, Defendants.
MEMORANDUM OPINION AND ORDER
J. Hale, Judge United States District Court.
Wilbur Macy and Pamela J. Stowe, on behalf of themselves and
others similarly situated, allege that Defendant GC Services
Limited Partnership violated the Fair Debt Collection
Practices Act by sending them debt-collection letters that
did not accurately convey their rights under the Act. (Docket
No. 1) The parties have reached a settlement to resolve this
class action, and Plaintiffs seek preliminary approval of
that settlement. (D.N. 74) The motion for preliminary
approval is unopposed. (See id.) Nevertheless, the
Court must examine the proposed settlement before notice of
the proposal is sent to the class. See Fed.R.Civ.P.
23(e)(1)(B); Tenn. Ass'n of Health Maint. Orgs., Inc.
v. Grier, 262 F.3d 559, 565 (6th Cir. 2001). The Court
held a preliminary fairness hearing on November 8, 2019. (See
D.N. 82) After careful consideration, the Court will
preliminarily approve the parties' settlement.
Court previously certified the following class:
(1) All persons with a Kentucky or Nevada address, (2) to
whom GC Services Limited Partnership mailed an initial
communication that stated: (a) “if you do dispute all
or any portion of this debt within 30 days of receiving this
letter, we will obtain verification of the debt from our
client and send it to you, ” and/or (b) “if
within 30 days of receiving this letter you request the name
and address of the original creditor, we will provide it to
you in the event it differs from our client, ” (3)
between November 5, 2014 and November 5, 2015, (4) in
connection with the collection of a consumer debt, (5) that
was not returned as undeliverable to GC Services Limited
(D.N. 36, PageID # 361) The class-certification decision, as
well as the Court's conclusion that Plaintiffs have
Article III standing, was affirmed by the Sixth Circuit
Court of Appeals. Macy v. GC Servs. L.P., 897 F.3d 747
(6th Cir. 2018). Because the case was stayed pending appeal,
class members have not yet received notice of the action.
(See D.N. 59, PageID # 538)
Services has identified 8, 902 class members, including Macy
and Stowe. (D.N. 74, PageID # 594) Under the proposed
settlement, class members who do not opt out would
automatically receive $10.00 each, while the named plaintiffs
would each receive $2, 500 ($1, 000 in statutory damages and
$1, 500 as an “incentive award”), plus fees and
costs. (D.N. 74, PageID # 594-95) In addition, GC Services
would “cease using the form of debt collection letter
at issue” in this case. (Id., PageID # 594)
The agreement contemplates an award of $220, 000 in fees to
class counsel, and GC Services has agreed not to oppose the
motion for attorney fees. (D.N. 74-1, PageID # 625-26) As
discussed below, recent changes to Federal Rule of Civil
Procedure 23 require careful scrutiny of these provisions
before the settlement is preliminarily approved.
Court may approve a settlement only after determining that it
is “fair, reasonable, and adequate.” Fed.R.Civ.P.
23(e)(2). At the preliminary stage, the Court “must
make a preliminary determination” of these factors.
Manual for Complex Litigation (Fourth) § 21.632 (2004).
The standard for preliminary approval was codified in 2018,
with Rule 23 now providing for notice to the class upon
“the parties' showing that the court will likely be
able to” approve the proposed settlement under the
final-approval standard contained in Rule 23(e)(2).
Fed.R.Civ.P. 23(e)(1)(B)(i); see Newberg on Class Actions
§ 13:10. That standard requires the Court to consider
(A) the class representatives and class counsel have
adequately represented the class;
(B) the proposal was negotiated at arm's length;
(C) the relief provided for the class is adequate, taking
(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of any proposed method of distributing
relief to the class, including the method of processing
(iii) the terms of any proposed award of attorney's fees,
including timing of payment; and
(iv) any agreement required to be identified under Rule
(D) the proposal treats class members equitably relative to
Fed. R. Civ. P. 23(e)(2).
factors, which are also part of the 2018 amendments to Rule
23, are not meant “to displace any factor”
previously relied on by the courts, “but rather to
focus the court and the lawyers on the core concerns of
procedure and substance that should guide the decision
whether to approve the proposal.” Fed.R.Civ.P. 23(e)(2)
advisory committee's note to 2018 amendments. The rule
largely encompasses the factors that have been employed by
the Sixth Circuit:
(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
class representatives; (6) the reaction of absent class
members; and (7) the public interest.
Pelzer v. Vassalle, 655 Fed.Appx. 352, 359 (6th Cir.
2016) [Vassalle II] (quoting UAW v. Gen. Motors
Corp., 497 F.3d 615, 631 (6th Cir. 2007)). In addition
to the seven factors listed above, the Sixth Circuit has
“looked to whether the settlement ‘gives
preferential treatment to the named Plaintiffs while only
perfunctory relief to unnamed class members.'”
Vassalle v. Midland Funding LLC, 708 F.3d 747, 756
(6th Cir. 2013) [Vassalle I] (quoting Williams, 720 F.2d at
Sixth Circuit does not appear to have considered the new
version of Rule 23(e)(2). Since the amendment, courts within
the Sixth Circuit have been applying both sets of factors.
See, e.g., Elliott v. LVNV Funding, LLC, No.
3:16-cv-00675-RGJ, 2019 U.S. Dist. LEXIS 143692, at *18 (W.D.
Ky. Aug. 23, 2019) (citing Peck v. Air Evac EMS,
Inc., No. CV 5:18-615-DCR, 2019 U.S. Dist. LEXIS 11826
(E.D. Ky. July 17, 2019)). In light of the substantial
overlap between the two sets, they can easily be considered
Adequate Representation/Amount of Discovery/Opinions of Class
Counsel and Representatives The Court previously found that
Macy and Stowe were adequate class representatives and that
their counsel was qualified (see D.N. 36, PageID # 353-56),
and there is no indication that either class counsel or the
class representatives have failed to adequately represent the
class since that time. Macy and Stowe rejected GC
Services' offer of judgment early in the case, instead
opting to pursue their claims on behalf of the entire class.
Through those efforts, they secured a settlement in which
each class member would recover $10.00. They believe this
settlement to be fair, reasonable, and adequate, as does
class counsel, who has extensive experience in similar
litigation. (See D.N. 74, PageID # 616-17; D.N. 74-1, PageID
# 610) And the settlement was reached after substantial
discovery and motion practice (see D.N. 74, PageID # 600),
giving the class representatives and counsel “a
sufficient understanding of the case to gauge the strengths
and weaknesses of the claims and the adequacy of the
settlement.” N.Y. State Teachers' Ret. Sys. v.
GM Co., 315 F.R.D. 226, 236 (E.D. Mich. 2016) (citing
In re Telectronics Pacing Sys., Inc., 137 F.Supp.2d
985, 1015 (S.D. Ohio 2001)). These factors weigh in favor of
preliminary approval. See Fed.R.Civ.P. 23(e)(2)(A);
Pelzer, 655 Fed.Appx. at 359.
Arm's-Length Negotiations/Risk of Fraud or Collusion
is no evidence of fraud or collusion here. The procedural
posture of the litigation indicates that “the agreement
arose out of arms-length, noncollusive negotiations.”
Newberg on Class Actions § 13:14. This case has been
pending for four years, with extensive motion practice and
discovery during that time, as well as an interlocutory
appeal. See Id. (“Where the proposed
settlement was preceded by a lengthy period of adversarial
litigation involving substantial discovery, a court is likely
to conclude that settlement negotiations occurred at
arms-length.”). The fact that the settlement was
reached through mediation likewise suggests “an absence
of collusion.” Id. These factors therefore
also weigh in favor of preliminary approval.
Adequacy of Relief
Costs, Risks, and Delay of Trial and Appeal/Complexity,
Expense, and Likely Duration of the Litigation/Likelihood of
Success on the Merits
this case is not particularly complex, the parties have
already invested substantial time and money litigating it,
and proceeding to trial would significantly increase the
required investment. According to Plaintiffs, GC Services
“intended to renew its motion to compel
arbitration” following appeal of the certification and
standing issues, and it would have appealed any unfavorable
ruling as to arbitration; if unsuccessful on that front, it
would have sought summary judgment. (D.N. 74, PageID # 599)
And had the case proceeded to trial, GC Services would have
“argu[ed] that statutory damages should be discounted
substantially.” (Id.) Thus, at each stage of the
litigation, Plaintiffs would have faced opposition and
uncertainty. Even if they had prevailed at trial, they might
have been awarded only nominal damages. In other words, their
likelihood of success on the merits-or of substantial
recovery-is unclear. Thus, these factors suggest that
settlement is appropriate.
Method of Distribution
proposed settlement does not entail a complicated claims or
distribution process; any class member who does not opt out
will be mailed a check for $10.00. (See D.N. 74-1, PageID #
622) The Class Administrator will take several steps before
that point to ensure that class members' addresses are up
to date. (See id., PageID # 622-23) And unclaimed
funds-which should be minimal, given the
automatic-distribution and address-updating provisions in the
agreement-would not revert to GC except to cover expenses of
settlement administration, “with the remainder paid to
Legal Aid Society of Louisville as a cy pres
recipient.” (D.N. 74-1, PageID # 622) There thus does
not appear to be an attempt to benefit GC Services by
restricting class members' recovery. See Federal Judicial
Center, Managing Class Action Litigation: A Pocket Guide for
Judges 19-20 (3d ed. 2010) (identifying restrictions on
claims and reversion of unclaimed funds as red flags that
settlement may be unfair or collusive).
attorney fees contemplated by the settlement agreement are
somewhat troubling. First, the agreement contains a
clear-sailing provision under which GC Services agrees not to
oppose Plaintiffs' motion for attorney fees. (D.N. 74-1,
PageID # 625) Though such provisions are not “unlawful
per se, . . . their inclusion gives the district court
‘a heightened duty to peer into the provision and
scrutinize closely the relationship between attorneys'
fees and benefit to the class.'” Gascho v.
Global Fitness Holdings, LLC, 822 F.3d 269, 291 (6th
Cir. 2016) (quoting In re Bluetooth Headset Prods. Liab.
Litig., 654 F.3d 935, 948 (9th Cir. 2011)). The parties
further agree that “[f]or the limited purpose of
seeking a fee award, the Class Representatives and the Class
will be considered the prevailing party in this
litigation” and that Plaintiffs will request $220, 000
in attorney fees. (Id., PageID # 626) This figure
is not inherently unreasonable; however, it represents
approximately sixty-five percent of the total settlement
amount- significantly higher than the
twenty-to-thirty-percent range typical in class-action
See Dick v. Sprint Commc'ns Co., 297 F.R.D. 283,
299 (W.D. Ky. 2014) (citing Fournier v. PFS Invs.,
Inc., 997 F.Supp. 828, 832 (E.D. Mich. 1998)).
Sixth Circuit has identified six factors to be considered
when determining an appropriate fee ...