The opinion of the court was delivered by: Marvin Katz, Senior United States District Judge
The parties have requested approval of a settlement of this class
action, which consists of claims under the Fair Debt Collection Practices
Act, the Pennsylvania Fair Credit Extension Uniformity Act, and the
Pennsylvania Unfair Trade Practices and Consumer Protection Law.
According to the Settlement Agreement, each member of the Class who has
presented a timely claim will receive an equal share of a $20,000 award
deposited in the Settlement Fund. The representative Plaintiff, Salena
Oslan, will receive an award of $1,000 from the Settlement Fund.
Defendant has agreed to pay up to $55,000 in attorneys' fees, costs, and
reimbursable expenses and also fund the administration of the notice and
awards. After consideration of the terms of the proposed settlement and
the interests of the Class, the court approves the settlement under Rule
54(b) of the Federal Rules of Civil Procedure.
A Final Judgment and Order follows.
A. Background and Allegations
Ms. Oslan ("Plaintiff"), filed this class action lawsuit against the
Law Offices of Mitchell N. Kay ("Kay" or "Defendant") on December 3,
2001, alleging that letters mailed to her and others by the Defendant
violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et
seq., ("FDCPA"); the Pennsylvania Fair Credit Extension Uniformity Act,
73 P.S. § 2270.1 et seq.;*fn1
and the Pennsylvania Unfair Trade
Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq.
("CPL"). The Complaint alleged, inter alia, that the Defendant sent the
letters knowing that recipients would wrongly believe that a law firm and
lawyers were participating in the collection of these debts. Plaintiff
also alleged that the letters were objectively false in telling
recipients they only had one opportunity to accept the so-called
"settlement offer," when in fact Defendant sent subsequent letters with
the same offer.
The court held a pretrial conference on February 26, 2002. On March
26, 2002, the court granted Plaintiff's Motion for Class Certification,
in accordance with Federal Rule of Civil Procedure 23(b)(2), (b)(3). The
plaintiff class ("Class") consists of all persons in the Commonwealth of
Pennsylvania to whom, during the two years prior to the filing of this
Complaint, Defendant sent two debt collection letters offering initial
so-called "one-time settlement offers," in the form of the letters
attached to the Complaint, in an attempt to collect a non-business debt,
which letters were not returned as undeliverable by the Postal Service.
On May 10, 2002, the case was listed for a jury trial on July 15,
2002. Magistrate Judge Jacob P. Hart held a settlement conference on June
17, 2002. On May 20, 2002, Defendant and Plaintiff filed Motions for
Summary Judgment, both of which the court denied on June 20, 2002. After
a hearing on July 15, 2002, the court granted Plaintiff's Motion for
Preliminary Approval of Settlement Notice to Class.
On November 8, 2002, Plaintiff filed a Motion for Award of Attorneys'
Fees and Reimbursement of Expenses, requesting $55,000 plus interest to
be paid from the Settlement Fund, and a Motion for Final Approval of
Class Action Settlement and Award to Representative Plaintiff.
B. The Terms of the Settlement
Pursuant to the Settlement Agreement, Defendant would pay the sum of
$1,000 in full and complete satisfaction of the individual claims of
Plaintiff; the sum of $20,000 in full and complete satisfaction of the
damages claims of the Plaintiff and the Class in accordance with
15 U.S.C. § 1692k(a)(2)(B) and 73 P.S. § 201-9.2(a); and up to
$55,000 in attorneys' fees and costs and reimbursable expenses of the
Plaintiff and Class members. Defendant also agreed to fund the costs of
notice and claims administration. Following the July 15, 2002 hearing on
the Motion for Preliminary Approval of Settlement Notice to Class,
Defendant deposited $76,000 into an interest-bearing account at Hudson
United Bank ("Settlement Fund").
On November 18, 2002, the court held a fairness hearing on the proposed
settlement. Counsel for the Class presented the terms of a final judgment
giving effect to the Settlement Agreement. Counsel for the Class and
Defendant expressed their continued approval of the settlement as a fair
resolution of Plaintiff's claims and the interests of the Class.
II. Examination of the Settlement
In order to ensure meaningful appellate review, the district court must
present its reasoning for approving the settlement. See Eichenholtz v.
Brennan, 52 F.3d 478, 488-89 (3d Cir. 1995); Bryan v. Pittsburgh Plate
Glass Co., 494 F.2d 799, 804 (3d Cir. 1974), cert. denied, 419 U.S. 900
(1974) ("It is essential in cases such as this that the district court
set forth the reasoning supporting its conclusion in sufficient detail to
make meaningful review possible; use of `mere boilerplate' language will
not suffice."). The court should consider how the substantive terms of a
settlement compare to the likely result of a trial and whether the
process of negotiating the settlement was free of coercion and conducted
by experienced counsel. See Malchman v. Davis, 706 F.2d 426 (2d Cir.
1983) (citing Protective Comm. for Indep. Stockholders of TMT Trailer
Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25 (1968)). In addition to
finding the settlement fair, the court must be satisfied that the Class
was properly certified under Federal Rule of Civil Procedure 23 and that
members of the Class have received adequate notice of the action and
Although the court may certify a "settlement only" class, it may not
substitute a finding of fairness with respect to the proposed settlement
for Rule 23(a) and (b) inquiries. See Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 620-21 (1997); Ortiz v. Fibreboard Corp., 527 U.S. 815,
848-49 (1999) (holding that when certifying a class for settlement
purposes only, the district court should pay "heightene[d] attention . . .
to the justifications for binding the class members . . . . because
certification of a mandatory settlement class, however provisional
technically, effectively concludes the proceeding save for the final
fairness hearing") (citations omitted). See also In re Prudential Ins.
Co. of Amer. Sales Practices Litig., 148 F.3d 283, 308 (3d Cir. 1998)
("[A] district court must first find a class satisfies the requirements
of Rule 23, regardless of whether it certifies the class for trial or
B. Notice to Members of the Class
Because the Class was certified under Federal Rule of Civil Procedure
23(b)(3), Plaintiff must also satisfy Rule 23(c)(2), which requires "the
best notice practicable under the circumstances, including individual
notice to all members who can be identified through reasonable efforts."
By Order dated April 18, 2002, the court granted Plaintiff's Motion to
Approve Form of Notice to Class Members. On May 31, 2002, the court
granted the Joint Motion For Stay of Deadline for Notice to Class because
the parties reported that they were near settlement and therefore could
conserve resources and reduce confusion by sending members of the Class a
single letter notifying them of the action and the proposed settlement.
Federal Rule of Civil Procedure 23(e) states that "notice of the
proposed . . . compromise shall be given to all members of the class in
such manner as the court directs." Plaintiff provided notice of the
proposed settlement and the Final Approval Hearing to Class members via
first class mail, based on each member's last known address in
Defendant's records, within thirty days of the July 15, 2002 hearing. The
notice provided the date and location of the Final Approval Hearing and
included instructions on how to opt-out of the Class and object to the
settlement and proposed payment. The court ...