The Court of Appeals for the Eleventh Circuit Court yesterday reversed a previous approval of a substantial settlement under the Telephone Consumer Protection Act (TCPA), ruling that the lower court abused its discretion and overlooked evidence of collusion between the class counsel and failed to properly inform members of the class about the settlement. The ruling also issued a stern warning to class counsel about its failure to include a reference to important information that should have been provided to the members of the class.
The Background: This case has been making waves for some time now. The Eleventh Circuit last year ruled that receipt of one text message is sufficient for an individual to have standing to sue because of this case.
- GoDaddy faced a TCPA class action lawsuit after being accused of using an automatic telephone dialing system (ATDS) to make calls and send texts without first obtaining the recipient’s consent. The initial settlement proposed that GoDaddy would pay up to $35 million, covering class member claims and up to $10.5 million in attorney’s fees.
- However, the settlement was reached and approved by the district court just before a critical Supreme Court decision on the definition of an ATDS in the related case of Facebook v. Duguid.
- The Supreme Court’s decision in Facebook significantly narrowed the scope of what could be considered an ATDS and, by extension, impacted the this litigation. Specifically, the systems used by GoDaddy did not meet this definition, potentially rendering the class’s claims invalid under the new interpretation.
- Despite the impending Supreme Court decision, the district court approved the settlement, a decision that was appealed by an objector.
The Ruling: The Eleventh Circuit criticized this approval, stating it was prematurely granted without proper consideration of the Supreme Court’s pending ruling. The appellate court highlighted that the settlement was erroneously classified, and the attorney fees were disproportionately high compared to the actual benefits to the class members, labeling the process as potentially collusive.
- “The District Court neglected its duty in failing to inform the absent Class Members about the Facebook issue: whether GoDaddy used an ATDS in making the calls and sending the text messages,” the Appeals Court wrote. “This was the dispositive issue in the case. Both sides agreed that this was so. Can there be any doubt that the District Court’s failure to inform the Class Members denied them due process of law?”
