CALIFORNIA CLASS ACTION LAW

United States Magistrate Judge Donna M. Ryu of the Northern District of California granted a petition for attorneys fees and costs in a FDCPA class action of up to $23,539.31 in costs and up to $287,589.25 in attorneys’ fees from a $359,000 total settlement fund.  Hunt v. Imperial Merchant Services, No. C-05-04993 DMR, 2010 WL 3958726, *1 (N.D. Cal. Oct. 7, 2010) (slip op.).

Plaintiffs filed a consolidated class action against Defendant Imperial Merchant Services, Inc., doing business as Check Recovery Systems (“IMS”), for violating the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. section 1692 et seq. Id. *1. Plaintiffs claimed that IMS’ practice of demanding 10% interest, in addition to a statutory service charge for dishonored checks, was not permitted by California law and was unlawful under the FDCPA. Id.

Plaintiffs obtained class certification, and the parties reached a class-wide settlement, which generated a $359,000 total settlement fund.  Id. Specifically, the settlement funds are to be used first to pay class notice costs incurred by Plaintiffs’ counsel as well as expenses for administering the class settlement.  Id. Next, the two class representatives will receive $2,000 each, and qualifying class members will be entitled to a pro rata share of the $100,000 Damages Class Fund, up to 100% of an individual class members’ damages. Id. The settlement funds are then be used to pay attorneys’ fees and expenses.  Id. And any remaining settlement funds are to be distributed to designated cy pres recipients. Id. Subject to the terms of the above plan of distribution, the court granted the motion for reimbursement of up to $287,589.25 in attorneys’ fees.  Id.

Legal Standard

The Fair Debt Collection Practices Act (“FDCPA”) requires the payment of costs and reasonable attorneys’ fees to successful plaintiffs. Id. *4 (citing 15 U.S.C. s 1692k(a)(3)).  The FDCPA’s statutory language “makes an award of fees mandatory,” because “congress chose a ‘private attorney general’ approach to assume enforcement of the FDCPA.'” Id.

Plaintiffs claimed hourly rates of $250 to $480 for attorneys with 6 to 37 years of practice and $90 to $125 for legal assistants.  Id. *4.  The billable hours totaled 649.96 hours, which amounted to $289,487.25.

The court found that “Plaintiffs’ counsel all have significant experience in consumer and/or bankruptcy cases” and noted that “[a]lthough not necessary to the result . . . many of the plaintiffs’ lawyers in this case has resulted in numerous published opinions in their fields of expertise.” Id. Based on the evidence submitted, the court found that the “hourly rates sought by Plaintiffs’ counsel are well within the range of reasonable hourly rates for attorneys of comparable skill, experience and reputation litigating similar cases in the San Francisco Bay Area.” Id.

The amount of time and labor expended by Plaintiffs’ counsel reflects hard-fought litigation before the district court as well as the bankruptcy court and appellate courts. The lawsuit presented novel questions, and resulted in precedent-setting rulings by both the Ninth Circuit Court of Appeals and the California Supreme Court. The Ninth Circuit ruled for the first time that the costs of class notice could be shifted to defendant after liability has become reasonably clear. Hunt v. Imperial Merch. Servs., Inc., 560 F.3d 1137, 1143- 44 (9th Cir. 2009) (“We have never addressed when it is appropriate to place notice costs on a class action defendant.”). The California Supreme Court held that statutory damages prescribed in California Civil Code section 1719 “are exclusive in the sense that a debt collector who recovers a service charge pursuant to section 1719 may not also recover prejudgment interest under [California Civil Code] section 3287.” Imperial Merch. Servs., Inc. v. Hunt, 47 Cal. 4th 381, 384 (2008). California’s high court heard the matter after the Ninth Circuit certified the question of state law which it deemed “of the utmost importance to California creditors, California consumers, and the California economy.” Imperial Merch. Servs., Inc. v. Hunt, 528 F.3d 1129, 1131 (9th Cir. 2008).

The successful prosecution of this litigation required significant skill and experience on the part of Plaintiffs’ counsel not only with the FDCPA, but also with bankruptcy law and Rule 23 class action procedures. Plaintiffs’ counsel were willing to take on the financial risks inherent in prosecuting a class action case on a contingency fee basis. These risks became even greater after Defendant declared that it was going out of business.

Id. *5.

The court praised the “good result for the members of the class”, noting that:

Plaintiffs ultimately were successful before the bankruptcy court, the district court, the Ninth Circuit, and the California Supreme Court. Plaintiffs’ counsel estimate that class members will recover upwards of 70% of their damages through the class settlement fund.

Id.

Judge

United States Magistrate Judge Donna M. Ryu

By CHARLES JUNG