As part of its consideration of the parties’ request for preliminary approval of their settlement agreement of a Telephone Consumer Protection Act (TCPA) class action, a California federal court signaled that an award of full statutory damages would not survive due process considerations.
Cory Larson, the plaintiff, sued Harman-Management Corporation, the defendant, a nationwide franchisee of fast food chains such as KFC, Taco Bell, Pizza Hut and A&W Restaurants, after receiving text messages as part of a marketing program dubbed the “A&W Text Club.” His complaint alleged that the defendants texted more than 150,000 consumers.
The parties engaged in extensive discovery and motion practice before reaching a deal. Harman’s total exposure was in the billions of dollars, with approximately 13.5 million text messages having been sent as part of the A&W Text Club, given that the TCPA provides for $500 per violation (tripled to $1,500 for willful violations).
Pursuant to the proposed settlement, Harman agreed to create a $4 million settlement fund that would provide pro rata distributions to class members, as well as pay for attorneys’ fees and costs, an incentive award for Larsen and the cost of settlement administration.
Considering whether to grant preliminary approval of the agreement, U.S. District Judge Dale A. Drozd relied on an opinion from the U.S. Court of Appeals, Eighth Circuit, with similar calculations.
Judge Drozd agreed with the plaintiff that, when viewed in light of the risks associated with continued litigation and the likelihood that a billion-dollar damages award would be deemed unconstitutional, the settlement agreement with Harman was reasonable and granted preliminary approval of the deal.
To read the order in Larson v. Harman-Management Corporation, click here.
Why it matters: To grant preliminary approval of the deal, the court considered the reasonableness of the settlement fund, including a concern that an award based on the statutory damages for the challenged text messages would not survive due process review.