Wednesday, June 21, 2023

FYI: 7th Cir Affirms Award of Over $600k in Class Notice Costs to TCPA Plaintiffs

The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court's order allocating class notice costs in the amount of $602,838 to the defendant in a putative class action alleging violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227(b)(1)(B) (TCPA).


In so ruling, the Court held that, although putative class plaintiffs must initially bear the cost of notice to the class, and these costs should usually not be shifted to the defendant if they are "substantial", the trial court here awarded the costs to the plaintiffs only after it granted summary judgment in favor of plaintiffs. 


A copy of the opinion is available at:  Link to Opinion


Several named plaintiffs ("Plaintiffs") brought a putative class action lawsuit against a travel company (defendant) alleging that the defendant violated the TCPA by calling class members using prerecorded voice messages without their consent. The Plaintiffs alleged that the defendant contracted with an Indian based company to call millions of Americans to offer them a free cruise. Plaintiffs alleged the defendant would pay the Indian based company a fee for every customer who contacted the defendant based on the sales call.


Under Federal Rule of Civil Procedure 23(b)(3), Plaintiffs initially moved to certify a nationwide class of people who had received calls from the company based in India. The trial court granted in part and denied in part the motion and certified a class of Illinois resident but not a nationwide class due to lack of jurisdiction over the travel company under the recently decided opinion in Bristol-Myers Squibb Co. v. Superior Court of California, No. 21-2653 3 582 U.S. 255 (2017). Based on this ruling Plaintiffs used two (2) third-party service providers to identify and send notice to the 28,239 Illinois class members. Plaintiffs covered that cost.


The parties both moved for summary judgment against each other. The trial court granted Plaintiffs' motion on the TCPA claim. The court also determined that travel company's TCPA violations were committed willfully or knowingly and this finding permitted an award of actual to treble damages under 47 U.S.C. § 227(b)(3)(C).


Based on the recently decided case of Mussat v. IQVIA, Inc., holding that "the principles announced in Bristol-Myers do not apply to the case of a nationwide class action filed in federal court under a federal statute." 953 F.3d 441, 443 (7th Cir. 2020) the trial court reconsidered the nationwide class issue. Ultimately the trial court granted Plaintiff's motion to amend, certified a nationwide class, and entered summary judgment in favor of the nationwide class for the same reasons it had entered summary judgment in favor of the Illinois class.


The trial court noted that it had some discretion to shift notice costs to the defendant. The trial court sought briefing from the parties on this issue. Plaintiffs proposed that the parties use the same method that they had employed to identify and send notice to the Illinois class members. Plaintiffs submitted documentation from third-party service providers estimating that the total cost of identifying and sending notice to the new members would be $602,838. 


The travel company did not oppose Plaintiffs' plan, but it argued that cost-shifting was not appropriate. Relying on the case of Oppenheimer and Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), the defendant argued it was not responsible for the notice costs because the costs were not nominal but substantial. The trial court disagreed and ordered the travel company to bear the costs of providing notice to the nationwide class because the defendant's liability was already established through the summary judgment order.


The defendant travel company appealed, and although this was not a final order the Supreme Court of the Unites States' ruling in Eisen established that an order allocating the cost of class to a defendant is an immediately appealable collateral order. See Eisen, 417 U.S. at 171–72.


On appeal, the Seventh Circuit agreed that the trial court had discretion to allocate the notice costs to the defendant, and therefore examined the trial court's ruling under an abuse of discretion standard.


In general, the rule regarding notice costs "requires the plaintiff to initially bear the cost of notice to the class," Eisen, 417 U.S. at 178, because Plaintiffs "seek to maintain the suit as a class action and to represent other members of his class." Oppenheimer, 437 U.S. at 356. The Supreme Court of the United States has noted that lower courts should not stray too far from this basic principle. Id. at 359.


Under the guidelines in the Oppenheimer case, the test should be whether the expense is "substantial," in which case it should be borne by the representative plaintiff. Id. at 359. But if "the task ordered is one that the defendant must perform in any event in the ordinary course of its business," then "it may be appropriate to leave the cost where it falls." Id. In addition, Oppenheimer noted only that it would be unfair to shift costs to the defendant based solely on "[a] bare allegation of wrongdoing," similar to what a plaintiff may initially aver in a complaint. Id. at 363.


However, the Seventh Circuit noted that the Plaintiffs in this case were already awarded summary judgment and noted the similarities between this case and the case of Hunt v. Imperial Merchant Services., Inc., 560 F.3d 1137 (9th Cir. 2009). In Hunt,  the trial court certified a plaintiff class, granted partial summary judgment for the class, and then ordered the defendant to pay the costs of notifying the class members. Hunt further cited other district court opinions where courts have placed notice costs on the class action defendant once the defendant's liability has been established.


Although this is not a bright line rule, the Seventh Circuit ruled that it meant the trial court had discretion once liability was established through the summary judgment order to tax the notice costs to the defendants.


Accordingly, the Seventh Circuit agreed that the trial court may elect to shift the cost of class notice to the defendant. Because the trial court ruled on liability and exercised its discretion by shifting notice costs to the travel company, the Appellate Court found no abuse of discretion with the trial court's decision.  Accordingly, the trial court's order allocating notice costs to the defendant was affirmed.





Ralph T. Wutscher
Maurice Wutscher LLP
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