Florida federal court rejects TCPA class action, refusing to grant such uncertain recovery

On August 20, 2014, a federal judge from the Southern District of Florida rejected a Telephone Consumer Protection Act (TCPA) class action settlement stating that she would not approve a contemplated settlement “with such an uncertain recovery.” This finding by the federal court diverges from the typical class action preliminary settlement hearings. Why did this happen? In Physicians Healthsource, Inc. v. Doctor Diabetic Supply, LLC, the class sought damages for the sending of over 17,000 unsolicited faxes to consumers. After over a year of extensive litigation attempting to resolve the complaint, the defendant entered into a settlement for approximately $8.7 million—what was the catch? This agreement was between the class and the lead defendant only. The plaintiffs’ attorney would then attempt to “pursue” recovery from the other defendants, numerous insurers and indemnifiers. The lead defendant could not guarantee that any recovery would even result from such attempt. The Court determined that this settlement was not fair, adequate or reasonable to the class action members, which are required elements for the Court to preliminarily approve such a settlement. Back to the drawing board for these TCPA litigants. But why did the lead defendant want to settle? Why was the class willing to take this settlement without any guarantee of compensation? TCPA class actions are usually long and expensive, for both sides. But because the settlement must be fair for the entire class and must survive strict judicial scrutiny, be sure that the settlement is adequate before spending time negotiating terms that won’t withstand the fairness test.