Camp Drug Store, Incorporated v. Cochran Wholesale Pharmaceutic

Procedural entryThis page is a short order in Camp Drug Store, Incorporated v. Cochran Wholesale Pharmaceutic. Read the opinion of the Court — 897 F.3d 825
Court of Appeals for the Seventh Circuit·Decided July 27, 2018·No. 17-2086·Published

Opinion

In the

United States Court of Appeals For the Seventh Circuit

No. 17‐2086 CAMP DRUG STORE, INCORPORATED, Plaintiff‐Appellant,

v.

COCHRAN WHOLESALE PHARMACEUTICAL, INCORPORATED, Defendant‐Appellee.

Appeal from the United States District Court for the Southern District of Illinois.

No. 3:16‐cv‐00488‐SMY‐RJD — Staci M. Yandle, Judge.

ARGUED NOVEMBER 9, 2017 — DECIDED JULY 27, 2018

Before RIPPLE, MANION, and SYKES, Circuit Judges. RIPPLE, Circuit Judge. Camp Drug Store, Inc., filed this ac‐ tion, on its own behalf and as a representative of a proposed class, against Cochran Wholesale Pharmaceutical, Inc. (“Cochran”). Camp Drug Store alleged that Cochran had vio‐ lated the Telephone Consumer Protection Act (“TCPA” or “the Act”), 47 U.S.C. § 227, by faxing unsolicited advertise‐ 2 No. 17‐2086

ments to the class members. The parties entered into early me‐ diation and reached a settlement. The district court approved the settlement on behalf of the class, but reduced the pro‐ posed attorney fee and incentive awards.

Camp Drug Store appeals. It maintains that the settlement created a common fund against which the reasonableness of the attorney fee award should be assessed. It also notes that the proposed incentive awards were commensurate with other awards to named plaintiffs for claims under the TCPA.

We cannot accept Camp Drug Store’s characterization of the settlement as a common fund. Neither our case law, nor that of the Supreme Court, supports that characterization. Moreover, given the early stage at which this litigation was settled, the reductions in the attorney fee and incentive awards were not an abuse of discretion. We therefore affirm the district court’s judgment.

I

BACKGROUND Cochran, a small pharmaceutical distribution company in Monroe, Georgia, obtained a list of approximately 17,000 pharmacies. Using the list, it then sent faxes to prospective customers. It did not have permission from those to whom it sent faxes. Camp Drug Store was one of the recipients of the faxes and brought this class action under the TCPA, 47 U.S.C. § 227. Section 227(b)(1)(C) of Title 47 generally prohibits the sending of unsolicited advertisements by facsimile. Its com‐ plaint was filed on May 2, 2016.

No. 17‐2086 3

Before an answer was filed, the parties moved to stay the litigation for ninety days to explore settlement. In mid‐Octo‐ ber, the parties engaged in mediation, which produced a pro‐ posed settlement. According to the agreement, Cochran would “make up to $700,000.00 available to settle” the case, but was not required to create a separate account to hold the

1

funds or to deposit them with the court. Each class member could submit a claim for $125; if the dollar value of the claims exceeded the total available funds, each timely claim would be subject to a pro‐rata reduction. Any funds that were not claimed by class members were to be kept by Cochran. The agreement further provided that each of the representative

2

plaintiffs was entitled to an incentive award of $15,000, and class counsel were to be paid “one third of the Settlement

3

Fund ($233,333.33).”

On December 7, 2016, the district court held a hearing to consider the preliminary approval of the settlement. At the outset, the court advised the parties that it had concerns about some aspects of the proposed settlement: the early stage of the litigation and the amount of work that had been done com‐ pared to the amount of attorneys’ fees; the reversion of funds

1 R.28‐1 at 5.

2 In addition to Camp Drug Store, ARCare became a second representative

plaintiff. ARCare originally filed an action against Cochran in the district court for the Middle District of Georgia. The claims were consolidated for settlement, and ARCare was added as a named plaintiff in this action. See R.44 at 1. 3 R.28‐1 at 8.

4 No. 17‐2086

4

to the defendant; and the means and timeline for notification. The court explored each of these topics during the hearing. Specifically, counsel advised the court that no formal discov‐ ery had occurred, but that, in anticipation of mediation, Cochran had provided plaintiffs’ counsel with its financials and a list of businesses to which it likely had faxed infor‐ mation. Counsel also informed the court that the action rep‐ resented an uninsured risk to Cochran, a small family busi‐ ness. Finally, counsel clarified for the court that the settlement agreement did not guarantee plaintiffs’ counsel one‐third of the available funds; it simply allowed plaintiffs’ counsel to pe‐

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tition the court for “up to one‐third of 700[,000].”

After discussing these issues with counsel, the district court formally appointed counsel and representatives for the class, elongated the time frame for notice and response, and preliminarily approved the settlement agreement. The court directed that plaintiffs’ counsel file a motion for final ap‐ proval by March 20, 2017, and scheduled a final hearing for April 19, 2017.

The settlement administrator sent the notice of the pro‐ posed settlement and the claim form to all class members, in‐ itially by fax and, if the fax was unsuccessful, by mail. Of the approximately 17,000 potential class members, 1,765 class members returned claim forms. No class members filed objec‐ tions, and only twelve class members requested to be ex‐ cluded from the settlement. The total amount of funds that Cochran paid to claimants was $220,625.00.

4 See R.39 at 4–5.

5 Id. at 20.

No. 17‐2086 5

The plaintiffs subsequently filed a motion for final ap‐ proval of the class settlement. According to the plaintiffs, the settlement was “fair, reasonable, and adequate,” as required by Federal Rule of Civil Procedure 23(e)(2). With respect to fees, the plaintiffs requested that class counsel be awarded one‐third of the $700,000 ($233,333.33) that had been made available for the settlement of the claims, as well as an addi‐ tional $30,000 in out‐of‐pocket expenses attributable to medi‐ ation fees, costs of notice, and settlement administration. In support of this award, the plaintiffs noted that “[w]hen a class suit produces a fund for the class, it is commonplace to award

6

the lawyers for the class a percentage of the fund.” “Here,” the plaintiffs continued, “the Settlement created a common

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fund by agreement of the parties.” Consequently, the plain‐ tiffs maintained that one‐third of the settlement fund was an appropriate fee award.

The court considered the propriety of the final settlement at a hearing held on April 19, 2017. It evaluated the settlement against each of the factors set forth in Isby v. Bayh, 75 F.3d 1191, 1199 (7th Cir. 1996), namely:

the strength of plaintiffs’ case compared to the amount of defendants’ settlement offer[;] an as‐ sessment of the likely complexity, length and expense of the litigation[;] an evaluation of the amount of opposition to settlement among af‐ fected parties[;] the opinion of competent coun‐ sel[;] and the stage of the proceedings and the

6 R.41 at 12 (quoting Gaskill v. Gordon, 160 F.3d 361, 362 (7th Cir. 1998)).

7 Id. at 13.

6 No. 17‐2086

amount of discovery completed at the time of settlement.

As it had in the preliminary hearing, the court expressed con‐ cerns about the requested attorneys’ fees “[i]n terms of the

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stage of the proceedings and the amount of discovery.” The court observed that “there was no real litigation in this case. The case was filed. Counsel entered their appearance. They requested a stay. They began negotiations … . The case was

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stayed and then they announced a settlement.”

The court also was not persuaded that the $700,000 repre‐ sented a common fund that inured to the benefit of the class.

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Instead, the court explained that “it was a security deposit.” The court stated that it would have agreed with the plaintiffs’ argument “if the defendant plopped down $700,000 and sa[id], This is it, now you can divvy this up with claims, attorneys’

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