Dan Churney Sep. 8, 2016, 11:17am

A Chicago federal judge has approved a $12.1 million class action settlement against a national mortgage company, which allegedly made improper automated phone calls to collect debts, in which each class member gets $45 and attorneys pocket $3.1 million – even as attorneys had wanted $600,000 more.

The Aug. 29 decision was rendered by Judge Edmond Chang in U.S. District Court for Northern Illinois. 

In December 2014, eight plaintiffs filed a class action suit against Nationstar Mortgage, claiming the company broached the federal Telephone Consumer Protection Act. Nationstar, which is based in Lewisville, Texas, provides mortgages and services loans from other mortgage companies.

Plaintiffs alleged Nationstar made unsolicited, prerecorded debt collection phone calls to their cellular phones, using an automated dialing system, without their consent. There were 2.3 million people who potentially received the calls. After the suit was lodged, plaintiffs sent notices of the suit, with claim forms, to those who may have received the calls; as of April, 147,476 claims were returned and entered.

In April 2016, parties reached a settlement agreement in which Nationstar would set up a $12.1 million fund, from which each member of the class action would be paid about $45. The fund would also cover administration costs, as well as $3.7 million in fees for plaintiffs’ attorneys. The $3.7 million figure represented 36 percent of the estimated amount remaining in the fund after the other payouts.

Attorney fees of 30 percent are a “baseline” standard for such settlements, but the attorneys wanted an extra 6 percent, because of the added risk they said they faced in agreeing to handle the case. However, Judge Chang refused to approve the six percent, saying the risk was already included in the 30 percent contingency fee. 

“The 30 percent baseline appropriately reflects the market rate in this case,” Chang observed.

The eight plaintiffs who brought the suit each asked for a $5,000 “incentive award,” in addition to their $45, for their efforts in getting the case off the ground. Chang found this request “reasonable,” saying such awards are necessary to induce plaintiffs to initiate class actions.

In approving the settlement, Chang said success for plaintiffs was far from assured, with continued proceedings likely to be lengthy and expensive. In this regard, Chang quoted an unnamed Nationstar defense attorney, who said, “If this case doesn’t settle, this litigation will be a war.”

Chang noted one hurdle for plaintiffs would have been the issue of consent. Nationstar could have contended participants in the class action agreed to be called by Nationstar, when they listed their cell phone numbers on loan applications or associated papers. This argument would not only have served as a viable defense, but would also have presented “significant manageability obstacles” to plaintiffs, as “individualized” inquiries would have had to be made to clarify the “scope of consent,” Chang concluded.

Complicating matters, some participants provided phone numbers on forms for other lenders – with wording different than that of Nationstar – which Nationstar serviced, adding more knots for lawyers to untie. Chang said that as a consequence, the case could have become “unwieldy” to pursue as a class action.

Another challenge to plaintiffs, in Chang’s view, would have been whether Nationstar’s phone system was an auto dialing system as defined in the Telephone Consumers Protection Act. Chang said the question figures in a pending appeal in the U.S. Court of Appeals for the District of Columbia, which could narrow the definition to such a degree that Nationstar’s system could fall outside it.

Plaintiffs were represented by the following counsel: Edelson P.C., of Chicago; Law Offices of Stefan Coleman, of Miami; Horwitz, Horwitz & Paradis, of New York; Landskroner, Grieco & Merriman, of Cleveland; Douglas J. Campion Law Office, of San Diego; Wick, Phillips, Gould & Martin, of Fort Worth, Texas; and Law Offices of Michael P. Sousa, of San Diego.

Nationstar was defended by the firm of Reed Smith LLP, which is headquartered in Pittsburgh, Penn., with an office in Chicago.

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Organizations in this Story

Edelson PC
350 N LaSalle St Suite 1300
Chicago, IL 60654

Law Office of Stefan Coleman, LLC
1072 Madison Ave Suite 1
Lakewood, NJ 08701

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