Settlement Reached in TCPA Case Against Chase Bank; Attorneys Win

A settlement of a class action lawsuit brought against Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. (collectively, “Chase”) by several consumers (“Plaintiffs”) has been reached in the United States District Court for the Northern District of Illinois (Gehrich v. Chase, Case No. 1:12-CV-5510).  A copy of the Memorandum, Opinion and Order approving the settlement can be found here.

Plaintiffs alleged that Chase violated the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. (“TCPA”), by making automated telephone calls (i.e., using an automatic telephone dialing system and/or an artificial or prerecorded voice) and sending text messages to cell phones, including Collection Calls and Automatic Alerts, in connection with Chase credit card and bank accounts without the prior express consent of the people contacted.

The Litigation – Background

Jonathan Gehrich filed this suit in July 2012 as a putative class action against Chase Bank for alleged violations of the TCPA. Plaintiff alleged that Chase violated the TCPA by placing automated calls and sending automated alerts regarding account updates or debt collection to their cell phones using automatic dialing systems, without their consent and after they asked that the calls and alerts cease. Two other putative class actions were consolidated with this one.

On April 25, 2013, nine months after the initial complaint was filed and before any non-discovery motion practice, the parties entered settlement negotiations. Prior to commencing negotiations, Plaintiffs had moved to compel certain discovery, but with both parties moving to stay the case during settlement discussions, Plaintiffs withdrew the motion before the court could rule on it.

On November 25, 2013, the parties reported that they had reached a class-wide settlement in principle, and they subsequently moved for preliminary approval of the settlement, which the court granted. The case proceeded in the background as class members were identified and provided notice of the proposed settlement.

The proposed Settlement Class, which has 32,297,356 members, is defined as follows:

All persons to whom, on or after July 1, 2008 through December 31, 2013, Chase USA and/or JPMC Bank placed a non-emergency call, SMS text message or voice alert call to a cellular telephone through the use of an automatic telephone dialing system and/or an artificial or prerecorded voice.

The Settlement Class comprises two subclasses, which correspond to different TCPA violations. The Alert Call Subclass consists of:

Persons whom, on or after July 1, 2008 through December 31, 2013 received one or more Short Message Service (“SMS”) text messages or voice alert calls to a cellular telephone using an automatic telephone dialing system and/or prerecorded voice placed either directly or indirectly by Chase USA or JPMC Bank in connection with providing account information (“Automatic Alert Calls”). The Alert Call Subclass includes, without limitation, persons to whom such Automatic Alerts were placed notwithstanding that they are not Chase customers and/or not the person to whom the Automatic Alert was intended to be directed …. Alert Call Subclass Members did not also receive Collection Calls.

The Alert Call Subclass has 13,927,106 members. The approved settlement does not provide for any monetary distribution to Alert Call Subclass members. The court determined it appropriate in light of the fact that Alert Call Subclass members provided prior express consent to the alerts, so they almost certainly had no viable TCPA claim.

The Collection Call Subclass consists of:

Persons whom, on or after July 1, 2008 through December 31, 2013 received one or more non-emergency telephone calls to cellular telephones placed either directly or indirectly by Chase USA or JPMC Bank using an automatic telephone dialing system and/or artificial prerecorded voice in connection with attempts to collect debts relating to Chase credit card accounts or JPMC Bank accounts (“Collection Calls”). The Collection Call Subclass includes, without limitation, persons to whom such Collection Calls were placed notwithstanding that they are not Chase customers and/or not the person to whom the Automatic Collection Call was intended to be directed.

The Collection Call Subclass has 18,370,250 members.

Settlement Class Members submitted 349,206 timely claims, representing 1.08% of the class. Per the Order: The theoretical recovery per Collection Call Subclass member is about $1.00. The actual recovery per claimant is approximately $52.50

The Settlement

Chase will pay the amount of $34,000,000 into a Settlement Fund, which will cover: (1) cash payments to eligible persons in the Settlement Class who submitted valid Claim Forms; (2) a dedicated cy pres distribution of $50,000 to the Consumer Federation of America; (3) settlement administration expenses of $5,152,929.51; (4) court-approved incentive awards to the five class representatives in the amount of $1,500 each ($7,500 total); and (5) court-approved attorney fees and costs of $7,257,914.10.

Per the Order: The theoretical recovery per Collection Call Subclass member is about $1.00. The actual recovery per claimant is approximately $52.50

insideARM Perspective

This case highlights the absurdity of the TCPA. TCPA supporters love to talk about “Robocalls” and “Robo-calling.”  Yet this case was not about random calls to consumers. Here there was a pre-existing business relationship between the defendant and the members of the putative class. However, the TCPA has been interpreted to treat all calls the same.

In its opinion, the court discussed Chase’s potential “exposure” under the TCPA with a class size of over 32 million individuals. The court noted, “However improbable it may be, complete victory for Plaintiffs at $500 or $1,500 per class member could bankrupt Chase. Even assuming (conservatively and unrealistically) only one violation per class member, if Plaintiffs won a complete victory, Chase would owe $16.1 billion, and $48.4 billion if the jury found that Chase’s violations were knowing or willful.”

The case also highlights the lucrative business of class action litigation. Attorneys for the plaintiffs had requested an attorney fee award in excess of $9 million. The judge reduced that amount to $7.250 million. There is no information on the attorney’s fees and expenses incurred by Chase in defending the case.

Class action litigation is very, very good for attorneys.

By Tim Bauer