Watson v. Manhattan Luxury Automobiles Inc.

Background

The parties moved for preliminary approval of a proposed class-action settlement. The settlement would distribute money from a common fund to National Do Not Call Registry class members on a per-person basis, with each member’s recovery capped at $500. The agreement releases Manhattan Luxury Automobiles Inc. from claims under the Telephone Consumer Protection Act, which permits recovery of up to $500 for each violation. The opinion states that class members, by definition, received two or more messages within a 12-month period.

The court observed that the proposed cap could leave some class members with less than they might recover at trial if they were subject to more than one violation. The settlement also provides for attorneys’ fees, attorneys’ expenses and costs, and a proposed service fee for the lead plaintiff. Any remaining amount would be paid to a cy pres recipient, meaning a designated recipient other than the class members. The court stated that the agreement therefore allocates the available settlement funds among class members, class counsel, and potentially the cy pres recipient.

Court’s Analysis

The court explained that separate negotiation of a class settlement and attorneys’ fees is generally preferable because negotiating them together can create a potential conflict. Because the proposed agreement capped class members’ recovery while reserving the remainder for possible attorneys’ fees, the court determined that it needed to evaluate the requested fees to make a preliminary assessment of whether the settlement was fair, reasonable, and adequate.

The court stated that it would evaluate the fee request under the factors identified in Goldberger v. Integrated Resources, Inc. and a three-step approach from In re Colgate-Palmolive ERISA Litigation. First, it would establish a baseline fee by comparing the request with fees in similar common-fund settlements, considering the fee’s relation to the settlement, the case’s magnitude and complexity, and the risk of a windfall to class counsel. Second, it would adjust that baseline based on factors including litigation risk, representation quality, and public-policy concerns. Third, it would use the lodestar method as a cross-check, considering the time and labor counsel expended.

Order and Effect

Judge Schofield ordered class counsel to file its fee application by November 7, 2025, using the three-step approach. The parties could instead renegotiate the agreement to remove the $500 per-person cap and provide for distribution of excess funds to class members after attorneys’ fees and administrative costs. If they chose that option, they were required to file a revised agreement showing the changes by November 7, 2025. The order did not grant or deny preliminary approval of the proposed settlement.