Esparza v. Smartpay Leasing, Inc.

Background

Shawn Esparza alleged that she terminated her mobile-phone lease from Smartpay Leasing, Inc. in early 2016 but continued receiving promotional text messages from Smartpay on a different phone. She alleged that the messages continued after she asked Smartpay to stop sending them. Smartpay later learned that a coding error prevented people from opting out of the messages.

Esparza filed claims alleging negligent and willful violations of the Telephone Consumer Protection Act. In June 2019, the court certified a class consisting of people in the United States who, between September 29, 2015, and June 13, 2017, received the covered messages after texting “STOP.” After mediation, the parties reached a settlement. Smartpay did not oppose Esparza’s motion for preliminary approval.

Preliminary Settlement Approval

Federal Rule of Civil Procedure 23(e) requires court approval of a settlement involving a certified class. The court explained that preliminary approval is appropriate when a settlement appears to result from serious, informed, non-collusive negotiations, has no obvious defects, does not improperly favor the class representative or parts of the class, and falls within the possible range of approval.

The proposed settlement established a non-reversionary gross fund of $8,679,000, to be divided evenly among 23,144 class members. Each member would receive a gross payment of $375 before deductions for attorney’s fees, litigation expenses, administration costs, and any incentive award. Because the TCPA provides $500 in statutory damages per violation, the gross settlement represented 75% of the damages Esparza contended the class was owed.

The court found the proposed amount reasonable at the preliminary stage. It noted the risks and costs of continued litigation, including the possibility that Smartpay could become insolvent and the class could recover much less after trial. The parties had exchanged written and documentary discovery, litigated motions, and pursued an appeal concerning Smartpay’s motion to compel arbitration before settling after a full day of mediation. The court stated that the final reasonableness assessment would also depend on the amounts requested for administration, attorney’s fees, litigation expenses, and any incentive award.

Release, Notice, and Unclaimed Funds

The settlement used the same class definition as the class-certification order. Its release was limited to claims concerning automated text messages sent by Smartpay to class members during the defined period under the TCPA and related state-law claims. The court found that scope appropriately tailored.

The agreement did not require class members to submit a claim form to receive their share. Uncashed settlement checks would first be distributed to class members who cashed their checks, if feasible; otherwise, the remaining funds would go to a charitable-purpose recipient. The court approved CTIA, a trade association promoting TCPA compliance practices, as that recipient.

The claims administrator would mail notice using Smartpay’s class list and would post a longer notice on a settlement website. The parties clarified that class members whose notices remained undeliverable would not lose their claims solely for that reason. The court found the notice adequate because it explained the action, estimated recovery, the consequences of objecting, and the process for opting out.

Ruling and Schedule

Judge William Alsup preliminarily approved the settlement as fair, reasonable, and adequate, and granted Esparza’s unopposed motion for preliminary approval. The court appointed Heffler Claims Group as claims administrator and approved the proposed class notice, provided missing information was completed. Smartpay was directed to provide the administrator with the class list and other information needed to mail the notices.

The order directed that notice should be distributed by October 16, 2019. The deadline to opt out or object was December 16, 2019; responses to objections were due January 6, 2020; class counsel’s fee, cost, and enhancement motion was due November 21, 2019; and Esparza’s motion for final settlement approval was due December 16, 2019. The court set a January 16, 2020 hearing on final approval and fee-related requests. The final pretrial conference and trial dates were vacated and would be reset if final approval was not granted.