Judy Larson v. AT&T Mobility LLC , 687 F.3d 109 ( 2012 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 10-1285/1477/1486/1587
_____________
JUDY LARSON, BARRY HALL, JOE MILLIRON,
TESSIE ROBB, WILLIE DAVIS, ROMAN SASIK, DAVID
DICKEY, STEVEN WRIGHT, JANE WALDMANN,
ROBERT WISE, JACKIE THURMAN, RICHARD
CHISOLM, MARY PITSIKOULIS, DEBRA LIVELY,
JACQUELINE SIMS, KISHA ORR, Individually and on
behalf of all others similarly situated
v.
AT&T MOBILITY LLC, f/k/a Cingular Wireless LLC;
SPRINT NEXTEL CORPORATION; SPRINT SPECTRUM,
d/b/a/ Sprint Nextel; NEXTEL FINANCE COMPANY,
LINA GALLEGUILLOS; MICHAEL MOORE;
ANTRANICK HARRENTSIAN,
Appellants in No. 10-1285,
(Pursuant to FRAP 12(a))
BRAMSON, PLUTZIK, MAHLER & BIRKHAEUSER;
LAW OFFICE OF SCOTT A. BURSOR; FRANKLIN &
FRANKLIN; GILMAN & PASTOR; LAW OFFICES OF
ANTHONY A. FERRIGNO; REICH, RADCLIFFE &
KUTTLER; LAW OFFICES OF CARL HILLIARD;
MAGER & GOLDSTEIN; LAW OFFICES OF JOSHUA P.
DAVIS; CUNEO, GILBERT & LADUCA,
Appellants in No. 10-1477
(Pursuant to FRAP 12(a))
BRAMSON, PLUTZIK, MAHLER & BIRKHAEUSER;
LAW OFFICE OF SCOTT A. BURSOR; FARUQI &
FARUQI,
Appellants in No. 10-1486
(Pursuant to FRAP 12(a))
JESSICA HALL,
Appellant in No. 10-1587
(Pursuant to FRAP 12(a))
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 07-cv-5325)
District Judge: Hon. Jose L. Linares
_______________
Argued
January 12, 2012
2
Before: McKEE, Chief Judge, FUENTES, and JORDAN,
Circuit Judges.
(Filed: June 29, 2012)
_______________
Scott A. Bursor [ARGUED]
Bursor & Fisher
369 Lexington Avenue – 10th Fl.
New York, NY 10017
Nadeem Faruqi
Faruqi & Faruqi
320 E. 39th Street – 3rd Fl.
New York, NY 10016
L. Timothy Fisher
Alan R. Plutzik
2125 Oak Grove Blvd.
Walnut Creek, CA 94598
Jacob A. Goldberg
Fauqi & Faruqi
101 Greenwood Avenue - #600
Jenkintown, PA 19046
3
William J. Pinilis
Pinilis Halpern
160 Morris Street
Morristown, NJ 07960
Sandra G. Smith
Faruqi & Faruqi
101 Greenwood Avenue - #600
Jenkintown, PA 19046
Anthony Vozzolo
369 Lexington Avenue
New York, NY 10017
Counsel for Appellants Lina Galleguillos; Michael
Moore; Antranick Harrentsian
Scott A. Bursor
Bursor & Fisher
369 Lexington Avenue – 10th Fl.
New York, NY 10017
Joshua Davis
437 Valley Street
San Francisco, VA 94131
4
Nadeem Faruqi
Faruqi & Faruqi
320 E. 39th Street – 3rd Fl.
New York, NY 10016
Anthony A. Ferrigno
P.O. Box 5799
San Clemente, FL
L. Timothy Fisher
Alan R. Plutzik
2125 Oak Grove Blvd.
Walnut Creek, CA 94598
J. David Franklin
550 West C Street - #950
San Diego, CA 92101
Pamela Gilbert
Cuneo, Gilbert & LaDuca
507 C Street, NE
Washington, DC 20002
Jacob A. Goldberg
Fauqi & Faruqi
101 Greenwood Avenue - #600
Jenkintown, PA 19046
5
Jayne A. Goldstein
Shepherd, Finkelman, Miller & Shah
35 E. State Street
Media, PA 19063
David Pastor
63 Atlantic Avenue
Boston, MA 02110
William J. Pinilis
Pinilis Halpern
160 Morris Street
Morristown, NJ 07960
Marc G. Reich
Reich Radcliffe
4675 MacArthur Court - #550
Newport Beach, CA 92660
David S. Senoff
Caroselli, Beachler, McTiernan & Conboy
1500 Walnut Street - #507
Philadelphia, PA 19102
Steven M. Sherman
Sherman Business Law
220 Montgomery Street – 15th Fl.
San Francisco, CA 94104
6
Counsel for Appellants, Bramson, Plutzik, Mahler
& Birkhaeuser; Law Office Of Scott A. Bursor;
Franklin & Franklin; Gilman & Pastor; Law
Offices Of Anthony A. Ferrigno; Reich,
Radcliffe & Kuttler; Law Offices Of Carl Hilliard;
Mager & Goldstein; Law Offices Of Joshua P. Davis;
Cuneo, Gilbert & Laduca
Scott A. Bursor
Bursor & Fisher
369 Lexington Avenue – 10th Fl.
New York, NY 10017
Nadeem Faruqi
Faruqi & Faruqi
320 E. 39th Street – 3rd Fl.
New York, NY 10016
L. Timothy Fisher
Alan R. Plutzik
2125 Oak Grove Blvd.
Walnut Creek, CA 94598
William J. Pinilis
Pinilis Halpern
160 Morris Street
Morristown, NJ 07960
7
Steven M. Sherman
Sherman Business Law
220 Montgomery Street – 15th Fl.
San Francisco, CA 94104
Sandra G. Smith
Fauqi & Faruqi
101 Greenwood Avenue - #600
Jenkintown, PA 19046
Counsel for Appellants, Bramson, Plutzik,
Mahler & Birkhaeuser; Law Office Of
Scott A. Bursor; Faruqi & Faruqi
Phillip A. Bock
Robert M. Hatch
Bock & Hatch
134 North La Salle Street - #1000
Chicago, IL 60602
Anthony L. Coviello
307 Montgomery Street
Bloomfield, NJ 07003
8
Robert J. Evola
Bradley M. Lakin
Lakin Chapman
300 Evans Avenue
P.O. Box 229
Wood River, IL 62095
Counsel for Appellant Jessica Hall
James E. Cecchi [ARGUED]
Lindsey H. Taylor
Carella, Byrne, Cecchi, Olstein, Brody & Agnello
5 Becker Farm Road
Roseland, NJ 07068
Scott A. George
Seeger Weiss
1515 Market street - #1380
Philadelphia, PA 19102
Counsel for Appellees, Judy Larson, Willie Davis,
Joe Milliron, Tessie Robb, Roman Sasik,
David Dickey, Steven Wright, Jane Waldman,
Robert Wise, Jackie Thurman, Richard Chisolm,
Mary Pitsikoulis, Debra Lively, Jacqueline Sims,
And Kisha Orr
9
Andrew B. Joseph
Drinker, Biddle & Reath
18th & Cherry Streets
One Logan Square - #2000
Philadelphia, PA 19103
Joseph Boyle [ARGUED]
Lauri A. Mazzuchetti
Vincent P. Rao, III
Kelley, Drye & Warren
200 Kimball Drive
Parsippany, NJ 07054
Counsel for Appellees Sprint Nextel Corp.,
Sprint Spectrum DBA Sprint Nextel,
Nextel Fin. Co.
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge.
Until late 2008, Sprint Nextel Corporation
(collectively with its operating subsidiaries, including Sprint
Spectrum L.P., “Sprint”) included a flat-rate early termination
fee (“ETF”) provision in its cellular telephone contracts,
which allowed it to charge a set fee to customers who
terminated their contracts before the end date stated in the
contract. Because many consumers believed that flat-rate
10
ETFs were illegal penalties, various class action lawsuits
were brought against cellular phone service providers who
charged flat-rate ETFs, including Sprint. In the case before
us now (the “Larson” action), the plaintiffs entered into
negotiations with Sprint, and, after five months of mediation,
the parties decided to settle the matter for $17.5 million,
pursuant to the terms of their agreement (the “Settlement
Agreement”). Over objections lodged by several class
members, the United States District Court for the District of
New Jersey certified the settlement class and approved the
Settlement Agreement. Objectors Lina Galleguillos,
Antranick Harrentsian, and Michael Moore (collectively, the
“Galleguillos Objectors”), along with Jessica Hall, appealed.1
Because the District Court did not adequately protect the
rights of absent class members, we will vacate its order and
remand the matter for further proceedings.
I. Background
A. Class Action and Settlement Agreement
A flat-rate ETF is one that does not vary during the
term of the contract.2 At the time the Larson class action was
1
Two groups of attorneys also appealed, challenging
the District Court‟s allocation of attorneys‟ fees. Because of
the nature of our disposition, we will not address those
appeals.
2
A flat-rate ETF stands in contrast to what is known as
a prorated ETF. A prorated ETF is an “[ETF] contract
provision that is structured such that the initial amount of the
[ETF] will decrease over the term of the contract in some
incremental form, resulting in a termination fee at the end of
11
filed, if a Sprint customer terminated a contract prior to the
end of the contract term, Sprint would impose a flat-rate ETF
of approximately $200. The Larson plaintiffs filed their suit
in the District Court on November 5, 2007, alleging that the
flat-rate ETFs charged by AT&T Mobility, LLC (“AT&T”)
and Sprint were illegal penalties that violated the Federal
Communications Act and state consumer protection laws.
The Complaint was amended twice, with the Second
Amended Complaint, as discussed in greater detail herein,
being filed by five plaintiffs (the “Class Representatives”).
Each of the Class Representatives was charged a flat-rate ETF
by Sprint.3
Sprint moved to dismiss the Larson action pursuant to
Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil
Procedure, but before the District Court rendered a decision
on that motion, the Class Representatives and Sprint entered
into mediation of the dispute, under the guidance of a retired
the contract term which is lower than the initial termination
fee.” (Appellants‟ Joint Appendix (“AJA”) at 273.) Prorated
ETFs are not at issue in this case.
3
The plaintiffs named in the original Complaint were
three individuals who were charged a flat-rate ETF by Sprint
and one who was charged a flat-rate ETF by AT&T. The
Second Amended Complaint did not include the
representative who was charged a flat-rate ETF by AT&T,
and added two additional individuals who were charged a
flat-rate ETF by Sprint. Thus, none of the Class
Representatives in the Second Amended Complaint were
charged a flat-rate ETF by AT&T. AT&T was not part of the
eventual settlement and is not a party to this appeal.
12
judge of the District Court. After approximately five months
of negotiations, on December 3, 2008, the parties agreed to
settle the matter for $17.5 million, comprised of $14 million
in cash and $3.5 million in activation fee waivers, bonus
minutes, and credit forgiveness (collectively, the “Common
Fund”).4 In addition to the monetary relief, the Settlement
Agreement also enjoined Sprint from entering into new fixed-
term subscriber agreements containing flat-rate ETFs for a
period of two years, effective January 1, 2009.5 Along with
4
If the claims paid out of the cash portion of the
Common Fund were to exceed the amount available in the
Common Fund, all cash benefits would be reduced pro rata.
Any cash that remained in the Common Fund after the close
of the claim period was to be converted into a cy pres award
for distribution to an organization qualifying as tax exempt
under § 501(c)(3) of the Internal Revenue Code, or any other
organization or institution agreed upon by the parties. After
execution of the Settlement Agreement, the parties agreed
that any money remaining in the Common Fund would be
used to purchase prepaid long distance calling cards for use
by members of the U.S. armed forces and their families.
5
At oral argument, Sprint indicated that it had not
collected flat-rate ETFs since December of 2010. In a letter
submitted pursuant to Federal Rule of Appellate Procedure
28(j), counsel for the Class Representatives confirmed that
fact, indicating that the last flat-rate ETF contract expired on
December 31, 2010. Thus, even after the Settlement
Agreement‟s two-year injunction prohibiting Sprint from
including flat-rate ETFs in subscriber agreements ended on
January 1, 2011, it appears that Sprint has not yet resumed
including flat-rate ETFs in customer contracts.
13
ending the Larson action, the Settlement Agreement
expressly resolved ten other lawsuits pending in various state
courts, but it excepted certain claims that were being asserted
in a California-only state court class action against Sprint
captioned Ayyad v. Sprint Spectrum, LLP (“Ayyad”).
The Settlement Agreement provided for four different
categories of claimants, three of which are relevant to this
appeal:6
Category I. – Claimants Who Paid an ETF
(Other Than Category III or IV Class
Members):
A. Those Claimants who had a two-
year term contract and terminated within the
first six months of that contract term [or (B.)
had a one-year term contract and terminated
within the first three months of that contract
term], and show sufficient proof that they paid
an ETF including signing under penalty of
perjury,[7] shall be entitled to a payment of $25
6
Category III is entitled “Claimants Who Claim Their
Wireless Term Contract(s) Including Amendments, Changes
and/or Extensions to the Contract(s) or the Assessment or
Potential Assessment of an ETF, or is [sic] Improper, Invalid,
Unlawful or Otherwise Unenforceable For Any Reason
Whatsoever.” (AJA at 289.) No one contends that the issues
on appeal affect the Claimants who would have rights under
Category III, and, by the terms of the category, we do not see
that they would.
7
The Settlement Agreement defined an ETF as “any
14
from the Common Fund; or to the extent such
Settlement Class Members desire to activate a
new service line with Sprint Nextel: (i) a waiver
of the approximately $36 activation fee
normally charged by Sprint Nextel in
connection with obtaining a new two-year
contract to become a Sprint Nextel subscriber;
and (ii) 100 free bonus minutes per month for
the first year of that two-year contract. …
….
C. Those Claimants who had a two-
year term contract and terminated at any time
between the seventh to the twenty fourth month
of that contract term [or (D.) had a one-year
term contract and terminated within the fourth
to twelfth month of that contract term], and
show sufficient proof that they paid an ETF
including signing under penalty of perjury, shall
be entitled to a payment of $90 from the
Common Fund; or to the extent such Settlement
Class Members desire to activate a new service
line with Sprint Nextel: (i) a waiver of the
approximately $36 activation fee normally
charged by Sprint Nextel in connection with
obtaining a new two-year contract to become a
charge described, imposed, charged, or collected pursuant to a
provision in a fixed-term subscriber agreement calling for the
payment of a flat-rate amount for terminating the agreement
prior to expiration of the agreement‟s specified term.” (AJA
at 267.)
15
Sprint Nextel subscriber; and (ii) 100 free bonus
minutes per month for the first year of that two-
year contract. …
….
E. Those Claimants who cannot
show sufficient proof that they paid an ETF, but
sign under penalty of perjury that they paid an
ETF will receive $25 cash payment; or to the
extent such Settlement Class Members desire to
activate a new service line with Sprint Nextel:
(i) a waiver of the approximately $36 activation
fee normally charged by Sprint Nextel in
connection with obtaining a new two-year
contract to become a Sprint Nextel subscriber;
and (ii) 100 free bonus minutes per month for
the first year of that two-year contract. …
Category II. – Claimants Who Were Charged an
ETF But Did Not Pay the ETF:
A. Those Claimants who had a two-
year term contract and terminated within the
first six months of that contract term [or (B.)
had a one-year term contract and terminated
within the first three months of that contract
term], and show sufficient proof that were
charged an ETF, including signing under
penalty of perjury, shall be entitled to $25 in
credit relief, if the debt owed to Sprint Nextel is
still owned by Sprint Nextel; or to the extent
such Settlement Class Members desire to
activate a new service line with Sprint Nextel:
16
(i) a waiver of the approximately $36 activation
fee normally charged by Sprint Nextel in
connection with obtaining a new two-year
contract to become a Sprint Nextel subscriber;
and (ii) 100 free bonus minutes per month for
the first year of that two-year contract. …
….
C. Those Claimants who had a term
contract and terminated after the seventh month
of a two year term or terminated after the fourth
month of a one year term, and show sufficient
proof that they were charged an ETF, including
signing under penalty of perjury, shall be
entitled to (i) a $90 credit, if the debt owed to
Sprint Nextel is still owned by Sprint Nextel; or
(ii) to the extent such Settlement Class
Members desire to activate a new line of service
with Sprint Nextel: (i) a waiver of the
approximately $36 activation fee normally
charged by Sprint Nextel [for] free activation in
connection with obtaining a new two-year
contract to become a Sprint Nextel subscriber;
and (ii) 100 free bonus minutes per month for
the first year of that two-year contract. …
….
Category IV. – Claimants Whose Claim
Arises After Notice to The Class But Before
January 1, 2011:
17
H. Any Claimant who has a wireless
line of service under a term contract entered
into before January 1, 2009 and is subject to a
flat-rate ETF that terminates after the close of
the notice period, whose Approved Claim arose
after the notice for approval of Settlement is
provided to the Settlement Class but before
January 1, 2011, and who swears under penalty
of perjury that they were harmed as a result of
the flat-rate ETF will be entitled to either: (i) a
Sprint Nextel prepaid 90 minute Long Distance
Calling Card to be purchased out of the
Common Fund; (ii) to the extent such
Settlement Class Member desires to activate a
new line of service with Sprint Nextel, a waiver
of the approximately $36 activation fee
normally charged by Sprint Nextel in
connection with obtaining a new two-year
contract to become a Sprint Nextel subscriber
and 100 free bonus minutes per month for the
first year of that two year contract; or (iii) 300
free text messages per month for six months. …
(Appellants‟ Joint Appendix (“AJA”) at 283-291.)
The Settlement Agreement released Sprint from all
ETF-related claims, including claims “arising from or relating
to any decision by Sprint … to impose [or] collect … an
Early Termination Fee, regardless of the basis for the
customer‟s claim that the fee should or should not be imposed
[or] collected.” (AJA at 270.) The Settlement Agreement
defined the “Claim Period” – that is, the time frame in which
eligible claimants are entitled to file a claim to acquire the
18
relief set forth in the Settlement Agreement – as “the period
beginning 30 days after entry of the Preliminary Approval
Order and ending 60 days after entry of the Final Approval
Order and Judgment” related to the class settlement. (AJA at
263-64.) However, “the Claim Period d[id] not apply to
Category IV benefits [, as] the deadline for submitting a
Category IV benefit Claim Form [was] January 1, 2011.”
(AJA at 264.)
B. Class Certification and Settlement Approval
On December 8, 2008, the District Court entered an
order preliminarily approving the Settlement Agreement and
conditionally certifying the class under Federal Rule of Civil
Procedure 23(b)(3).8 The settlement class was defined as
follows:
All persons in the United States who are or
were parties to a personal fixed-term subscriber
agreement for a Sprint Nextel Wireless Service
Account for personal or mixed
business/personal use, whether on the Sprint
CDMA network or Nextel iDen network, or
both, excluding accounts for which the
responsible party for the Wireless Service
Account is a business, corporation or a
governmental entity, entered into between July
8
Under Rule 23(b)(3), and assuming compliance with
Rule 23(a), a court may certify a class when “questions of law
or fact common to class members predominate over any
questions affecting only individual members.” Fed. R. Civ.
P. 23(b)(3).
19
1, 1999 and December 31, 2008 and whose
claims relate in any way to an Early
Termination Fee or use of an Early Termination
Fee in a fixed-term subscriber agreement,
and/or use or propriety of a fixed-term
subscriber agreement whether the term was for
the initial fixed-term subscriber agreement or
subsequent extensions or renewals to the fixed-
term subscriber agreement for whatever reason
and/or who were charged by or paid an Early
Termination Fee to Sprint Nextel, excluding
only the Ayyad Class Claims and Persons whose
right to sue Sprint Nextel as a Settlement Class
Member is otherwise barred by a prior
settlement agreement and/or prior final
adjudication on the merits. The Settlement
Class includes Persons who were subject to an
ETF, whether or not they paid any portion of
the ETF either to Sprint Nextel or to any outside
collection agency or at all, and includes persons
who are prosecuting excluded claims to the
extent such persons have claims other than
those expressly excluded.
(AJA at 7-8 (internal footnote omitted).)
After preliminarily approving the Settlement
Agreement, the District Court set forth a schedule for the final
approval process, including allowing class members to lodge
objections to the class certification and the Settlement
Agreement.
20
1. Initial Fairness Hearing
The District Court held an initial approval hearing (the
“Initial Fairness Hearing”) over a four-day period in March of
2009. In papers filed prior to that hearing, the Galleguillos
Objectors attacked many aspects of the adequacy of notice
given to potential class members about the class action. In
particular, they complained about the efforts undertaken by
Sprint to produce a class member list for use in providing
individual notice to class members.9 Following that hearing,
on April 30, 2009, the Court issued an opinion agreeing with
the Galleguillos Objectors that the initial notice plan (“INP”)
did not comply with Rule 23(c)(2), which requires “the best
notice that is practicable … .”10 Fed. R. Civ. P. 23(c)(2)(B).
Accordingly, the Court issued an order denying final approval
of the settlement without prejudice, and ordered counsel for
the Class Representatives (“Class Counsel”) and Sprint to
submit a new notice plan within 21 days.
9
Appellant Hall also objected to the settlement prior to
the Initial Fairness Hearing, alleging that the Settlement
Agreement was the product of a reverse auction. “A „reverse
auction‟ is generally „the practice whereby the defendant in a
series of class actions picks the most ineffectual class lawyers
to negotiate a settlement [with, in] the hope that the district
court will approve a weak settlement that will preclude other
claims against the defendant.‟” (AJA at 31-32 (quoting In re
Cmty. Bank of N. Va., 418 F.3d 277, 308 (3d Cir. 2005)).)
That claim and another one – that class notice was deficient
because the costs of notice and administrative expenses were
to be paid from the Common Fund, see infra note 17 – were
rejected by the Court. See infra note 18.
10
More fully, Rule 23(c)(2)(B) provides, in relevant
21
In its opinion holding the INP deficient, the District
Court instructed Sprint “to attempt to identify subclasses of
individuals [who paid an ETF] and include individual notice
to those persons.” (AJA at 4264.) The Court determined
that, based on data provided by Sprint, it would be
unreasonable for Sprint to compile a full list of class members
from 1999-2008 because it would require six to twelve
months of work at a cost of at least one million dollars.
However, also based on records provided by Sprint, the Court
found that “Sprint could conduct an inquiry as to whether …
it can identify specific subsets of customers – whether by
year, geographic region, ETF paid, or type of contract – that
are members of the class,” and the Court concluded that,
“therefore … the Galleguillos Objectors assert[ion] that
partial class lists are as noticeable as complete ones … has
merit.” (AJA at 4260.)
The District Court meticulously reviewed case law
discussing what constitutes a reasonable effort at sending
individual notice to class members, and it held that “Rule
23(c)(2) [could not] be so easily circumvented by undertaking
only an analysis of identifying each and every class member,
part:
For any class certified under Rule 23(b)(3), the
court must direct to class members the best
notice that is practicable under the
circumstances, including individual notice to all
members who can be identified through
reasonable effort.
Fed. R. Civ. P. 23(c)(2)(B).
22
rather than some or most class members.” (AJA at 4263.)
Instead, the Court said that:
Sprint must do more than it has done thus far …
[because] those subclasses capable of
reasonable identification require individual
notice. This especially holds true in a case such
as this one, where those who paid an ETF are
entitled to recover the lion‟s share of the
settlement but are generally unlikely to be
current Sprint customers.
(AJA at 4264.) The Court instructed Class Counsel and
Sprint to construct a new notice plan that included, inter alia,
“an indication from Sprint as to what subclasses of
subscribers are reasonably identifiable and a corresponding
plan to provide individual notice to those subscribers.”11
(AJA at 4274.) Because the Court “found notice to be
insufficient,” it concluded that it “lack[ed] jurisdiction over
11
The Court also instructed that the new notice plan
should include at least five other items: (1) “a new form of
individual notice that contain[ed] the 23(c)(2) elements”; (2)
“a plan to supply that notice to members of the Robertson
class [a related litigation in California where Sprint had
compiled a list of all members of a class that had paid flat-
rate ETFs]”; (3) “a plan to supply that individual notice to all
current Sprint subscribers”; (4) “a new form of notice
publication that is fully compliant with 23(c)(2) and 23(e)”;
and (5) “a full publication plan that, in conjunction with
individual notice, will provide the „best notice practicable.‟”
(AJA at 4274-75.)
23
the absent class members,” and, “[u]ntil notice [was] properly
administered,” it could not “evaluate the reasonableness of
the settlement.” (AJA at 4276.)
2. Amended Notice Plan
In response to the District Court‟s April 30, 2009
opinion and order, Sprint and Class Counsel submitted a
proposed Amended Notice Plan (“ANP”) on May 21, 2009.12
Although it addressed several of the concerns that the Court
had with the INP,13 the proposed ANP stated that it would be
unreasonable to search any of Sprint‟s billing records to
identify subclasses of individuals who had been charged a
flat-rate ETF. To support that contention, Sprint and Class
Counsel attached as an exhibit to the proposed ANP a
declaration from Sprint‟s Vice President of Customer Billing
12
The day before the ANP was submitted, the Court
granted Sprint‟s and Class Counsel‟s motion for
reconsideration regarding publication notice, finding the
publication notice complied with Rule 23. That order,
however, specifically noted that the portions of the Court‟s
April 30, 2009 opinion addressing lack of proper individual
notice remained in effect.
13
Specifically, the proposed ANP included the
following modifications from the INP: (1) a bill insert to send
to its current customers which was Rule 23-compliant, at an
estimated cost of $750,000; (2) individual notice to 194,461
subscribers of the Robertson class, at an estimated cost of
$73,895; and (3) individual notice to approximately 90,000
subscribers that it could identify without searching its billing
records, at an estimated cost of approximately $34,623.
24
Services, Scott Rice (the “Rice Declaration”). The Rice
Declaration detailed the efforts that would be required to
search Sprint‟s billing records for class members who were
charged a flat-rate ETF. Specifically, it noted that, “without
unforeseen interruptions or data losses” (AJA at 5504), it
would take one to two months to capture information for class
members who were charged a flat-rate ETF between April 1,
2009 and June 30, 2009, at an estimated cost of $20,000, and
it would take four to five months to capture information for
class members who were charged a flat-rate ETF between
April 1, 2007 to March 31, 2009, at an estimated cost of
$80,000. Because, in the view of Sprint and Class Counsel,
“such efforts would require an unreasonable amount of time
at a substantial cost,” the ANP they proposed did not provide
for any search of Sprint‟s billing records.14 (AJA at 4337.)
Twelve days later, on June 2, 2009, the District Court
entered an order approving the ANP. The Court explained
that it was “satisfied – upon examining [the Rice Declaration]
– that it would be unreasonable to require Sprint to engage in
further efforts to individually identify additional class
members [because] [t]he time, cost, and effort associated with
poring through and analyzing the various Sprint databases
[were] not reasonable.” (AJA at 4347.) Therefore, the Court
found “that individual notice, as outlined [in the ANP], [was]
14
Sprint and Class Counsel did note that “[i]f the
Court believe[d] that it would be reasonable for Sprint to
engage in any of the further efforts set forth in the Rice
[Declaration], Sprint [was] willing to do so. However, the
dates for the final approval hearing and the exclusion and
objection deadlines would have to be pushed out by at least a
few months.” (AJA at 4337 n.3.)
25
sufficient to satisfy Rule 23.” (Id.) The District Court set the
second final approval hearing (the “Second Fairness
Hearing”) for October 21, 2009, and set October 7, 2009 as
the “[d]eadline for any member of the settlement class … to
file specific objections to the settlement.” (Id.)
3. Second Fairness Hearing
The Galleguillos Objectors submitted a brief on the
October 7, 2009 deadline, arguing, among other things, that
the ANP was inadequate under Rule 23(c)(2)(B) and that the
Class Representatives themselves were inadequate to satisfy
the requirements of Rule 23(a).15 With respect to the ANP,
the Galleguillos Objectors said that Sprint wrongly failed to
provide individual notice to 9.2 million reasonably
identifiable class members who had been charged flat-rate
ETFs between April 1, 2007 and June 30, 2009. With respect
to the Class Representatives, they asserted that the interests of
class members who were current Sprint customers were not
adequately protected because the Class Representatives
“[had] no interest in stopping [the flat-rate ETF] charges
15
Rule 23(a) provides, in part, that, in order to certify a
class, a court must find that “the representative parties will
fairly and adequately protect the interests of the class.” Fed.
R. Civ. P. 23(a)(4). Although the Galleguillos Objectors did
not specifically cite to Rule 23(a) in their October 7 brief,
they cited to a case, Hassine v. Jeffes, 846 F.2d 169 (3d Cir.
1988), that specifically discussed the proper inquiry that a
court should make to determine whether class representatives
are adequate under Rule 23(a)(4), see infra Part II.B, and they
couched their claim as challenging various prerequisites of
Rule 23(a) that they alleged were not satisfied.
26
because, as former customers, they [were] no longer subject
to them.” (AJA at 5554.)
On October 14, Sprint submitted a memorandum in
response to the objections related to the adequacy of notice.16
It contended that the 9.2 million number cited by the
Galleguillos Objectors was overstated because the Sprint
document on which that number was based included flat-rate
ETFs charged to government and corporate accounts as well
as individual accounts. Although Sprint acknowledged “that
the number of Settlement Class Members who were charged
an ETF could measure into the tens of millions,” and a search
of its billing records “could result in the identification of
millions of Settlement Class Members,” Sprint argued that the
Court had already “properly concluded that the effort to
identify [those] Settlement Class Members would not be
reasonable.” (AJA at 4706.) On October 19, two days before
the Second Fairness Hearing, the Galleguillos Objectors
conceded that the 9.2 million number was overstated and
submitted the testimony of an expert who examined Sprint‟s
databases from the Ayyad case to provide a corrected
estimate. That expert indicated that, using “a widely
available statistical software package” (AJA at 5625), he was
able to quickly sort the data to find that 44.95% of the
customers from those databases were individual accounts.
Therefore, the Galleguillos Objectors revised their initial
16
That memorandum did not respond to the
Galleguillos Objectors‟ contention that the Class
Representatives could not adequately represent the interests
of all class members.
27
figure of 9.2 million individual class members to 4.2
million.17
The Second Fairness Hearing went forward as
scheduled on October 21, 2009.
4. Order Approving Class Certification and
Settlement
In an opinion dated January 15, 2010, the District
Court overruled all objections,18 certified the proposed
17
Objector Hall also renewed her objection that the
settlement was the product of a reverse auction. Additionally,
Hall claimed that the class notice was still deficient because
Class Counsel and Sprint provided that the costs of notice and
administrative expenses, including the ANP, were to be paid
from the Common Fund, and Hall asserted that those costs
should instead be borne by Sprint and/or Class Counsel.
18
The Court thus also overruled both of Hall‟s
objections. With regard to the reverse auction claim, the
Court stated that it had been presented with no evidence of
collusiveness “[a]side from the mere overlap of time when
counsel for Jessica Hall and Class Counsel were apparently
negotiating with Sprint.” (AJA at 32.) In contrast, the Court
pointed out that “[the retired district judge], who oversaw five
months of intense settlement negotiations, specifically
dismissed the idea that the Settlement was the product of a
reverse auction or collusion.” (Id.) Thus, the Court
determined that the reverse auction claim was “baseless.”
(Id.) The Court then turned to Hall‟s argument that payment
for additional notice should not come from the Common Fund
but rather be borne by either Sprint or Class Counsel.
28
settlement class, and approved the Settlement Agreement.
Though noting Hall‟s “objection [was] well taken,” the Court
cited to the Settlement Agreement, which contemplated that
“all costs” of providing notice would come out of the
Common Fund. (Id.) The Court also cited to the ANP, which
provided that Sprint and Class Counsel would seek
reimbursement from the Common Fund for the re-notice
costs. Accordingly, the Court did not accept Hall‟s notice
objection.
Hall has raised those same two objections to us on
appeal, re-framing her notice-related claim as an attack on the
Court approving a settlement that was neither fair, reasonable,
nor adequate, as required under Rule 23(e)(2). See Fed. R.
Civ. P. 23(e)(2) (“If the propos[ed] [settlement] would bind
class members, the court may approve it only after a hearing
and on finding that it is fair, reasonable, and adequate.”). We
conclude that the District Court did not abuse its discretion in
rejecting Hall‟s first objection. Regarding the reverse auction
claim, as the District Court noted, Hall‟s assertion was
directly contradicted by the retired district judge who oversaw
five months of negotiation between the parties. Concerning
the attack as to the adequacy of the settlement, in evaluating
whether the settlement was fair, reasonable, and adequate, the
District Court utilized the proper test by analyzing each of the
nine factors as laid out in Girsh v. Jepson, 521 F.2d 153, 157
(3d Cir. 1975). After such analysis, it determined that the
settlement was fair, reasonable, and adequate. Because notice
issues remain to be resolved and because we also question
whether the Class Representatives were adequate under Rule
23(a)(4), see infra Part II.B, we make no comment on
whether the settlement was fair, reasonable, and adequate.
29
Regarding adequacy of representation under Rule 23(a)(4),
the District Court stated that two factors must be considered:
“(1) the plaintiff‟s attorney must be qualified, experienced,
and generally able to conduct the proposed litigation, and (2)
the plaintiff must not have interests antagonistic to those of
the class.” (AJA at 10-11 (quoting In re Prudential Ins. Co.
of Am. Sales Practices Litig., 962 F. Supp. 450, 519 (D.N.J.
1997)).) The Court noted that “[n]o objection has been
lodged specifically as to the qualification and capabilities of
Class Counsel,” and it also determined that the “interests [of
the Class Representatives] [were] not antagonistic to those of
other members of the Class.” (AJA at 11.) Acknowledging
the Galleguillos Objectors‟ contention that the Class
Representatives were not adequate because none of them
were current subscribers subject to a flat-rate ETF and thus
did not negotiate or attempt to enjoin Sprint from enforcing
its flat-rate ETF against current customers, the Court said
that, if current subscribers who were subject to a flat-rate ETF
were “otherwise harmed because of the existence of the flat-
rate ETF, such Class members would fall into Category IV …
and would be entitled to the relief afforded therein.”19 (AJA
19
The District Court made that remark after
specifically referring to a group known as the California
Subscriber Class Claims, class members that were Sprint
customers who “[had] not allege[d] that they had been
charged and/or paid an ETF, but instead alleged simply that
they were subject to an ETF in their subscriber agreement.”
(AJA at 12.) For purposes of relief afforded under the
Settlement Agreement, the members of the California
Subscriber Class were in the same position as all class
members who were current customers and still subject to a
flat-rate ETF and had not been charged a flat-rate ETF.
30
at 12.) The Court further noted that the type of injunctive
relief that the Galleguillos Objectors sought – allowing
current subscribers to terminate without paying a flat-rate
ETF – “could potentially expose such Class members to a
counterclaim for damages from Sprint.”20 (AJA at 12 (citing
Garrett v. Coast & S. Fed. Sav. & Loan Ass’n, 511 P.2d 1197,
1203-04 (Cal.1973)) (“We do not hold herein that merely
because the late charge provision is void and thus cannot be
used in determining the lender‟s damages, the borrower
escapes unscathed. He remains liable for the actual damages
resulting from his default.”).)
The District Court then addressed the Galleguillos
Objectors‟ notice-related claims. Concerning the reach of
individual notice, the District Court rejected the contention
that Sprint failed to provide notice to 9.2 million identifiable
class members.21 The Court said that the “crux” of that
Accordingly, we assume the Court‟s analysis here was meant
to apply to all class members that were current Sprint
subscribers.
20
That statement was also made in the context of
referring to the California Subscriber Class Claims, and we
make the same inference here as stated in note 19, supra.
21
The District Court noted that the “Galleguillos
Objectors now concede that the 9.2 million figure [was], at
the very least, based on outdated data and therefore
unreliable.” (AJA at 22.) The Court did not mention that the
Galleguillos Objectors submitted a revised estimate of 4.2
million class members. In a footnote, the Court pointed out
that the Galleguillos Objectors “made no effort to obtain
additional data” from Sprint or Class Counsel until two weeks
31
objection was “that Sprint could have identified millions of
additional class members through Sprint‟s own billing
records.” (AJA at 22.) The response was that “[e]ven if such
speculation were correct, the Court ha[d] already examined
the Rice Declaration and found that the time, cost and effort
necessary to do so … would be unreasonable in light of all
the circumstances.”22 (Id.)
The Court concluded that it was “satisfied that it would
be unreasonable to require Sprint to engage in further efforts
to identify class members beyond” the approximately 285,000
additional individuals who received individual notice of the
settlement for the first time through the ANP. (AJA at 26.)
The Court noted that, just prior to the ANP, only 12,501
claim forms for 19,105 lines of service had been submitted.
Since the implementation of the ANP, however, an additional
44,408 claim forms for 66,913 lines of service had been
before the Second Fairness Hearing, and the Court was not
aware of such matters until less than a week before the
Second Fairness Hearing. (AJA at 22 n.15.) “As a result,
their belated efforts to obtain such data were denied by the
Court as untimely.” (Id.)
22
The District Court also emphasized that, after Sprint
and Class Counsel proposed the ANP on May 21, 2009, the
Court received no opposition to it prior to approving the plan
on June 2, 2009. Similarly, the Court rejected the
Galleguillos Objectors‟ claim that the Rice Declaration was
inadmissible, reasoning that that claim was waived because
no action was taken on that objection until October 7, 2009,
the deadline to file objections, over four months after the
Court had approved the ANP.
32
submitted. Because the Court viewed the notice plan as
“robust, thorough, and includ[ing] all of the essential
elements to properly apprise absent Class members of their
rights,” it concluded that the “parties ha[d] now fully
complied with the stringent requirements set forth by Rules
23(c)(2)(B) and 23(e).”23 (AJA at 26-27.)
The Court entered a final order certifying the proposed
settlement class under Rule 23(a) and 23(b)(3) and granting
final approval to the Settlement Agreement. Appellants then
timely filed the present appeals.
II. Discussion24
The Galleguillos Objectors renew on appeal many of
the objections they made before the District Court, asserting,
among other things, that the District Court abused its
discretion by finding that it would be unreasonable to require
Sprint to perform any search of its billing records to provide
individual notice to class members who had been charged a
flat-rate ETF, and that the Court further abused its discretion
by holding that the Class Representatives were adequate. Our
23
After that analysis, the District Court analyzed the
nine Girsh factors, see supra note 18, to evaluate whether the
settlement was “fair, reasonable, and adequate” under Rule
23(e)(2), and determined that it was so. The Court also
approved the attorneys‟ fee award, as well as addressed the
allocation of that award.
24
The District Court had jurisdiction pursuant to 28
U.S.C. § 1332(d), and we have jurisdiction pursuant to 28
U.S.C. § 1291.
33
disposition of these appeals focuses on the first of those
issues, though we think the second warrants comment as well.
As the framing of the objectors‟ arguments indicates,
we review a district court‟s decision to certify a class and
approve a settlement for an abuse of discretion. In re Pet
Food Prods. Liab. Litig., 629 F.3d 333, 341 (3d Cir. 2010)
(citation omitted). An abuse exists “where the district court‟s
decision rests upon a clearly erroneous finding of fact, an
errant conclusion of law or an improper application of law to
fact.” Id. (citation and internal quotation marks omitted).
A. Billing Records Search
The Rice Declaration was the sole basis on which the
District Court determined that it would be unreasonable for
Sprint to search its billing records to identify class members
who had been charged a flat-rate ETF. Even accepting the
contents of the Rice Declaration,25 the Galleguillos Objectors
25
The Galleguillos Objectors also challenge the
District Court‟s ruling that their objections to the Rice
Declaration were waived because that objection was not made
in a timely manner. The Galleguillos Objectors had alleged
that the Rice Declaration was inadmissible under Federal
Rules of Evidence 601, 602, 701, 702, and 802. Sprint and
the Class Representatives argue that the Court properly
determined the objections to the Rice Declaration were
waived because the Galleguillos Objectors did not object until
October 7, 2009, more than four months after the ANP‟s June
2, 2009 implementation. The Galleguillos Objectors respond
that they filed the objection by the October 7, 2009 deadline
set in the District Court‟s order implementing the ANP.
34
claim that the District Court failed to properly exercise its
discretion when it determined that it would be unreasonable
to require any such search of those records for the purpose of
providing individual notice to those class members. We
agree.
The Rice Declaration estimated that, to capture contact
information for class members who were charged a flat-rate
ETF between April 1, 2007 and June 30, 2009, a search
would take approximately four to five months at an estimated
cost of $100,000.26 Sprint candidly acknowledged before the
District Court, and likewise represents to us,27 that the search
Moreover, they argue that there was no prior deadline to
adhere to since the proposed ANP had not been heard on a
noticed motion, and thus there was no briefing schedule
setting the date by which the District Court expected a
response. Furthermore, they contend that the 12 days
between the filing of the Rice Declaration and the order
approving the ANP was not an adequate amount of time to
respond. Without deciding the matter, we accept for purposes
of this opinion that the Rice Declaration was admissible.
26
Specifically, the Rice Declaration estimated that it
would take one to two months to acquire information for class
members who were charged a flat-rate ETF between April 1,
2009 and June 30, 2009 at a cost of approximately $20,000,
and four to five months to obtain that information for class
members who were charged a flat-rate ETF between April 1,
2007 and March 31, 2009 at a cost of about $80,000. See
supra Part I.B.2.
27
Class Counsel, on behalf of the Class
Representatives, filed a letter indicating that the Class
35
efforts described in the Rice Declaration could result in the
identification of millions of class members. After examining
the Rice Declaration, however, the District Court, both in its
order approving the ANP and in its opinion approving the
final settlement, concluded that it would be unreasonable for
Sprint to undertake the search of its billing records because of
the “time, cost and effort necessary to do so.” (AJA at 22; see
also AJA at 4347 (“The time, cost, and effort associated with
poring through and analyzing the various Sprint databases are
not reasonable… .”).) Given the requirements of Rule 23(c)
and of our precedents, and in light of the record before the
District Court, that decision cannot stand.
As noted earlier, Rule 23(c)(2)(B) requires “individual
notice to all members who can be identified through
reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). The Supreme
Court discussed what constitutes “reasonable effort” in Eisen
v. Carlisle & Jacquelin, which involved a prospective class
consisting of nearly six million individuals who had engaged
in odd-lot stock purchases. 417 U.S. 156, 166 (1974). The
district court in that case had noted that at least two million of
those individuals could be identified by names and addresses
“[b]y comparing the records and tapes of the odd-lot firms
with the wire firm tapes which contain the name and address
of each customer,” Eisen v. Carlisle & Jacquelin, 52 F.R.D.
Representatives join the arguments made by Sprint in Sprint‟s
brief responding to the claims made by the Galleguillos
Objectors in their opening brief. Thus, when we refer
hereinafter to arguments made by Sprint in response to the
opening brief filed by the Galleguillos Objectors, it should be
understood that such arguments are also advanced by the
Class Representatives.
36
253, 257 (S.D.N.Y. 1971), rev’d, 479 F.2d 1005, 1020 (2d
Cir. 1973), aff’d, 417 U.S. 156 (1974), and that “an additional
250,000 persons who had participated in special investment
programs involving odd-lot trading” could also be reasonably
identified, 417 U.S. at 166-67. Including the price of first
class postage, the district court determined that individual
notice to all identifiable class members would cost $225,000.
Id. at 167. It held, however, that such a substantial
expenditure was not required at the outset of the litigation,
and ordered limited individual notice, 90% of the cost to be
paid by petitioner. Id. The United States Court of Appeals
for the Second Circuit reversed, holding that Rule 23(c)(2)
required individual notice to all identifiable class members,
with the entire cost to be paid by petitioner as the
representative plaintiff. Id. at 169.
The Supreme Court agreed with the Second Circuit
and said that “the names and addresses of 2,250,000 class
members [were] easily ascertainable, and there [was] nothing
to show that individual notice [could not] be mailed to each.”
Id. at 175. The Court expressly rejected petitioner‟s argument
that the requirement of individual notice should be
“dispense[d] with … in this case … [because of] the
prohibitively high cost of providing individual notice to
2,250,000 class members.” Id. As the Court put it,
“individual notice to identifiable class members is not a
discretionary consideration to be waived in a particular case.
It is, rather, an unambiguous requirement of Rule 23. …
Accordingly, each class member who can be identified
through reasonable effort must be notified… .” Id. at 176.
The Court noted that “[t]here is nothing in Rule 23 to suggest
that the notice requirements can be tailored to fit the
pocketbooks of particular plaintiffs.” Id. And the Court also
37
stated that notice by publication “had long been recognized as
a poor substitute for actual notice.” Id. at 175 (citation
omitted). Thus, Eisen stands for the proposition that
individual notice must be delivered to class members who can
be reasonably identified, and that the costs required to
actually deliver notice should not easily cause a court to
permit the less satisfactory substitute of notice by publication.
In Oppenheimer Fund, Inc. v. Sanders, the Supreme
Court again had occasion to consider the individual notice
requirement. 437 U.S. 340 (1978). To identify class
members in Oppenheimer Fund, the representative plaintiffs
sought to require the defendants, an investment fund, its
management corporation, and a brokerage firm, to help
compile a list of names and addresses of class members from
records kept by the transfer agent for one of the defendants,
so that the individual notice required by Rule 23(c)(2) could
be sent. 437 U.S. at 342. The class was estimated to include
approximately 121,000 persons. Id. at 344-45. The transfer
agent‟s employees testified that:
[I]n order to compile a list of the class
members‟ names and addresses, they would
have to sort manually through a considerable
volume of paper records, keypunch between
150,000 and 300,000 computer cards, and
create eight new computer programs for use
with records kept on computer tapes that either
[were] in existence or would have to be created
from the paper records.
38
Id. at 345. “The cost of [those] operations was estimated in
1973 to exceed $16,000.”28 Id. Having learned of the cost
and efforts required, the representative plaintiffs sought to
redefine the class to include only persons who had bought
fund shares during a specific time period and still held shares
in the fund, so that individual notice could be sent in one of
the fund‟s periodic mailings to its current shareholders. Id.That redefinition would have had the effect of excluding
individual notice to 18,000 former fund shareholders who
were class members, and reaching 68,000 current
shareholders who were not class members. Id. The district
court rejected the proposed redefinition because it arbitrarily
reduced individual notice to the class. Id. at 346. The district
court explained that “it [was] the responsibility of defendants
to cull out from their records a list of all class members and
provide [that] list to plaintiffs.” Id. (citation and internal
quotation marks omitted). The district court also held that
the cost of that endeavor was “the responsibility of [the]
defendants,” though it did note that the representative
plaintiffs would “then have the responsibility to prepare the
necessary notice and mail it at their expense.” Id. (citation
and internal quotation marks omitted).
28
When the Galleguillos Objectors provided the
District Court with the revised 4.2 million estimate of class
members that could be identified through Sprint‟s billing
records, they noted that, using the inflation calculator on the
United States Department of Labor website, the cost incurred
to identify the 121,000 class members in Oppenheimer Fund
would be approximately $80,000 in 2009 dollars. Those
search efforts amounted to approximately 13 cents per class
member using 1973 dollars, or approximately 64 cents per
class member in 2009 dollars, adjusting for inflation.
39
The Second Circuit, en banc, affirmed, id. at 347-48,
and the Supreme Court granted certiorari on the underlying
cost-allocation problem, id. at 349. Although the Supreme
Court held that the district court abused its discretion in
requiring defendants to bear the expenses of identifying the
class members,29 the Court affirmed, sub silentio, the decision
requiring the additional search efforts. Id. at 364. In
particular, the Supreme Court concluded that the “information
[from the transfer agent] must be obtained to comply with the
[representative plaintiffs‟] obligation to provide notice to their
class.” Id.In the course of discussing the underlying cost-
allocation issue, the Oppenheimer Fund court relied heavily
on the decision of the United States Court of Appeals for the
Fifth Circuit in In re Nissan Motor Corp. Antitrust Litigation,
552 F.2d 1088 (5th Cir. 1977). See Oppenheimer Fund, 437
U.S. at 355-60. The Fifth Circuit there discussed Rule
23(c)(2)‟s individual notice requirement in the context of
identifying a class of original retail purchasers of 371,000
new Datsun cars. The plaintiffs in Nissan had argued to the
district court that the defendants, including Nissan Motor
Corp. and every Datsun dealer nationwide, were “obligated to
conduct and bear the costs of” an examination of 1.7 million
Retail Delivery Report (“RDR”) cards that recorded sales of
new Datsun motor vehicles between 1966 and 1975 so that
29
The Supreme Court reached that conclusion because
the plaintiffs could obtain the information by paying the
transfer agent the same amount that the defendants would
have to pay and that no special circumstances existed that
warranted requiring the defendants to bear the expense. Id. at
363-64.
40
individual notice could be sent to class members. 552 F.2d at
1094. The district court instead only ordered the defendants,
at their own expense, to prepare and submit a computer listing
containing the names and addresses of currently registered
Datsun owners, id., “characterize[ing] the examination of the
1,700,000 RDR cards to extract the class members‟ names
and addresses as an „herculean task‟ and an „unnecessarily
time consuming and burdensome process,‟” id. at 1096.
The Fifth Circuit, however, vacated the district court‟s
class notice order, explaining:
The source or sources providing the greatest
number of names and addresses must be used.
Obviously, the word “reasonable” cannot be
ignored. In every case, reasonableness is a
function of anticipated results, costs, and
amount involved. A burdensome search
through records that may prove not to contain
any of the information sought clearly should not
be required. On the other hand, a search, even
though calculated to reveal partial information
or identification, may be omitted only if its cost
will exceed the anticipated benefits. Here, we
know that the RDR cards provide the court with
the best available listing of the names and
addresses of all class members. Indeed, the
parties agree on this. They only shy from
undertaking the effort. While the search cannot
be made with push-button ease, its advantages
bring the effort required within the range of
reasonableness.
41
Id. at 1098-99. The Nissan court then expounded on
reasonableness:
When the chore of examining defendants‟ RDR
cards is juxtaposed to the efforts required to
identify the … class members [in Eisen v.
Carlisle & Jacquelin], it pales by comparison.
The district court‟s characterization of the
undertaking here as “herculean” is accurate only
in relation to the class‟s size. The key, though,
is reasonable effort, and a large class requires a
large effort. Subdivision (c)(2) mandates that
each class member be given the “best notice
practicable under the circumstances.” While
the mechanical process of examining the cards
may prove to be expensive and time-
consuming, the individual right of absentee
class members to due process makes the cost
and effort reasonable.
Id. at 1100. Such effort was required because “[a]bsentee
class members … generally have … no knowledge of the suit
until they receive initial class notice [,and individual notice]
will be their primary, if not exclusive, source of information
for deciding how to exercise their rights under [R]ule 23.” Id.
at 1104. Accordingly, the Fifth Circuit ordered the district
court “to require individual notice to the class based on the
information available on the RDR cards.” Id. at 1100.
We have been similarly stringent in enforcing the
individual notice requirement. In Greenfield v. Villager
Industries, Inc., we vacated a district court‟s order approving
a settlement because no effort was made to identify class
42
members from the defendant‟s stock transfer records for the
purpose of giving individual notice; rather, only publication
notice was used. 483 F.2d 824, 834 (3d Cir. 1973). We said
that “a procedure such as the class action, which has a
formidable, if not irretrievable, effect on substantive rights,
can comport with constitutional standards of due process only
if there is a maximum opportunity for notice to the absentee
class member… .” Id. at 831. Citing Supreme Court
precedent, we noted that publication notice “failed to satisfy
due process requirements since „… it [was] not reasonably
calculated to reach those who could be informed by other
means at hand.‟” Id. at 832 (quoting Mullane v. Central
Hanover Bank & Trust Co., 339 U.S. 306, 319 (1950)). We
explained that, “[w]here names and addresses of members of
the class are easily ascertainable, … due process would
dictate that the „best notice practicable under the
circumstances …‟ would be individual notice.” Id. at 832
(quoting Fed. R. Civ. P. 23(c)(2)). Our holding, based on
Eisen, was straightforward: “„[a]ctual notice must be given to
those whose identity could be ascertained with reasonable
effort.‟” Id. (quoting Eisen, 479 F.2d at 1009, aff’d 417 U.S.
156). We also said that it was “[t]he ultimate responsibility”
of the district court to ensure that the parties complied with
notice requirements because “the district court [is] … the
guardian of the rights of the absentees.” Id.Those cases notwithstanding, Sprint cites a decision
from the Northern District of Georgia, In re Domestic Air
Transportation Antitrust Litigation, to support its claim that it
would be unreasonable to require it to search its billing
records so that individual notice can be sent to more people.
141 F.R.D. 534 (N.D. Ga. 1992). Domestic Air involved a
class action on behalf of purchasers of “domestic airline
43
passenger tickets from one or more of the defendant airlines
… to and/or from a defendant‟s hub.” Id. at 537. Initially,
the defendants had argued to the Court that class members
could not be identified from the airlines‟ records for the
purposes of compiling a list to provide those members with
individual notice. Id. at 539. After the Court certified the
class, an evidentiary hearing was held regarding “the
proposed content, timing, and method of notice.” Id. at 538.
At that hearing, the plaintiffs agreed with the defendants‟
initial position “that class members … [could not] be
identified with reasonable effort and thus there [was] no list
of class members to which mandatory individual notice
[could] be given.” Id. The defendants, however, in an abrupt
“about face,” id. at 540, then “insist[ed] that it [was] possible
to identify a partial list of class members, and plaintiffs must,
therefore, individually notify persons on the partial list,” id. at
538. In support, the defendants said they had developed a list
containing more than 9.3 million names and addresses of
possible class members. Id. at 541.
The district court took a different view. It determined
that the list developed by the defendants was not a list of class
members, and it found “as a fact that class members [could
not] be identified at [that] time through reasonable effort.”
Id. at 541. As the district court saw it, the defendants‟ list
was both over-inclusive and under-inclusive, and it was thus
“„impossible to estimate how many absentee class members
would receive individual notice.‟” Id. at 545 (quoting Nissan,
552 F.2d at 1099). Cautioning that “„reasonableness is a
function of anticipated results, costs, and amounts involved,‟”
id. at 547 (quoting Nissan, 552 F.2d at 1099), the court
concluded that
44
this [was] not the classic case where Rule
23(c)(2) individual notice [was] mandated. In
cases such as Eisen and Nissan the records kept
by the defendants indisputably contained the
names and addresses of the universe of class
members. … Because the [list at issue in
Domestic Air] [was] not a list of class members,
there [was] no way to assure that notice to the
list would definitely result in notice to a
substantial number of class members.
Id. at 546. Thus, the district court did “not direct individual
mail notice … to the … list.” Id.
The decision in Domestic Air is no support for Sprint
here. On the contrary, as the District Court in this action had
initially noted in its order holding the INP deficient,
“Domestic Air does not stand for the proposition that partial
class lists do not require individual notice; rather, it adopted
quite the opposite formulation. Partial lists – to the extent
they are accurate – would require 23(c)(2)-compliant notice.”
(AJA at 4262.) After relying on both Eisen, (see AJA at 4263
(“Given that Eisen required notice to a partial class and that it
pronounced constructive notice to be especially unreliable,
this Court is hard-pressed to find Sprint‟s arguments
persuasive.”)), and Nissan, (see AJA at 4263 (“Nor does the
fact that a large effort is required to identify a subset of class
members automatically render individual notice
inapplicable.” (citing Nissan, 552 F.2d at 1100))), the District
Court found
that Sprint must do more than it ha[d] done so
far. The fact that not every member of the class
45
can receive the best notice does not mean that
everyone gets the least notice. Rather, those
subclasses capable of reasonable identification
require individual notice. This especially holds
true in a case such as this one, where those who
paid an ETF are entitled to recover the lion’s
share of the settlement but are generally
unlikely to be current Sprint customers. Sprint
shall attempt to identify subclasses of
individuals and include individual notice to
those persons.
(AJA at 4264 (emphasis added).)
Despite that well-grounded and thoroughly persuasive
conclusion, the District Court, much like the defendants in
Domestic Air, did something of an about face when it
approved the ANP proposed by Sprint and Class Counsel.
Other than a general reference to the Rice Declaration for the
proposition that the “time, cost, and effort necessary to
[conduct a partial search of its billing records to provide
individual notice to a subset of class members who were
charged ETFs] … would be unreasonable in light of all the
circumstances” (AJA at 22), the Court did not provide any
support for its new and very different determination that
Sprint did not need to conduct a search of its billing records
to provide individual notice to a larger group of class
members. This is particularly puzzling given that the District
Court had said, in its order holding the INP deficient, that
“Sprint can run targeted searches that pull relevant
information for sub-classes of individuals.” (AJA at 4260
(emphasis added).)
46
Viewing “reasonableness [as] a function of anticipated
results, costs, and amount involved,” Nissan, 552 F.2d at
1099, the District Court‟s changed determination, based
solely on the Rice Declaration, that it would be unreasonable
for Sprint to undertake any search of its own billing records
was “an errant conclusion of law or an improper application
of law to fact.” In re Pet Food Prods. Liab. Litig., 629 F.3d
at 341 (citation and internal quotation marks omitted).
Similar to Eisen, where at least 2.25 million class members
could have been identified by names and addresses, Sprint
has acknowledged here that the database search outlined in
the Rice Declaration “could result in the identification of
millions of Settlement Class Members.”30 (AJA at 4706.)
The cost of identifying those “millions” of class members is
approximately $100,000. If only two million people were
identified through that billing records search, the search
would have cost approximately 5 cents per class member
identified in 2009. Including the expense of mailing the
individual notice, the cost would have been approximately 43
cents per class member.31 Given the size of the class and the
30
Sprint confirmed that fact in both its brief, (see
Sprint‟s Br. at 37 n.20 (stating “[a]t the time the District
Court conducted its analysis, the record was clear that the
efforts that Sprint described in the Rice Declaration could
result in the identification of millions of class members (albeit
at an unreasonable expenditure of time, effort and money)”)),
and at oral argument, (see Oral Argument Transcript (“Tr.”)
26:18-20 (answering that it was “without question” that there
were “potentially millions of class members in” the billing
database)).
31
Using the 4.2 million estimate given by the
Galleguillos Objectors, the search would have cost less than
47
due process rights at stake, these are not troublingly high
sums.
Even if the costs had been higher, however, that would
not automatically mean they were unreasonable. Eisen
expressly rejected the argument that costs are the primary
driver in the judgment on notice, because “individual notice
to identifiable class members is not a discretionary
consideration to be waived in a particular case. It is, rather,
an unambiguous requirement of Rule 23 … .” 417 U.S. at
176. Here, the costs per class member were projected to be
less than the per-member cost for individual notice in both
Eisen and Oppenheimer Fund, after adjusting for inflation.32
2.5 cents per class member. If, however, there were actually
4.2 million class members that were identified, that would, of
course, increase the cost of mailing notice to those
individuals. Assuming that the cost of mailing postcard
notice was 38 cents per postcard, which was the estimate used
to determine the cost of the mailing to the Robertson class in
the ANP, it would have cost approximately $1.6 million to
mail 4.2 million postcards in 2009. At oral argument,
however, counsel for Sprint conceded that mailing expenses
ought not be factored into the analysis if it is known how
many class members are identifiable. (See Tr. 29:6-8 (“I
understand you can‟t [object to] expenses when it comes to
the mailing. If they‟re identifiable, they‟ve got to be mailed
to. I get that.”).)
32
Excluding mailing expenses, the cost of identifying
contact information and preparing the individual notice forms
for the 2.25 million class members in Eisen in 1971 was
$90,000. See Eisen, 417 U.S. at 167 (noting that, including
the postage rate of six cents, the expense of stuffing and
48
Sprint refers to the “cumbersome process required to
search its vast data environments” (Sprint‟s Br. at 35) and
argues that “[e]ven assuming that the efforts outlined in the
Rice Declaration would yield 4.2 million … [c]lass members,
it is simply another way of restating the already known [fact
that,] with significant effort, a large number of … [c]lass
members could be identified,” (Sprint‟s Br. at 37-38).
Instead, Sprint asserts that “[t]he question before the District
Court … was whether that effort was reasonable,” and “the
Court reviewed the efforts outlined in the Rice Declaration
and determined, within its sound discretion, that it would be
unreasonable to have Sprint undertake those efforts.”
(Sprint‟s Br. at 38.) But, if the efforts detailed in the Rice
Declaration, whereby a computer program would have to run
search queries in certain databases, would identify 4.2 million
class members, we fail to see why running those search
inquiries is unreasonable, and no explanation for that
conclusion was provided by the District Court. In fact, the
effort that would be required here seems less significant than
the efforts required in Eisen, 52 F.R.D. at 257 (identifying at
least two million individuals “[b]y comparing the records and
tapes of the odd-lot firms with the wire firm tapes which
contain the name and address of each customer”), or in
mailing the 2.25 million notice forms would cost $225,000).
After adjusting for inflation, that cost would have been
approximately $477,000 in 2009, or 21 cents per class
member. See Dep‟t of Labor, Bureau of Labor Statistics CPI
Inflation Calculator,
http://bls.gov/data/inflation_calculator.htm. The cost of the
efforts to compile the list required in Oppenheimer Fund,
excluding mailing expenses, was approximately 64 cents per
class member in 2009 dollars. See supra note 28.
49
Oppenheimer Fund, 437 U.S. at 345 (requiring transfer
agent‟s employees to “sort manually through a considerable
volume of paper records, keypunch between 150,000 and
300,000 computer cards, and create eight new computer
programs for use with records kept on computer tapes that
either [were] in existence or would have to be created from
the paper records.”), or in Nissan, 552 F.2d at 1094, 1096(undertaking examination of 1.7 million RDR cards to
identify names and addresses of 371,000 original retail
purchasers, an examination that the district court called
“herculean” and “unnecessarily time consuming and
burdensome”).
As did the parties in Nissan, it appears that Sprint and
the Class Representatives would agree that the search of the
billing records would “provide … the best available listing of
the names and addresses of … class members [who were
charged ETFs]. … They only shy away from undertaking the
effort.” Id. at 1099. While it may be that a search of the
billing records to find class members who have been charged
flat-rate ETFs “cannot be made with push-button ease,” “its
advantages,” based on the admissions made by Sprint itself,
appear likely to “bring the effort required within the range of
reasonableness.” Id. Because we have no way of knowing
what in the Rice Declaration caused the District Court to
change its mind about the need for a search of the billing
records, “the individual right of absentee class members to
due process” under Rule 23(c)(2) may have been violated. Id.
at 1100. In light of the principles outlined in Eisen,
Oppenheimer Fund, and Nissan, and our own precedent
calling for “a maximum opportunity for notice to the absentee
class member,” Greenfield, 483 F.2d at 831; see Girsh v.
Jepson, 521 F.2d 153, 159 (3d Cir. 1975) (noting our
50
“Circuit‟s strong policy in favor of „maximum notice‟”), the
District Court needs to do more to fulfill its duty as “the
guardian of the rights of the absentees” to ensure that the
parties complied with the individual notice requirement of
Rule 23(c)(2), Greenfield, 483 F.2d at 832.
We will therefore remand to the District Court to again
assess whether the ANP passes muster under Rule 23(c)(2).
Given Sprint‟s concession that a billing records search could
result in identifying millions of class members who were
charged a flat-rate ETF – individuals who are in the sweet
spot of the proposed class – we are not sure how it can be said
that it is unreasonable for Sprint to search any of its billing
records, but we leave that determination to the District Court,
to be made on a more complete record and with a fuller
explanation. In that connection, we note the availability of
statistical sampling of Sprint‟s billing records as a means to
provide the District Court with a better grounded estimate of
the number of class members who could, through a search of
those records, be identified during the relevant period.33
33
Guidelines in the electronic discovery realm that
contemplate statistical sampling to assist in the cost-benefit
analysis required under Federal Rule of Civil Procedure
26(b)(2)(C)(iii) may also help determine what is a
“reasonable effort” in the class action context under Rule
23(c)(2). In assessing whether to limit discovery, a court may
be required to consider whether “the burden or expense of the
proposed discovery outweighs its likely benefit, considering
the needs of the case, the amount in controversy, the parties‟
resources, the importance of the issues at stake in the action,
and the importance of the discovery in resolving the issues.”
Fed. R. Civ. P. 26(b)(2)(C)(iii). One of the Sedona
51
Conference Principles of Proportionality, a set of guidelines
that offer a framework for the best electronic discovery
practices, provides that “[e]xtrinsic information and sampling
may assist in the analysis of whether requested discovery is
sufficiently important to warrant the potential burden or
expense of its production.” The Sedona Conference® WG1,
The Sedona Conference® Commentary on Proportionality in
Electronic Discovery 291 (“Sedona Commentary”) (2010),
available at
http://www.thesedonaconference.org/content/miscFiles/Propo
rtionality2010.pdf. The commentary to that principle
provides as follows:
When asked to limit discovery on the basis of
burden or expense, courts must make an
assessment of the importance of the information
sought. Discovery should be limited if the
burden or expense of producing the requested
information is disproportionate to its
importance to the litigation. Performing such
an assessment can be challenging, given that it
may be impossible to review the content of the
requested information until it is produced.
In some cases, it may be clear that the
information requested is important – perhaps
even outcome-determinative. In other cases,
courts order sampling of the requested
information, consider extrinsic evidence, or
both, to determine whether the requested
information is sufficiently important to warrant
potentially burdensome or expensive discovery.
Sedona Commentary 299 (internal footnote omitted); see
52
Once that estimate is made, the Court, weighing the
“anticipated results, costs, and amount involved,” Nissan 552
F.2d at 1099, should be able to determine whether a full
search of the subject period would be reasonable, especially
in light of the fact that the class members who were charged a
flat-rate ETF were the ones who were “entitled to recover the
lion‟s share of the settlement” (AJA at 4264) but were
unlikely to otherwise know of it. See Nissan, 552 F.2d at
1104 (“Absentee class members will generally have had no
knowledge of [a] suit until they receive the initial class notice
[,which] will be their primary, if not exclusive, source of
information… .”).
Advisory Committee Notes to Fed. R. Civ. P. 26(b)(2)
(“[T]he parties may need some focused discovery, which may
include sampling of the sources, to learn more about what
burdens and costs are involved in accessing the information,
what the information consists of, and how valuable it is for
the litigation in light of information that can be obtained by
exhausting other opportunities for discovery.”).
We do not suggest that e-discovery practice provides a
perfect parallel. An important point of distinction is that we
already know it is of high importance to gain access to
individual-identifying information in the class notice context,
see Eisen, 417 U.S. at 176 (“[I]ndividual notice to identifiable
class members is … an unambiguous requirement of Rule
23.”), and the billing records here are admitted to have such
information, whereas the value of much discovery
information will be largely unknown until tested.
Nevertheless, these e-discovery principles may provide a
helpful template.
53
B. Adequacy of Representatives
Although we remand to the District Court to further
address the notice issues, we also suggest that the Court
consider again whether the Class Representatives can
adequately represent all class members. The Galleguillos
Objectors allege that the Class Representatives are inadequate
since none of them were “current subscribers subject to
Sprint‟s illegal ETFs” at the time that the Settlement
Agreement was executed. (Galleguillos Objectors‟ Opening
Br. at 59.) One of the essential problems with the settlement,
as those objectors see it, is “the license it grants to Sprint to
continue making illegal ETF charges against current
subscribers.” (Id. at 60.) According to the Galleguillos
Objectors, because “[t]he claims of the class representatives
are … atypical of the claims ….of [current subscribers,] …
the class representatives are inadequate representatives.” (Id.)
Sprint responds that the Class Representatives satisfy the
adequacy requirement of Rule 23(a)(4) because their interests
“[were] not antagonistic to those of the class.”34 (Sprint‟s Br.
34
Sprint also emphasizes the adequacy of Class
Counsel, as did the District Court, and we agree with Sprint
and the District Court that Class Counsel were “well-
equipped to handle a case of this size and complexity.” (AJA
at 11.) Sprint further argues that the Galleguillos Objectors
lack standing to complain about the adequacy of the Class
Representatives because those objectors allegedly conceded
to the District Court that they themselves were not Sprint
customers at the time that the Settlement Agreement was
executed. One of the Galleguillos Objectors, however,
arguably was a current Sprint customer at the time that the
Settlement Agreement was executed on December 3, 2008.
54
at 22 (citations and internal quotation marks omitted).)
As noted earlier, Rule 23(a)(4) provides that, in order
to certify a class, a court must find that “the representative
parties will fairly and adequately protect the interests of the
class.” Fed. R. Civ. P. 23(a)(4). “The adequacy inquiry
under Rule 23(a)(4) serves to uncover conflicts of interest
(See AJA at 1681 (“I, ANTRANICK HARRENTSIAN,
declare … I had an account with Sprint … [and] [o]n or about
December 8, 2008, Sprint charged my account for [two] early
termination fees (ETFs) of $200 apiece, for a total of
$400.”).) Whether or not any of the Galleguillos Objectors
were current Sprint customers at the time that the Settlement
Agreement was executed, however, they still had
constitutional standing to make such an objection because
they were class members who had asserted that objection to
the District Court. See Devlin v. Scardelletti, 536 U.S. 1, 6-7
(2002) (noting that as long as an individual is a member of
the class, that individual “has an interest in the settlement that
creates a „case or controversy‟ sufficient to satisfy the
constitutional requirements of injury, causation, and
redressability” (citations omitted)). Even assuming arguendo
that they did not have constitutional standing to bring an
objection based on adequacy of representation, the District
Court still has an independent duty to ensure that all class
members are adequately represented. See Greenfield, 483
F.2d at 832 (noting “the district court [is] … the guardian of
the rights of the absentees”); see also Ehrheart v. Verizon
Wireless, 609 F.3d 590, 593 (3d Cir. 2010) (“Under Rule
23(e), a district court acts as a fiduciary, guarding the claims
and rights of the absent class members.” (quoting In re AT&T
Corp., 455 F.3d 160, 175 (3d Cir. 2006))).
55
between named parties and the class they seek to represent.”
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997).
More specifically, as we stated in In re Community Bank of
Northern Virginia, the inquiry has two purposes: “to
determine [1] that the putative named plaintiff has the ability
and the incentive to represent the claims of the class
vigorously, … and [2] that there is no conflict between the
individual‟s claims and those asserted on behalf of the class.”
35
622 F.3d 275, 291 (3d Cir. 2010) (ellipsis in original)
(quoting Hassine v. Jeffes, 846 F.2d 169, 179 (3d Cir. 1988)).
“This inquiry is vital, as „class members with divergent or
conflicting interests [from the named plaintiffs and class
35
Several other circuits are in accord. See, e.g., Ellis
v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011)
(“To determine whether named plaintiffs will adequately
represent a class, courts must resolve two questions: (1) do
the named plaintiffs and their counsel have any conflicts of
interest with other class members and (2) will the named
plaintiffs and their counsel prosecute the action vigorously on
behalf of the class?” (citation and internal quotation marks
omitted)); In re Literary Works in Elec. Databases Copyright
Litig., 654 F.3d 242, 249 (2d Cir. 2011) (“Adequacy is
twofold: the proposed class representative must have an
interest in vigorously pursuing the claims of the class, and
must have no interests antagonistic to the interests of other
class members.” (citation and internal quotation marks
omitted)); Int’l Union, United Auto., Aerospace, and Agr.
Implement Workers of Am. v. Gen. Motors Corp., 497 F.3d
615, 626 (6th Cir. 2007) (“Class representatives are adequate
when it appear[s] that [they] will vigorously prosecute the
interests of the class … .” (citation and internal quotation
marks omitted)).
56
counsel] cannot be adequately represented… .‟” Id. at 291-92
(alteration in original) (quoting In re Diet Drugs Prods. Liab.
Litig., 385 F.3d 386, 395 (3d Cir. 2004)).
In its opinion approving the settlement here, the
District Court focused on the second purpose of the
Community Bank inquiry as to Rule 23(a)(4), i.e., the “no
conflict” part.36 The Court stated that “„the plaintiff must not
have interests antagonistic to those of the class,‟” (AJA at 11
(quoting In re Prudential Ins. Co. of Am. Sales Practices
Litig., 962 F. Supp. 450 (D.N.J. 1997))), and it found that the
Class Representatives did not.
If that were the complete test, we would perhaps be
less concerned about the District Court‟s finding of adequacy
under Rule 23(a)(4), but the test cited by the District Court
fails to include the first and, in this instance,37 likely the most
36
As noted supra at note 34, as part of the Rule
23(a)(4) inquiry, the District Court also analyzed whether
Class Counsel was adequate. “„Although questions
concerning the adequacy of class counsel were traditionally
analyzed under the aegis of the adequate representation
requirement of Rule 23(a)(4) … those questions have, since
2003, been governed by Rule 23(g).‟” In re Cmty. Bank of N.
Va., 622 F.3d at 292 (quoting Sheinberg v. Sorenson, 606
F.3d 130, 132 (3d Cir. 2010)).
37
None of the objectors claim that the interests of the
Class Representatives were “antagonistic” to those class
members who were current subscribers subject to a flat-rate
ETF on the date that the Settlement Agreement was executed.
Merriam-Webster defines “antagonism” as “actively
expressed opposition or hostility” or “opposition of a
57
important part of the Community Bank inquiry. That part
requires that the Class Representatives have “the ability and
the incentive to represent the claims of the class vigorously.”
In re Cmty. Bank of N. Va., 622 F.3d at 291 (citation omitted).
Here, it is difficult to understand how the Class
Representatives, none of whom were Sprint customers at the
time that the Settlement Agreement was executed, had the
interest, much less the incentive, to stop Sprint from
enforcing flat-rate ETFs against its current customers. Cf. id.
at 311 (vacating decision to certify class “because the
settlement appear[ed] to lack „structural assurance of fair and
adequate representation for the diverse groups and individuals
affected‟” (quoting Amchem, 521 U.S. at 627)); Nat’l Super
Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9, 17 n.6 (2d
Cir. 1981) (“Th[e] justification for permitting the
representatives to sue on behalf of the class has no application
to claims of class members in which the representatives have
no interest and which … they are willing to throw to the
winds in order to settle their own claims.”).
The District Court rejected the objectors‟ adequacy of
representation argument, in part,38 because it found that, even
if class members who were subscribers at the time that the
Settlement Agreement was executed were still subject to a
flat-rate ETF, those members would be entitled to the relief
conflicting force, tendency, or principle.” Merriam-
Webster’s Collegiate Dictionary 48 (10th ed. 2002).
38
The Court also pointed out that the injunctive relief
that the Galleguillos Objectors sought “could potentially
expose [current subscribers] to a counterclaim for damages
from Sprint.” (AJA at 12.)
58
afforded under Category IV of the Settlement Agreement.
We briefly note, however, the dissimilar treatment received
by class members who only qualified for benefits under
Category IV, but who were similarly situated to class
members who qualified for benefits either under Category I
(charged and paid a flat-rate ETF) or Category II (charged but
did not pay a flat-rate ETF).39 Those class members who
were Sprint customers as of March 15, 2010 – the claim
deadline for Categories I and II40 – but terminated their
contract between March 15 and December 31, 2010 and were
charged a flat-rate ETF,41 only qualified for benefits under
Category IV, which provided for certain non-cash relief.42
39
We recognize that, while adequacy of representation
cannot be determined solely by reviewing the settlement
benefits available to class members, examining such benefits
may be indicative of whether the Class Representatives did,
in fact, vigorously represent the claims of all class members.
See In re Literary Works in Elec. Databases Copyright Litig.,
654 F.3d 242, 252 (2d Cir. 2011) (“The Supreme Court‟s
decision in Amchem … allows courts, in assessing the
adequacy of representation, to examine a settlement‟s
substance for evidence of prejudice to the interests of a subset
of plaintiffs.”).
40
The deadline for submitting a claim form to receive
Category IV benefits was January 1, 2011.
41
The last flat-rate ETF contract did not expire until
December 31, 2010. See supra note 5.
42
Specifically, Category IV provides that qualifying
class members are entitled to receive one of three benefits: (i)
a prepaid 90 minute long distance calling card; (ii) if the class
member wanted to activate a new line of service with Sprint,
59
That relief is far different from the relief that other similarly
situated class members were entitled to under Category I or
Category II.43 (See AJA at 285 (providing a $90 payment to
class members under a two year contract who terminated any
time between the seventh and twenty-fourth month and paid a
flat-rate ETF); AJA at 287-88 (providing a $90 credit to class
members under a two year contract who terminated any time
between the seventh and twenty-fourth month and were
charged, but did not pay, a flat-rate ETF).)
Nevertheless, because that objection was not made
before the District Court with the clarity it has been pressed
a waiver of the $36 activation fee normally associated with a
two-year contract, and 100 free bonus minutes per month for
the first year of that two year contract; or (iii) 300 free text
messages per month for six months.
Throughout oral argument, class members who only
qualified for Category IV benefits were referred to as those in
the “donut hole.” The term “donut hole” captures the idea
that there is a difference in coverage between class members
in Categories I and II and other members who were similarly
situated to them but were unable to acquire the same relief
under the Settlement Agreement.
43
Indeed, Class Counsel concedes as much. (See
Class Counsel Rule 28(j) Ltr. at 1 (“Except for subscribers in
the ‘donut hole’, all persons with a flat-rate ETF who
terminated their contract and were charged an ETF, whether
before or after the settlement, were identically situated and
identically treated, thus, were adequately represented.”
(emphasis added) (citation omitted)).)
60
on us,44 we will not opine on the District Court‟s conclusion
that the Class Representatives can adequately represent all
class members. That being said, because the case must be
considered again on the notice issue, and because the
adequacy issue is one of high significance, we urge the
District Court to consider again in greater detail whether the
Class Representatives are adequate under Rule 23(a)(4).
44
In its letter submitted pursuant to Federal Rule of
Appellate Procedure 28(j), Class Counsel argues that because
the Galleguillos Objectors did not specifically raise the
“donut hole” objection prior to oral argument, they have
waived it. That assertion is debatable. The Galleguillos
Objectors did object to the adequacy of representation based
on the fact that Sprint was still allowed to charge flat-rate
ETFs against current subscribers who had contracts
containing flat-rate ETFs, and a logical extension of that
objection can arguably be that Sprint could continue to
enforce flat-rate ETFs without a remedy for those subscribers
that was identical to what other similarly situated class
members received under the Settlement Agreement. That
being said, because those objectors did not explain this issue
to the District Court in nearly the level of detail as they
explained it to us at oral argument, the waiver argument that
Class Counsel advances is not without weight. Whether or
not the “donut hole” objection was waived, we note again that
the District Court has an independent duty to ensure that all
class members are adequately represented. See supra note 34.
61
III. Conclusion
With full appreciation for the considerable efforts that
have been invested in the settlement of this class action, we
emphasize again the judicial duty to act as the guardian of
absent class members. For the reasons stated, we conclude
that that duty was not fully met and, accordingly, vacate the
District Court‟s January 15, 2010 order and remand the case
for further proceedings consistent with this opinion.
62