Alarm.com has agreed to pay $28 million to settle a TCPA class action, which involves allegations that it sent unlawful telemarketing communications to more than 1.2 million consumers.  The parties filed a motion for preliminary approval of the class settlement, which is set for hearing on November 27.  The case, pending in the Northern District of California, is Abante Rooter and Plumbing, Inc. v. Alarm.com Inc., No. 4:15-cv-06314.

The proposed settlement requires Alarm.com to pay $28 million into a settlement fund, which would be used to pay the timely and valid claims submitted by class members.  The settlement fund is non-reversionary, so if any funds remain after the deadline for cashing checks, the administrator will issue a second distribution to class members, with any remaining balance to be disbursed cy pres to the National Consumer Law Center.  The parties estimate that the proposed settlement allows for each class member to receive a payment of between $95 and $143.

In support of the motion for preliminary approval of the class settlement, the parties argue that the settlement is fair given several considerations.  The parties maintain that:

• The settlement is the result of an arm’s-length and non-collusive negotiation.
• The relief provided by the settlement is adequate considering the strength of the plaintiffs’ case and the potential risks, costs, and delay of trial and appeal.  On this point, the parties note that if consumers prevailed at trial and on appeal, the trebled TCPA damages could exceed $1.8 billion, a judgment which would be difficult for any company to satisfy.  The parties also note that the agreed monetary payment is approximately equal to Alarm.com’s entire net income from 2017.
• The settlement compares favorably to other TCPA class settlements and that the bargained-for injunctive relief will also benefit consumers.
• Counsel are well informed of the strengths and weaknesses of the claims and defenses and that they support the settlement, which was only negotiated weeks before trial.
• The settlement will be fairly distributed to settlement class members, given the simple and fair claims process and the reasonable service awards requested by the named class members.
• Class counsel will request approval of a fair and reasonable fee to be paid from the settlement fund—up to 30% of the fund or $8.4 million—plus approximately $300,000 in costs incurred.

If approved, the settlement would resolve a class action that was filed in December 2015, which accuses the security system provider and its dealer of using autodialers and recorded messages to call millions of cellphones, residential lines, and consumers on the National Do Not Call Registry.  The suit noted that Alarm.com sells its software through authorized third-party security system dealers, which have a history of compliance issues with the TCPA and which have been the subject of enforcement actions by attorneys general in Pennsylvania and Kentucky, and by the Federal Trade Commission.  In May 2017, the case was certified as a class action, and in May 2018 the court denied Alarm.com’s motion for summary judgment.

Troutman Sanders LLP has unique industry-leading expertise with TCPA compliance, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies.  We will continue to monitor this case along with regulatory and judicial interpretation of the TCPA to identify and advise on potential risks.