On June 12, a Northern District of Illinois judge ordered loan servicer and debt collector Real Time Resolutions, Inc. to distribute $261,815.82 in unclaimed funds to class members, rather than donating the funds to charity as a cy pres award. In doing so, the Court settled a dispute between the parties as to the proper interpretation of their class settlement agreement.
Real Time previously agreed to pay $1.3 million to settle Telephone Consumer Protection Act claims brought by plaintiff Michelle Lee Tannlund, on behalf of herself and all others similarly situated. In the lawsuit, Tannlund alleged Real Time violated the TCPA by using an automatic telephone dialing system to call her cellular phone, without her express consent, after Real Time began servicing her mortgage in 2011. The Court approved the parties’ settlement agreement on August 23, 2017.
After paying $502,000 in attorneys’ fees, $30,805 in costs and expenses, and a $12,500 incentive award to the Class Representative Plaintiff, almost $755,000 remained to be distributed to 16,485 class members who submitted a timely and valid claim. As a result, each class member received a check for $45.78. However, only approximately sixty-five percent of the class members cashed their check within the allotted 210 days. This created unclaimed funds in the amount of $261,815.82, with the parties disagreeing on how to distribute those funds.
The parties agreed their settlement agreement required a second distribution in the event unclaimed funds exceeded $4 per recipient and that the unclaimed funds should be donated to a related charity if they fell below this threshold amount. However, the parties disagreed over whether Real Time was permitted to deduct its administrative costs from the unclaimed funds when calculating whether the threshold amount was met.
Real Time argued that the settlement agreement provided that a second distribution was only necessary if, after subtracting administrative costs, the pro rata distribution would exceed the threshold amount. Based on this provision, Real Time argued the agreement required donating the unclaimed funds to charity. When deducting its $251,000 in administrative costs from the unclaimed funds, only $10,274 remained, which was less than $1 per class member.
Tannlund argued in response that the agreement “couldn’t be clearer: ‘The postage and administrative costs for any such second distribution shall be paid by Real Time.’” Therefore, she argued that dividing the unclaimed funds by the total number of class members who cashed their original settlement check yielded a payment of roughly $24 per person, thus exceeding the $4 threshold and necessitating a second distribution. Tannlund also sought sanctions in the amount of $2,500 as partial payment for the fees and costs incurred as a result of litigating the need for a second distribution.
Following briefing and a hearing, the Court granted Tannlund’s motion but denied the requested sanctions as not warranted. The Court ordered a second distribution to class members who cashed their original settlement check, at Real Time’s expense. The parties’ dispute and the Court’s Order highlight the importance of drafting settlement agreements that clearly delineate the parties’ responsibilities and account for potential contingencies, if they are foreseeable.
A copy of the Minute Entry granting Tannlund’s motion to compel and for sanctions is available here, a copy of the motion itself is available here, and a copy of Real Time’s opposition brief is available here.