Last week, a United States District Court in Washington rejected a proposed TCPA class settlement in part because the class definition included an impermissible characterization of the disputed term of art: automatic telephone dialing system (“ATDS”). A copy of the Order is available here

This TCPA class action involved allegations that the defendant made telemarketing calls to consumers, relating to the operation of a retirement home, using an ATDS and without their prior express consent. After two rounds of mediation, the parties reached agreement on a class-wide resolution, which consisted of an all-cash, non-reversionary settlement fund totaling $6 million. The proposed settlement required that class members complete and return a claim form to obtain their share of the proceeds.

The plaintiff filed a motion for preliminary approval of the class settlement agreement, which defined the class in relevant part as including consumers who received calls “through the use of a dialing system characterized by the plaintiff as an automated telephone dialing system or an artificial or prerecorded voice.” The Court rejected this unusual definition, which relied “solely on plaintiff’s characterization of an ATDS, rather than an ascertainable fact.” Of note, the defendant consistently denied that it used an ATDS to call the cellular telephone numbers at issue in the case. Given the use of a disputed term of art, the Court held that the proposed class definition lacked “the clarity required to determine who is in the class.”

The Court also identified other bases for rejecting the settlement. Specifically, the Court held that because the settlement provided for a pro rata distribution of funds, in concert with an affirmative opt-in requirement, there might be a conflict between the class and its representatives or among class members based on the incentive to minimize the number of class members that opt-in. The Court refused to approve any settlement requiring class members to “opt-in” to obtain their share of the settlement proceeds. In addition, the Court faulted the plaintiff for failing to include an estimate of the attorneys fees and litigation expenses that would reduce the fund available for class members, making it impossible to estimate what the proposed relief would be for the class.

Finally, the Court took issue with the identity of the proposed cy pres recipient and the fact that the proposed notice to class members required class members to send a letter to the Court in order to be permitted to address the Court at the final fairness hearing.