The settlement provided for both monetary and injunctive relief. Midland agreed to pay $5.2 million into a common fund for the benefit of the class. From this fund, class counsel would receive attorney fees of no more than $1.5 million, and the costs of administration. From the remainder of the fund, eligible class members who timely returned a claim form would receive payments of $10.00 each. In fact, however, the response rate was such that each class member would receive $17.38. In addition, the four named plaintiffs were to receive $8,000 collectively.
Short-Lived Landmark Ruling
On August 11, 2009, the district court issued a self-described "landmark ruling, holding that "robo-signing" affidavits in debt-collection actions violates the Fair Debt Collection Practices Act ("FDCPA")
The court found the affidavit to be false and misleading under the FDCPA due to the false attestation of personal knowledge. The court, however, denied declaratory and injunctive relief under the FDCPA.
On Appeal to The 6th Circuit
The Circuit enunciated a seven-point standard for determining whether a class action if fair, reasonable, and adequate:
- risk of fraud or collusion;
- complexity, expense and likely duration of the litigation;
- amount of discovery engaged in by the parties;
- likelihood of success on the merits;
- opinions of class counsel and class representatives;
- reaction of absent class members; and
- public interest.
In Vassalle, the Circuit found that the named plaintiffs receive "preferential treatment,"
while the relief provided to the unnamed class members is "perfunctory." Pointedly, here there were two benefits from the settlement that the unnamed class members do not receive:
First, the named plaintiffs receive the primary benefit of the settlement: the exoneration of debts owed to Midland. If the 1.44 million unnamed class members received this benefit, like Brent, they would be absolved of debts in the hundreds or even thousands of dollars. Instead, the settlement actually
prevents the unnamed class members from using Midland's use of false affidavits against Midland in any other lawsuit, virtually assuring that Midland will be able to collect on these debts; and
Second, the named plaintiffs receive an $8,000 incentive payment to be split among them.
Finally, the 6th Circuit deemed the relief actually provided to the unnamed class members as, at best, perfunctory:
First, provided they respond to the notice, the unnamed class members receive
Second, the settlement provides for one year of injunctive relief, overseen by a retired federal judge, under which Midland is required to change its policies.
The $17.38 payment was deemed de minimis, ; particularly so since many of the 1.44 million class members' debts are in the thousands or at least hundreds of dollars.
The one-year injunction was deemed of little value for three reasons:
- It does not actually prohibit Midland from creating false affidavits; rather, it only requires Midland to change its policies and provides oversight of this process.
- The injunction only lasts one year, after which Midland is free to resume its predatory practices should it choose to do so.
- The injunction offers only prospective relief that likely does not benefit class members at all.