District court abused its discretion by approving a class action settlement which provided no actual benefit to class members in exchange for release of their FDCPA claims. With the named parties’ consent, a federal magistrate judge may rule on a motion for final approval of a settlement in a class action. However, the magistrate judge abused his discretion in approving the settlement in this FDCPA class action. Though the settlement provided for $1,000 payments to the named plaintiffs as well as substantial attorney fees to the named plaintiff’s counsel, it provided no benefit to class members in exchange for their release of FDCPA claims against the defendant. Statutory damages were limited to $35,000 due to the defendant’s low net worth. The settlement proposed a donation of that sum to a San Diego charity. But class members were scattered all over the country and would receive no clear benefit from the donation to a local charity. The injunctive relief required no more than what the defendant had already put in effect in order to comply with applicable law, would last only two years, and even then the defendant might seek relief if the law changed. Also, an injunction would not benefit the many class members who no longer had any dealings with the defendant. When class members are required to give something up in settlement–here the right to sue for the FDCPA violations—they must be given something of value in return. Here, they were not.
Ninth Circuit Court of Appeals (Watford, J.); January 25, 2017; 2017 WL 359670