Class Actions Brief Blog

There is no shortage of consumer class actions these days, but most of these cases are settled or dismissed. If trials are rare, trials of class actions are rarer, if only because of the stakes.   

In 2017, Dish Network tried its luck with a jury in the Middle District of North Carolina regarding claims that it made over 50,000 telephone solicitations to 18,000 residential phone numbers on the Do-Not-Call list in violation of the Telephone Consumer Protection Act. Dish lost and the Court trebled the jury award of $400 per call, resulting in $61,342,800 in total damages with $20.4 million in attorney’s fees. The Fourth Circuit affirmed the judgment, and the Supreme Court denied certiorari.

Unsurprisingly, though, a number of putative class members in the case did not file claims to receive the funds that Dish deposited to satisfy the judgment, even though they stood to receive over $800 each. The unclaimed amounts totaled over $11 million, and that amount may trend upward because not all class members will cash the checks they received.

So what happens to the unclaimed money?

In a recent order, Judge Eagles tackles that question. She considered three options: (1) a reversion to Dish; (2) a cy pres distribution; or (3) escheat to the government. Judge Eagles dispatched rather succinctly Dish’s claim to a reversion, emphasizing that the TCPA is a deterrence statute and that reversion would be inconsistent with that statutory objective. Next, she found that escheat to different state governments would be “too costly to be feasible” and would involve “significant administrative costs in dividing up the unclaimed funds,” as well as “significant resources from the court, class counsel and the administrator.”

In the end, the Court decided on a cy pres solution, which we have cautioned against in this space. To help decide on the recipients, the Court appointed a special master to make recommendations concerning potential recipients of the unclaimed funds. The Court emphasized that the proposed distributions should address the objectives of the TCPA and provide some benefit to the class members. 

Unchecked cy pres distributions – which we see more commonly in a settlement setting – are worrisome. Here, the Court seems committed to ensuring that any beneficiaries will further the statutory purpose (peace from telemarketers?). The structure established by the Court also avoids some of the underlying concerns with cy pres distributions in class action settlements, such as directing funds to organizations favored by class counsel, disconnected from the litigation and without any benefit to the class. Leslie Winner, an experienced North Carolina practitioner, has received the appointment and it will be interesting to see what her recommendations will be.

Dish Network, for its part, has been plagued by telemarketing violations. On Dec. 7, 2020, the Justice Department announced a settlement in which Dish will pay $126 million in civil penalties for violating the FTC’s Telemarketing Sales Rule, which was the largest civil penalty ever paid for such violations.