Kevin McCabe v. Caribbean Cruise Line, Incorpo , 896 F.3d 792 ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 17-1626, 17-1778, 17-1953, 17-1969, 17-1984 & 17-2857
GRANT BIRCHMEIER, et al.,
Plaintiffs-Appellees,
v.
CARIBBEAN CRUISE LINE, INC., et al.,
Defendants-Appellants.
APPEALS OF:
CARIBBEAN CRUISE LINE, INC.; VACATION OWNERSHIP
MARKETING TOURS, INC.; THE BERKLEY GROUP, INC.;
FREEDOM HOME CARE, INC.; KEVIN MCCABE
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 12 C 4069 — Matthew F. Kennelly, Judge.
____________________
ARGUED FEBRUARY 14, 2018 — DECIDED JULY 24, 2018
____________________
2 Nos. 17-1626 et al.
Before EASTERBROOK and ROVNER, Circuit Judges, and
GRIESBACH, District Judge.*
EASTERBROOK, Circuit Judge. During 2011 and 2012 a mil-
lion people received phone calls asking them to take political
surveys in exchange for a chance to go on a free cruise. Some
recipients filed a class action under the Telephone Consumer
Protection Act, 47 U.S.C. §227, seeking damages for these
unsolicited communications. Caribbean Cruise Line, Vaca-
tion Ownership Marketing Tours, and the Berkley Group
were named as defendants on the theory that, though they
had not placed the calls, they had directed them and thus are
vicariously liable. (The plaintiffs also sued the caller, which
has not participated in these appeals.) The district court cer-
tified a class under Fed. R. Civ. P. 23(b)(3). Later it granted
partial summary judgment in the plaintiffs’ favor and
scheduled a trial. 179 F. Supp. 3d 817 (N.D. Ill. 2016).
On the eve of trial the parties settled. Plaintiffs agreed to
release their claims against all defendants and any of the de-
fendants’ “agents [or] independent contractors”. In exchange
defendants agreed to pay into a fund no less than $56 mil-
lion and no more than $76 million. The total will depend on
the number of approved claims that class members submit.
Out of the fund will come payments to the class, incentive
awards to the named representatives, about $2 million in
administrative expenses, and attorneys’ fees. The class will
receive payments in two rounds. If some claimants do not
cash the checks sent during the second round, money will be
left over, and those remaining funds will go to “an appro-
priate cy pres recipient” to be approved by the district court.
* Of the Eastern District of Wisconsin, sitting by designation.
Nos. 17-1626 et al. 3
(The district court has not yet determined whether that oc-
curs, so we need not wait for In re Google Referrer Header Pri-
vacy Litigation, 869 F.3d 737 (9th Cir. 2017), cert. granted un-
der the name Frank v. Gaos, 138 S. Ct. 1697 (2018).)
Over the objections of Kevin McCabe, who says he is in
the class, the district court approved the settlement, estimat-
ing that each claimant will receive $400. 2017 U.S. Dist. LEXIS
29400 (N.D. Ill. Mar. 2, 2017). After approving the settlement,
the court entered judgment under Fed. R. Civ. P. 58. It also
awarded attorneys’ fees to class counsel under Fed. R. Civ.
P. 23(h). The award gives counsel 36% of the first $10 million
paid into the fund, 30% of the next $10 million, 24% of the
next $36 million, and 18% of any additional recovery. 2017
U.S. Dist. LEXIS 54080 (N.D. Ill. Apr. 10, 2017).
We have three sets of appeals: (1) defendants and a
member of the class, Freedom Home Care, contend that the
award of fees overcompensates class counsel; (2) Freedom
Home Care wants an incentive award and attorneys’ fees for
its role in objecting to class counsel’s fees; and (3) McCabe
complains that the settlement’s approval was improper. Be-
fore we discuss the merits of these appeals, we must ensure
that we have jurisdiction.
The appeals are within our jurisdiction only if they chal-
lenge “final decisions” of the district court. 28 U.S.C. §1291.
A decision on the merits is final only if it “resolves all claims
of all parties”. Domanus v. Locke Lord LLP, 847 F.3d 469, 477
(7th Cir. 2017) (emphasis in original). The caller (or rather,
three entities that allegedly acted as the caller—Economic
Strategy LLC, Economy Strategy Group, Inc., and a political
committee named Economic Strategy Group) did not partic-
ipate in the settlement. But the settlement releases plaintiffs’
4 Nos. 17-1626 et al.
claims against the settling defendants’ “agents [or] inde-
pendent contractors”. The parties to these appeals tell us that
the caller was an “agent” or “independent contractor” of the
other defendants for the purpose of this release. Consistent
with that understanding, the district court’s judgment states:
“The Court hereby dismisses the Action”—the whole action,
not just some of it—“on the merits and with prejudice”. This
judgment disposes of the claims against all parties, not just
the claims against the settling parties, so it is a final decision
on the merits. Freedom Home Care’s challenge to the denial
of an incentive award and fees therefore falls within the
scope of §1291, as does McCabe’s appeal. Cf. Devlin v.
Scardelletti, 536 U.S. 1 (2002).
Whether the same can be said about defendants’ and
Freedom Home Care’s appeal of the decision awarding fees
to class counsel requires more discussion. A decision about
fees, if final, is appealable separately from the merits. See
Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988). The
district court wrote:
Because the process for approving claims is still ongoing, the
Court awards at this time only those attorney’s fees correspond-
ing to the minimum amount defendants will be required to pay
into the common fund. As discussed above, that fee amount is
$14.76 million [that is, the sum of 36% of the first $10 million,
30% of the next $10 million, and 24% of the next $34 million].
Class counsel may petition the Court for the remainder of the fee
award upon conclusion of the claims-approval process.
2017 U.S. Dist. LEXIS 54080 at *32. This decision does not
quantify the total fees that counsel will collect. It instead
awards a portion of the fees ($14.76 million) and tells counsel
to come back for more if the size of the pot grows.
Nos. 17-1626 et al. 5
Interim awards of attorneys’ fees can hardly be called fi-
nal, cf. Sole v. Wyner, 551 U.S. 74 (2007), and such awards
typically are not appealable under §1291. See, e.g., Dupuy v.
Samuels, 423 F.3d 714, 717 (7th Cir. 2005); People Who Care v.
Board of Education, 272 F.3d 936, 937 (7th Cir. 2001). But an
award may be final if the district court lays out a formula for
calculating the award’s amount. See, e.g., Hyland v. Liberty
Mutual Fire Insurance Co., 885 F.3d 482, 484 (7th Cir. 2018);
Production & Maintenance Employees’ Local 504 v. Roadmaster
Corp., 954 F.2d 1397, 1401–02 (7th Cir. 1992); Parks v. Pav-
kovic, 753 F.2d 1397, 1401 (7th Cir. 1985). See also Charles
Alan Wright, Arthur R. Miller & Edward H. Cooper, 15B
Federal Practice & Procedure §3915.2 at 279 (2d ed. 1992)
(“[M]erely ‘ministerial’ proceedings to calculate a specific
award do not defeat finality.”). Such an award leaves some
math but nothing for the district court to decide.
This award does exactly that. Though the district court
told counsel to “petition the Court for the remainder of the
fee award,” it also prescribed a formula for that remainder:
18% of the amount recovered over $56 million. The court
had considered other means, such as using a multiplier of
0.15 instead of 0.18. But it landed on 18%, explained its
choice, and stated that “the Court awards class counsel …
18% of the remainder.” 2017 U.S. Dist. LEXIS 54080 at *28–31.
The total award is not yet known only because the number
of approved claims is not yet known. Once the parties know
that number, computing the remaining fees will be a me-
chanical exercise. Some tasks unrelated to the calculation of
fees remain for the district court, such as (perhaps) choosing
a recipient for funds unclaimed after the second round of
payments. But as a practical matter the district court is fin-
6 Nos. 17-1626 et al.
ished with the litigation about class counsel’s fees, so the
award is final for the purpose of §1291.
More: The fact that the award postdates the judgment
creates a problem distinct from cases about prejudgment
awards. A litigant who wishes to challenge a prejudgment
award can do so by timely appealing the judgment. See
Dupuy, 423 F.3d at 717; Badger Pharmacal, Inc. v. Colgate-
Palmolive Co., 1 F.3d 621, 626 (7th Cir. 1993). But when, if not
now, could the defendants in this case challenge the
postjudgment award? Suppose that months from now the
parties determine that only $56 million goes into the fund.
Then there will not be any remaining fees for class counsel to
seek (18% of nothing is nothing) or any subsequent award
from which defendants could appeal. That possibility and its
variations, if combined with a conclusion that the original
award is not final, would put defendants in a bind. They
could not timely appeal the original award, because a second
might follow after the expiration of the 30-day deadline to
appeal the first. See 28 U.S.C. §2107(a). But a second might
not follow, and defendants cannot appeal an award that is
never made. Such dilemmas should be avoided. See Gelboim
v. Bank of America Corp., 135 S. Ct. 897, 904–06 (2015). We do
not mean to suggest that the collateral-order doctrine ap-
plies; that possibility goes nowhere after Mohawk Industries,
Inc. v. Carpenter, 558 U.S. 100 (2009). Instead we mean that
our conclusion about the award’s finality steers clear of a
problem that the opposite conclusion would produce.
So we have jurisdiction over the appeals, and we address
each in turn. Defendants take issue with the structure of the
fee award. They insist that the award should give class
counsel only 25% (rather than 30%) of the second tier of re-
Nos. 17-1626 et al. 7
covery, 20% (rather than 24%) of the third, and 15% (rather
than 18%) of the remainder. To this Freedom Home Care
adds that the third tier should be capped at some figure
lower than $56 million. These changes to the award, they
say, would align it with awards of attorneys’ fees that have
been approved in other suits brought under the Act. See also
In re Synthroid Marketing Litigation, 325 F.3d 974 (7th Cir.
2003).
Defendants are correct that the fee award is bigger than
some awards in other suits. But that does not mean the
award is too big. When awarding fees to class counsel, dis-
trict courts must approximate the fees that the lawyers and
their clients would have agreed to at the outset of the litiga-
tion given the suit’s risks, competitive rates in the market,
and related considerations. See In re Synthroid Marketing Liti-
gation, 264 F.3d 712 (7th Cir. 2001); Silverman v. Motorola Solu-
tions, Inc., 739 F.3d 956 (7th Cir. 2013). The district court en-
gaged in that ex ante analysis, explaining at length why this
suit had been a riskier undertaking than many others
brought under the Act and why counsel thus would have
negotiated a relatively high rate of compensation. A primary
source of risk was plaintiffs’ reliance on a theory of vicarious
liability, which created legal and factual complications that
do not arise when plaintiffs pursue only direct liability. See
2017 U.S. Dist. LEXIS 54080 at *18–32.
We need not reproduce the district court’s thorough dis-
cussion of this subject. We review decisions about attorneys’
fees for abuse of discretion, see, e.g., Silverman, 739 F.3d at
958, and appellants have not identified any abuse. We add
only that it is unproductive to make arguments about the
percentages assigned to some tiers of recovery, as defend-
8 Nos. 17-1626 et al.
ants have done. Consider: 30% of the first $20 million and
20% of the next $20 million come to the same as 25% of $40
million. Bands and percentages can be juggled, but, unless
the bottom line changes, what’s the point? (The risk profiles
of these two structures may differ, but that does not matter
when they are devised after the award of damages has been
calculated.) Defendants’ position boils down to a contention
that the fees exceed the market rate, and the district court
did not abuse its discretion in finding otherwise. What got
multiplied with what else to produce a market-
approximating outcome does not matter.
Freedom Home Care contends that it is entitled to an in-
centive award and attorneys’ fees for its objection to class
counsel’s fees. Plaintiffs’ motion for fees had proposed that
class counsel take a third of the fund. Freedom Home Care
counter-proposed that the fund be divided into four tiers
and that counsel take decreasing proportions of each. The
award adopts that structure, which the parties call a “slid-
ing-scale approach,” and Freedom Home Care wants to be
compensated for proposing it. Yet its proposal did not add
marginal value to the litigation. Plaintiffs’ motion itself dis-
cussed the sliding-scale approach, a common one in large
class actions. The district court was certain to consider the
possibility, no matter what Freedom Home Care said, so the
court did not abuse its discretion in concluding that Free-
dom Home Care did not supply value to the class. See 2017
U.S. Dist. LEXIS 135755 (N.D. Ill. Aug. 24, 2017).
Last comes McCabe’s appeal. He contends that the set-
tlement improperly releases claims outside the class period
(August 2011 to August 2012) and that the notice sent to the
class members was deficient. For two reasons the district
Nos. 17-1626 et al. 9
court held that McCabe lacks standing to raise these objec-
tions. First, McCabe’s objections state that he is “a class
member who received calls on his cell-phone number … and
landline phone … outside of the class period”. The court
found this statement self-contradictory; it treated McCabe’s
assertion that he received calls “outside of the class period”
as an assertion that he did not receive calls within the class
period, and it reasoned that McCabe thus could not be in the
class. Second, in 2015 McCabe won a judgment against Car-
ibbean Cruise Line in an action he had brought in the East-
ern District of New York. The court decided that any claim
arising from calls McCabe received during the class period
should have been brought in his separate suit, and that the
doctrine of claim preclusion now bars any such claim.
The district court’s conclusions about standing were
flawed. Claim preclusion, an affirmative defense under Fed.
R. Civ. P. 8(c), has nothing to do with standing. See Exxon
Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 293
(2005). And there wasn’t a basis to ignore McCabe’s asser-
tion that he is a member of the class. The statement on which
the district court relied does not say otherwise; it tells us that
McCabe is a member who also received calls outside the class
period. The other parties ask us to disbelieve McCabe be-
cause he has not produced logs to show when he received
calls. But McCabe supported his statement by signing it un-
der penalty of perjury. See 18 U.S.C. §1621; 28 U.S.C. §1746.
Though he could have proved his membership with differ-
ent evidence, it does not follow that we should disregard the
evidence he offered.
Despite concluding that McCabe lacks standing, the dis-
trict court rejected his objections on the merits. So do we.
10 Nos. 17-1626 et al.
McCabe first argues that the settlement releases claims aris-
ing from calls outside the class period. The settlement de-
fines “released claims” as:
[A]ny and all actual, potential, filed, known or unknown, fixed
or contingent, claimed or unclaimed, suspected or unsuspected,
claims … arising out of the facts, transactions, events, matters,
occurrences, acts, disclosures, statements, representations, omis-
sions or failures to act regarding the alleged calls made with a
prerecorded or artificial voice offering a free cruise in exchange
for taking an automated public opinion and/or political survey[.]
According to McCabe, the “alleged calls” mentioned in this
definition include calls made before 2011 or after 2012. Be-
cause the class members were never notified that the settle-
ment covers such calls, the argument goes, the court should
not have approved it. The argument rests on an incorrect
premise. The “alleged calls” include: well, only the calls that
were alleged. And the operative complaint, filed in March
2015, alleges calls only from August 2011 to August 2012.
The appellate briefs tell us that plaintiffs and defendants
(and the district court) agreed that “alleged calls” means
“calls within the class period”, and the doctrine of judicial
estoppel will prevent those parties from taking an opposite
position in future proceedings. See New Hampshire v. Maine,
532 U.S. 742, 749–51 (2001).
We can quickly dispose of McCabe’s remaining argu-
ment: He insists that the notice sent to the class insufficiently
described the process for selecting a cy pres recipient. Not so.
The notice told class members that a cy pres recipient might
be selected after the second round of payments, gave in-
structions for recommending recipients, and provided a
website where members can learn more about the settle-
Nos. 17-1626 et al. 11
ment. That is enough to meet the notice requirements of Fed.
R. Civ. P. 23.
AFFIRMED