Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-02164/USCOURTS-ca7-15-02164-0/pdf.json

Parties Involved:
Ira Holtzman
Appellee
Gregory P. Turza
Appellant

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit ____________________

Nos. 15-2164 & 15-2256

IRA HOLTZMAN, individually and as representative of a class,

Plaintiff-Appellee, Cross-Appellant,

v.

GREGORY P. TURZA,

Defendant-Appellant, Cross-Appellee.

____________________

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 08 C 2014 — Robert W. Gettleman, Judge.

____________________

ARGUED JANUARY 11, 2016 — DECIDED JULY 8, 2016

____________________

Before EASTERBROOK, WILLIAMS, and SYKES, Circuit Judges.

EASTERBROOK, Circuit Judge. Attorney Gregory Turza 

tried to solicit business by sending fax advertisements to accountants. Three years ago we held that these faxes violated 

the Telephone Consumer Protection Act of 1991, 47 U.S.C. 

§227. Ira Holtzman, C.P.A., & Associates, Ltd. v. Turza, 728 F.3d 

682 (7th Cir. 2013). The district judge had ordered Turza to 

post a fund of about $4.2 million, stating that he planned to 

distribute this sum to the class members and donate any reCase: 15-2164 Document: 42 Filed: 07/08/2016 Pages: 5
2 Nos. 15-2164 & 15-2256

mainder to a charity. We reversed that part of the district 

court’s order. We held that “this action stems from discrete 

injuries suffered by each recipient of the faxes; it does not 

create a common fund.” 728 F.3d at 688. We remanded the 

case to the district court for further proceedings.

While that appeal was pending, Turza had posted a supersedeas bond. After losing on the merits he deposited $4.2 

million into the court’s registry. Invoking the common-fund 

doctrine of Boeing Co. v. Van Gemert, 444 U.S. 472 (1980), the

district judge decided that class counsel gets a third of this

money (about $1.4 million) as compensation for legal services. The Act authorizes an award of up to $500 per improper fax. 47 U.S.C. §227(b)(3)(B). The district court ordered 

two-thirds of that, or $333 per fax, sent to every class member. (The names and phone numbers of the persons and 

businesses that received the faxes are known; the court’s order does not require class members to submit requests for 

payment.) If some class members fail to cash their checks, or

if they have moved and cannot be tracked down, then there 

will be a second distribution. The maximum paid out per fax 

is to be $500. If money remains in the fund after counsel 

have received $1.4 million and all members who can be located (and take the payments) have received $500 per fax, 

the residue goes back to Turza. Both the class and Turza 

have appealed from these orders.

Turza contends that paying counsel based on the total 

value of the fund is inappropriate, and he’s right. Boeing

holds that counsel are entitled to be compensated from a 

common fund, but our 2013 opinion held that this is not a 

common-fund case. Class counsel maintain that our decision 

is mistaken, but it is the law of the case. Our decision cites

Case: 15-2164 Document: 42 Filed: 07/08/2016 Pages: 5
Nos. 15-2164 & 15-2256 3

Boeing; it is not a new development or a controlling authority 

of which we were unaware. We thought then, and think 

now, that suits under the Telephone Consumer Protection 

Act seek recovery for discrete wrongs to the recipients. See

Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 

263–67 & n.39 (1975) (explaining the difference between 

common-fund cases and class actions that aggregate individual claims); Snyder v. Harris, 394 U.S. 332 (1969) (same);

Travelers Property Casualty v. Good, 689 F.3d 714 (7th Cir. 

2012) (same). Under our 2013 decision the $4.2 million represents security for payment, not a genuine common fund (see 

Boeing, 444 U.S. at 479–80 n.5).

If all class members claim their awards, this will make no 

difference. Under the American Rule for the allocation of attorneys’ fees, litigants must cover their own legal costs. (The 

Telephone Consumer Protection Act is not a fee-shifting 

statute.) So the members of the plaintiff class must pay their 

lawyers, and none of the class members has appeared to 

contend that a third of the recovery is an excessive fee. This 

means that, of each $500 in damages for a given fax, counsel 

are entitled to about $167, and the fax recipient gets the rest.

But if a given recipient cannot be located, or spurns the 

money, counsel are not entitled to be paid for that fax. The 

district judge held that Turza gets the money back, and 

awarding counsel $167 per fax when the class member gets 

nothing would be equivalent to treating the Act as a feeshifting statute and requiring Turza to pay the class’s attorneys just because he lost the suit.

The district judge ordered a second round of distributions, so that a class member could receive as much as $500 

per fax (if some class members could not be located or did 

Case: 15-2164 Document: 42 Filed: 07/08/2016 Pages: 5
4 Nos. 15-2164 & 15-2256

not cash their checks). But that second round of distribution 

would be inconsistent with the American Rule on the allocation of legal fees. The statute authorizes a maximum award 

of $500 per fax, out of which counsel must be paid. Given the 

district court’s conclusion that Turza is entitled to the return 

of the excess in the fund (which, to repeat, is only a security 

device), distributing more than $500 per fax ($333 to the recipient and $167 to counsel) would either exceed the statutory cap or effectively shift the class’s legal fees to Turza. See 

Pearson v. NBTY, Inc., 772 F.3d 778, 781–82 (7th Cir. 2014).

The class protests the district court’s conclusion that any 

residue goes back to Turza. It would prefer to direct the 

money to a charity, as the district court had announced before our 2013 decision. This argument is of a piece with the 

class’s contention that the $4.2 million represents a common 

fund. Given our conclusion that the class members have suffered discrete rather than undifferentiated losses, however, 

the money represents security for payment rather than a 

common fund. And once a debt has been satisfied, a security 

interest is released. So if X borrows from a bank and pledges 

stock as security, once X repays the loan the stock is returned; it is not given to charity.

We do not mean to foreclose the possibility of a cy pres

distribution (as these charitable uses are called) in all cases 

with individual harms. Our original opinion observes that 

settlements sometimes provide that none of the money will 

be returned, and then the judge must do something with the 

residue. If the government does not demand escheat, a charitable distribution to an organization that will do some good 

for the class becomes attractive. And our 2013 decision did 

not hold that the absence of a settlement makes a cy pres

Case: 15-2164 Document: 42 Filed: 07/08/2016 Pages: 5
Nos. 15-2164 & 15-2256 5

remedy impossible. A district judge might conclude that the 

inability to track down the current address of a victim who 

has moved should not automatically benefit the wrongdoer. 

But, for the reasons we gave in 2013, a judge is never legally 

obliged to divert money from the litigants to a charity. The 

district judge’s decision that any surplus goes back to Turza 

cannot be called either a legal blunder or an abuse of discretion.

The judgment is affirmed in part (on the class’s appeal) 

and reversed in part (on Turza’s appeal), and the case is remanded for the entry of judgment consistent with this opinion.

Case: 15-2164 Document: 42 Filed: 07/08/2016 Pages: 5