FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MICHAEL P. KOBY, an

individual; MICHAEL SIMMONS,

an individual; and JONATHAN

SUPLER, an individual, on behalf

of themselves and all others

similarly situated,

Plaintiffs-Appellees,

BERNADETTE M. HELMUTH,

Objector-Appellant,

UNITED STATES OF AMERICA,

Intervenor,

v.

ARS NATIONAL SERVICES, INC.,

a California corporation; JOHN

AND JANE DOES, 1 through 25,

inclusive,

Defendants-Appellees.

No. 13-56964

D.C. No.

3:09-cv-00780-KSC

OPINION

Appeal from the United States District Court

for the Southern District of California

Karen S. Crawford, Magistrate Judge, Presiding

Argued and Submitted January 7, 2016

Pasadena, California
2 KOBY V. HELMUTH

Filed January 25, 2017

Before: Paul J. Watford and Michelle T. Friedland, Circuit

Judges, and J. Frederick Motz,

*

 District Judge.

Opinion by Judge Watford

SUMMARY**

Class Action Settlement / Magistrate Judges

The panel reversed a magistrate judge’s order approving

a class action settlement in a suit brought against a debt

collection agency under the Fair Debt Collection Practices

Act.

The panel held that the magistrate judge had the authority

to enter final judgment under 28 U.S.C. § 636(c) because she

obtained the consent of the named plaintiffs and the

defendant. Joining other circuits, the panel held that the

magistrate judge was not required to obtain the consent of the

four million additional class members who were not present

before the district court. The panel also held that § 636(c)

does not violate Article III of the Constitution by permitting

magistrate judges to exercise jurisdiction over class actions

without obtaining the consent of each absent class member.

*The Honorable J. Frederick Motz, District Judge for the U.S. District

Court for the District of Maryland, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
KOBY V. HELMUTH 3

The panel held that the magistrate judge abused her

discretion by approving the settlement as fair, reasonable, and

adequate under Federal Rule of Civil Procedure 23(e)(2)

because there was no evidence that the injunctive relief

afforded by the settlement had any value to the class

members, yet to obtain it they had to relinquish their right to

seek damages in any other class action. There was also no

evidence that the absent class members would derive any

benefit from the settlement’s cy pres award. The panel

remanded the case to the district court.

COUNSEL

Jonathan Taylor (argued) and Deepak Gupta, Gupta Beck

PLLC, Washington, D.C.; Donald A. Yarbrough, Fort

Lauderdale, Florida; Steven M. Bronson, The Bronson Firm

APC, San Diego, California; for Objector-Appellant.

Philip D. Stern (argued), Union, New Jersey; Robert E.

Schroth, Sr. and Robert E. Schroth, Jr., Schroth & Schroth,

San Diego, California, for Plaintiffs-Appellees.

Sean P. Flynn (argued), Gordon & Rees Scully Mansukhani,

Irvine, California; David L. Hartsell, McGuire Woods LLP,

Chicago, Illinois; for Defendant-Appellee.

Brian Wolfman, Institute for Public Representation,

Georgetown University Law Center, Washington, D.C.; Ira

Rheingold, National Association of Consumer Advocates,

Washington, D.C.; for Amicus Curiae National Association

of Consumer Advocates.
4 KOBY V. HELMUTH

OPINION

WATFORD, Circuit Judge:

The magistrate judge in this case approved a class action

settlement in which the named plaintiffs and class counsel got

what they wanted but the remaining four million class

members got worthless injunctive relief. In exchange for

receiving nothing of value, the class members gave up their

right to assert damages claims against the defendant in any

other class action. We are asked to decide two issues:

whether the magistrate judge had the authority to exercise

jurisdiction without obtaining the consent of all four million

class members; and, assuming we get past that issue, whether

the magistrate judge abused her discretion by approving the

settlement as fair, reasonable, and adequate.

I

The named plaintiffs are Michael Koby, Michael

Simmons, and Jonathan Supler. In April 2009 they sued ARS

National Services, Inc., a debt collection agency, under the

Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.

§ 1692 et seq. They alleged that ARS violated §§ 1692d(6)

and 1692e(11) of the FDCPA by leaving voicemail messages

in which the callers failed to disclose (1) that they worked for

ARS, (2) that ARS is a debt collector, or (3) that the purpose

of the call was to collect a debt. The named plaintiffs brought

the action on behalf of everyone in the United States who

received a voicemail message from ARS which failed to

disclose that information. The class consists of some four

million people nationwide.
KOBY V. HELMUTH 5

The named plaintiffs requested “maximum statutory

damages,” which vary under the FDCPA depending on the

nature of the action being brought. In an individual action, a

plaintiff may recover any actual damages suffered plus

statutory damages up to $1,000. § 1692k(a)(1), (a)(2)(A). In

a class action, the named plaintiffs may recover actual

damages plus statutory damages up to $1,000, but the

damages award for the rest of the class is capped at $500,000

or 1% of the defendant’s net worth, whichever is less. 

§ 1692k(a)(2)(B).

In August 2011, after the district court denied ARS’s

motion to dismiss the case on the pleadings, the parties began

discussing settlement. Around the same time, ARS

voluntarily adopted a new, standardized voicemail message

which requires its employees to disclose that they work for

ARS, that ARS is a debt collector, and that they are calling to

collect a debt. The parties agree that this new voicemail

message complies with the FDCPA.

Over the course of more than a year, the parties engaged

in settlement discussions with the assistance of a magistrate

judge. The named plaintiffs and ARS eventually consented

to having the same magistrate judge conduct all further

proceedings in the case, including the entry of final judgment. 

The district court entered an order authorizing the magistrate

judge to exercise jurisdiction over the case, and she presided

over all further proceedings.

In January 2013, following a full-day mandatory

settlement conference before the magistrate judge, the parties

finally hammered out a deal. Under the terms of the

settlement, the parties agreed to seek certification of a

nationwide, settlement-only class under Federal Rule of Civil
6 KOBY V. HELMUTH

Procedure 23(b)(2). The proposed class consisted of

everyone in the United States who between April 2008 and

August 2011 received a voicemail message from ARS that

failed to identify ARS as the caller, disclose that the call was

from a debt collector, or state that the purpose of the call was

to collect a debt. (The parties chose those dates because April

2008 is the beginning of the applicable statute of limitations

period and ARS ended the alleged FDCPA violations in

August 2011, when it adopted the new voicemail message.) 

Because the class would be certified under Rule 23(b)(2), the

parties agreed that no notice of any kind would be sent to the

four million class members and that no one would be

permitted to opt out of the class.

In terms of monetary payments, ARS agreed to pay each

of the three named plaintiffs $1,000, the maximum theycould

hope to recover under the FDCPA as none of them had

suffered any actual damages. ARS represented to the court

(although it is unclear whether the magistrate judge took any

steps to verify this fact) that its net worth was only $3.5

million, which meant the other four million class members

could collectively recover no more than $35,000. Given the

impossibility of distributing less than a penny to each

member of the class, ARS agreed to make a $35,000 cy pres

award to a local San Diego charity instead. ARS also agreed

to pay class counsel the negotiated sum of $67,500 in

attorney’s fees.

The four million unnamed class members receive no

monetary compensation under the settlement. They are,

however, the beneficiaries of a stipulated injunction to be

entered against ARS as part of the settlement. The injunction

requires ARS to continue using, for a period of two years, the

new voicemail message it had already adopted voluntarily
KOBY V. HELMUTH 7

back in August 2011. In return for that supposed benefit, the

four million class members forfeit the right to seek damages

from ARS as part of a class action. The class members retain

the right to pursue damages claims against ARS on an

individual basis.

As required by the Class Action Fairness Act, see

28 U.S.C. § 1715(b), ARS sent notice of the proposed

settlement to the appropriate state and federal officials, none

of whom objected to the settlement.

The four million class members did not receive individual

notice of the proposed settlement, but one class member—the

appellant in this case, Bernadette Helmuth—filed an

objection. She is the named plaintiff in a separate class

action against ARS pending in the district court for the

Southern District of Florida. Her lawsuit alleges essentially

the same FDCPA violations alleged in this case, except that

she seeks certification of a much smaller class limited to

Florida residents who owed money to a particular creditor on

whose behalf ARS was attempting to collect. After the

parties agreed to the settlement in this case, ARS asked the

district court in Florida to stay all further proceedings in

Helmuth’s case on the ground that, if approved, the

settlement would bar her case from proceeding as a class

action. The district court in Florida agreed to stay Helmuth’s

action pending final approval of the settlement.

In her objection to the settlement, Helmuth argued, among

other things, that the settlement was unfair and unreasonable

because class members would be barred from pursuing

damages claims as part of a class action but would receive

nothing of value in return. (Helmuth did not object to the

magistrate judge’s authority to approve the settlement and
8 KOBY V. HELMUTH

enter judgment, so we express no view on the propriety of

having the same judge who assisted the parties in negotiating

a settlement decide whether the settlement should be

approved as fair and reasonable.) After conducting a fairness

hearing at which Helmuth’s counsel, ARS’s counsel, and

class counsel presented argument, the magistrate judge

certified the proposed class under Rule 23(b)(2); approved the

settlement as fair, reasonable, and adequate under Rule

23(e)(2); and entered judgment accordingly. Having objected

to the settlement in the district court, Helmuth is entitled to

challenge the court’s rulings on appeal. See Devlin v.

Scardelletti, 536 U.S. 1, 14 (2002).

II

Before reaching the merits, we must be sure we have

jurisdiction to decide this appeal. That inquiry requires more

work here than in most cases. Our jurisdiction is triggered

only if the magistrate judge had the authority to enter final

judgment under 28 U.S.C. § 636(c). See Anderson v.

WoodCreek Venture Ltd., 351 F.3d 911, 913–14 (9th Cir.

2003). Section 636(c) authorizes magistrate judges, “[u]pon

the consent of the parties,” to “conduct any or all proceedings

in a jury or nonjury civil matter and order the entry of

judgment in the case, when specially designated to exercise

such jurisdiction by the district court or courts he serves.” 

28 U.S.C. § 636(c)(1). When a magistrate judge is authorized

to enter final judgment, “an aggrieved party may appeal

directly to the appropriate United States court of appeals from

the judgment of the magistrate judge in the same manner as

an appeal from any other judgment of a district court.” 

§ 636(c)(3).
KOBY V. HELMUTH 9

No one disputes that the district court properly designated

the magistrate judge to exercise jurisdiction in this case. Nor

is there any dispute that the named plaintiffs and ARS

consented to the magistrate judge’s exercise of jurisdiction. 

The only question is whether the statute required not just the

consent of the named plaintiffs, but also the consent of the

four million class members who were not present before the

court (we will refer to them as the absent class members). 

We conclude that the statute requires the consent of the

named plaintiffs alone and join three other circuits that have

reached the same conclusion. See Day v. Persels &

Associates, LLC, 729 F.3d 1309, 1316 (11th Cir. 2013);

Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 181

(3d Cir. 2012); Williams v. General Electric Capital Auto

Lease, Inc., 159 F.3d 266, 269 (7th Cir. 1998).

As a purely linguistic matter, § 636(c)(1)’s reference to

the consent of “the parties” could be read to encompass both

the named plaintiffs and the absent class members, for the

term does not have a single fixed meaning. In some contexts

absent class members are treated as parties, see In re Cement

Antitrust Litigation, 688 F.2d 1297, 1307–10 (9th Cir. 1982)

(judicial recusal statute), while in other contexts they are not,

see Snyder v. Harris, 394 U.S. 332, 340 (1969) (diversity

jurisdiction statute). As the Supreme Court has observed,

absent class members may be treated as parties “for some

purposes and not for others.” Devlin, 536 U.S. at 10.

Viewing § 636(c) as a whole, it seems clear that Congress

did not intend absent class members to be treated as parties in

this context. In § 636(c)(2), which specifies the procedures

for obtaining party consent under (c)(1), the phrase “the

parties” is used multiple times in a way that cannot sensibly
10 KOBY V. HELMUTH

be read to include absent class members.

1 For example, the

provision states that when a magistrate judge has been

designated to exercise jurisdiction under (c)(1), “the clerk of

court shall, at the time the action is filed, notify the parties of

the availability of a magistrate judge to exercise such

jurisdiction.” In virtually all class actions, it would be

impossible for the clerk of court to issue this notice to absent

class members at the time the action is filed. The identities

of all absent class members will often not be known until

later in the case, after at least preliminary discovery has been

conducted. Even if the identities of all absent class members

are known at the outset of the case, the clerk would need to

compile their names and contact information in order to send

the required notice, since that information will not appear in

the complaint. And in large class actions, the cost of sending

each class member notice of the availability of a magistrate

judge would be prohibitive even for the most well-funded

district courts. We doubt Congress would have imposed

1

 Section 636(c)(2) provides:

If a magistrate judge is designated to exercise civil

jurisdiction under paragraph (1) of this subsection, the

clerk of court shall, at the time the action is filed, notify

the parties of the availability of a magistrate judge to

exercise such jurisdiction. The decision of the parties

shall be communicated to the clerk of court. 

Thereafter, either the district court judge or the

magistrate judge may again advise the parties of the

availability of the magistrate judge, but in so doing,

shall also advise the parties that they are free to

withhold consent without adverse substantive

consequences. Rules of court for the reference of civil

matters to magistrate judges shall include procedures to

protect the voluntariness of the parties’ consent.
KOBY V. HELMUTH 11

these substantial budgetary and manpower burdens on clerks’

offices across the country without making that intent explicit.

There is an additional reason to believe that Congress

intended to require the consent of only the named plaintiffs

under § 636(c)(1). As a general matter, the named plaintiffs

in a properly certified class action are charged with

conducting the litigation on behalf of the class they represent;

by definition class actions involve too many plaintiffs to

allow each to participate personally. See Fed. R. Civ. P.

23(a)(1). The named plaintiffs serve as representatives of the

class and in that capacity are authorized to decide matters of

litigation strategy, such as which claims to assert or drop,

what discovery to take, what motions to file, and so forth. 

Deciding whether to consent to a magistrate judge is a matter

of litigation strategy of the same order. In fact, it is probably

less consequential to the outcome than other decisions the

named plaintiffs are ordinarily called upon to make, such as

deciding whether to consent to a bench trial or choosing

which issues to raise on appeal from an adverse verdict. It

would therefore have been sensible for Congress to assume

that the named plaintiffs in a class action will decide, on

behalf of the absent class members, whether to consent to the

jurisdiction of a magistrate judge.2

2

It is true that the consent required under § 636(c)(1) is usually given

at the outset of the case before a class has been certified, at which point

the named plaintiffs lack the authority to bind the absent class members. 

See Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345, 1349

(2013). That simply means if the class is never certified, the absent class

members will not be bound by the named plaintiffs’ decision to grant

consent. If the class is certified and the case proceeds to judgment,

however, the named plaintiffs’ litigation-related decisions are no less

binding merely because they occurred before the class certification order

was entered.
12 KOBY V. HELMUTH

With that issue of statutory interpretation resolved, the

jurisdictional analysis is straightforward. Congress has

authorized magistrate judges to enter judgment in a class

action so long as the named parties to the action have

consented, and here the named plaintiffs and ARS have done

so. Thus, an appeal from the judgment entered by the

magistrate judge may be taken directly to our court “in the

same manner as an appeal from any other judgment of a

district court.” 28 U.S.C. § 636(c)(3).

The only remaining issue is whether § 636(c) is

constitutionally valid. The National Association ofConsumer

Advocates, appearing as a friend of the court, argues that the

statute is unconstitutional, at least as applied to class actions. 

In its view, § 636(c) violates Article III of the Constitution by

permitting magistrate judges to exercise jurisdiction over

class actions without obtaining the consent of each absent

class member.

Article III grants judges who wield the judicial power of

the United States life tenure during good behavior and a

guaranteed salary that may not be diminished. These

protections are designed to ensure the independence and

impartiality of the judicial officers authorized to decide the

merits of a litigant’s case. The Supreme Court has held that

litigants in federal court have a personal right, conferred by

Article III, to insist upon adjudication of their claims by a

judge who enjoys the salary and tenure protections afforded

by Article III—protections that magistrate judges lack. 

Commodity Futures Trading Commission v. Schor, 478 U.S.

833, 848 (1986); see Pacemaker Diagnostic Clinic of

America, Inc. v. Instromedix, Inc., 725 F.2d 537, 542 (9th Cir.

1984) (en banc). But the personal right to an Article III

adjudicator may be waived, and a party’s express or implied
KOBY V. HELMUTH 13

consent to adjudication by a magistrate judge constitutes a

valid waiver of the right. Roell v. Withrow, 538 U.S. 580,

590 (2003).

So the question becomes whether Article III categorically

prohibits the named plaintiffs from waiving, on behalf of the

class members they represent, the right to proceed before an

Article III judge. A categorical prohibition of that sort might

be warranted if the interests of the named plaintiffs and the

absent class members frequently diverged with respect to

exercise of the right at issue. But the opposite is true of the

right to have a case heard by an Article III judge. To serve as

class representatives, the named plaintiffs must have claims

that are typical of the claims held by the class, and in

conducting the litigation the named plaintiffs must fairly and

adequately protect the interests of the class. Fed. R. Civ. P.

23(a)(3)–(4). When those requirements are met, the interests

of the named plaintiffs and absent class members will almost

always be aligned when it comes to deciding whether to

consent to a magistrate judge’s jurisdiction. Barring unusual

circumstances, the named plaintiffs will have as strong an

interest as the absent class members in having their claims

adjudicated by an independent and impartial decisionmaker. 

The named plaintiffs can therefore be expected to protect the

absent class members’ interests in the exercise of the right

conferred by Article III.

There are constitutional limits, of course, on the named

plaintiffs’ authority to waive the rights of their fellow class

members, but those limits are imposed by the Due Process

Clause, not by Article III. Most fundamentally, as mandated

by due process (and enforced through Federal Rule of Civil

Procedure 23), the named plaintiffs’ interests must in fact be

aligned with those of the class, and the named plaintiffs must
14 KOBY V. HELMUTH

adequately represent the interests of the class throughout the

litigation. Taylor v. Sturgell, 553 U.S. 880, 900–01 (2008);

Hansberry v. Lee, 311 U.S. 32, 41–43 (1940). In some

instances, absent class members must also receive notice of

the action and an opportunity to opt out. Taylor, 553 U.S. at

900; Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811–12

(1985).

The absent class members in this case were not afforded

notice and an opportunity to opt out. But we need not decide

whether the Due Process Clause required those protections

before the named plaintiffs could waive, on behalf of the

class, the right to an Article III adjudicator. Any violation of

the absent class members’ due process rights would affect

only the preclusive reach of the resulting class judgment in

subsequent litigation. See, e.g., Hecht v. United Collection

Bureau, Inc., 691 F.3d 218, 224–26 (2d Cir. 2012) (lack of

notice); Crawford v. Honig, 37 F.3d 485, 488 (9th Cir. 1994)

(inadequate representation). Limits imposed by the Due

Process Clause on the enforcement of class judgments do not

curtail a magistrate judge’s authority under § 636(c) to enter

judgment in the first instance—a judgment that at the very

least will bind the named parties who consented to the

magistrate judge’s jurisdiction. So any due process violation

that might have occurred here would not deprive us of

jurisdiction to decide this appeal, given that our jurisdiction

is keyed to the magistrate judge’s authority to enter final

judgment. Moreover, due process issues involving the extent

to which the judgment might bind absent class members in

future litigation would arise only if we were to uphold the

magistrate judge’s order approving the settlement. Because

we conclude below that the magistrate judge abused her

discretion in entering that order, we are not faced with such

due process issues here.
KOBY V. HELMUTH 15

III

Under Federal Rule of Civil Procedure 23(e)(2), a district

court may approve a class action settlement only after finding

that the settlement is “fair, reasonable, and adequate.” When,

as here, a class settlement is negotiated prior to formal class

certification, there is an increased risk that the named

plaintiffs and class counsel will breach the fiduciary

obligations they owe to the absent class members. As a

result, “such agreements must withstand an even higher level

of scrutiny for evidence of collusion or other conflicts of

interest than is ordinarily required under Rule 23(e) before

securing the court’s approval as fair.” In re Bluetooth

Headset Products Liability Litigation, 654 F.3d 935, 946 (9th

Cir. 2011). The decision to approve a class action settlement

is reviewed for abuse of discretion. Allen v. Bedolla,

787 F.3d 1218, 1222 (9th Cir. 2015).

The magistrate judge abused her discretion by approving

the settlement in this case. The settlement should not have

been approved for one primary reason: There is no evidence

that the relief afforded by the settlement has any value to the

class members, yet to obtain it they had to relinquish their

right to seek damages in any other class action.

The settlement’s injunctive relief is worthless to most

members of the class because it merely dictates the

disclosures ARS must make in future voicemail messages for

a period of two years. That relief could potentially benefit

class members who are likely to be contacted by ARS during

the two-year window, but there is an obvious mismatch

between the injunctive relief provided and the definition of

the proposed class. The class was not defined to include

those who are likely to be contacted by ARS in the future; it
16 KOBY V. HELMUTH

was defined to include those who had suffered a past wrong

at ARS’s hands—receiving a voicemail message between

2008 and 2011 that did not disclose certain information about

the caller and the purpose of the call. The fact that a class

member was a target of collection efforts sometime between

2008 and 2011, however, does not without more establish that

he or she would likely be contacted by ARS again after

October 2013, when the settlement was approved.

As the proponents of the settlement, ARS and the named

plaintiffs bore the burden of demonstrating that class

members would benefit from the settlement’s injunctive

relief, which required them to show that class members were

likely to face future collection efforts by ARS. See In re Dry

Max Pampers Litigation, 724 F.3d 713, 719 (6th Cir. 2013). 

They fell far short of carrying that burden. ARS and the

named plaintiffs made no showing that members of the class

continued to receive calls from ARS as part of ongoing

efforts to collect debts that were by then two to five years old,

a proposition doubtful enough that empirical data of some

sort would be necessary to substantiate it. Nor did they show

that class members were likely to become targets of ARS’s

collection efforts in the future. That would happen only if a

class member failed to pay another debt, the debt got referred

to a collection agency, and ARS turned out to be that agency. 

While some of the four million class members might find

themselves in that predicament during the two-year span of

the injunction, nothing in the record indicates that most class

members would. In other words, ARS and the named

plaintiffs provided no evidence to suggest that many, if any,

members of the proposed class would derive a benefit from

obtaining the injunctive relief afforded by the settlement.
KOBY V. HELMUTH 17

Even for class members who might become targets of

collection efforts by ARS in the future, the settlement’s

injunctive relief is of no real value. The injunction does not

obligate ARS to do anything it was not already doing. It

merely requires ARS to continue using the same voicemail

message it voluntarily adopted back in 2011. ARS took that

step for its own business reasons (presumably to avoid further

litigation risk), not because of any court- or settlementimposed obligation. ARS would therefore be unlikely to

revert back to its old ways regardless of whether the

settlement contained the stipulated injunction. See Crawford

v. Equifax Payment Services, Inc., 201 F.3d 877, 882 (7th Cir.

2000). To make matters worse, the settlement contained an

escape clause that allowed ARS to seek dissolution of the

injunction “at any time if there is a change in the law.” Thus,

if the litigation risk were reduced by a new court decision or

legislative enactment—the onlyscenario inwhich ARS might

be tempted to resume its prior conduct—ARS could seek to

wriggle out of the injunction.

ARS and the named plaintiffs likewise presented no

evidence that the absent class members would derive any

benefit from the settlement’s cy pres award. Indeed, it is

doubtful that the award could be approved under our

precedents, which require that cy pres awards be tethered to

the objectives of the underlying statutes or the interests of the

class members. See Nachshin v. AOL, LLC, 663 F.3d 1034,

1039 (9th Cir. 2011). Here, the award consists of a $35,000

donation to a San Diego veterans’ organization. The San

Diego location of the chosen charity has no geographic nexus

to the class, which includes four million individuals scattered

throughout the United States. Nor was there any evidence

that the settlement class is disproportionately composed of

veterans. And there was no showing that the work performed
18 KOBY V. HELMUTH

by the designated charity would protect consumers from

unfair debt collection practices, the objective of the FDCPA. 

Thus, even putting aside the relatively small size of the cy

pres award, we cannot say that this aspect of the settlement

provided any material benefit to the class members.

Because the settlement gave the absent class members

nothing of value, they could not fairly or reasonably be

required to give up anything in return. Yet the settlement

requires absent class members to relinquish their right to

pursue damages claims against ARS as part of a class action. 

The parties dispute whether that right has any real value to

the absent class members, given the FDCPA’s cap on class

action damages. ARS asserts that, with total damages capped

at $35,000, none of the absent class members have any hope

of obtaining meaningful monetary relief as part of another

class action because it would be impossible to define a class

small enough to afford individual recoveries of more than a

trivial amount. Helmuth asserts, however, that the proposed

class in her pending Florida action might contain as few as

several hundred members, each of whom could recover

meaningful relief of roughly $100.3

We need not resolve the parties’ dispute on this point. It

is enough to conclude that the waiver of the right to seek

3 The parties overlook the fact that the settlement also waives the

absent class members’ right to pursue class action damages for claims

under state law, so they have not explored whether state-law analogues of

the FDCPA contain similar class action damages caps. In States without

such a cap, the right to pursue class action damages under state law could

be considerably more valuable than the right to pursue such damages

under the FDCPA, as no court of which we are aware has held that the

FDCPA’s damages cap preempts state statutes permitting a larger

recovery.
KOBY V. HELMUTH 19

damages in future class actions has some value, and it plainly

does. Very few class members would bother to file their own

individual actions to recover minimal (or non-existent) actual

damages and statutory damages capped at $1,000. For smalldollar claims like these, even under a statute with a feeshifting provision, a class action is often the only realistic

means of obtaining any monetary recovery. See Shutts,

472 U.S. at 809; Crawford, 201 F.3d at 882. Cutting off

access to a procedural tool that may offer the only realistic

means of obtaining monetary relief deprived the absent class

members of something of value here, even if it might be

worth relatively little. The fact that class members were

required to give up anything at all in exchange for worthless

injunctive relief precluded approval of the settlement as fair,

reasonable, and adequate under Rule 23(e)(2).

Helmuth challenges the reasonableness of the settlement

on other grounds, such as the disparity between what the

named plaintiffs got and what the rest of the class members

received, and she contends in addition that the class could not

be certified under Rule 23(b)(2). In light of our disposition

above, we need not address these remaining contentions.

REVERSED and REMANDED.