Court Opinion

ID: 4118416
Source: CourtListenerOpinion
Date Created: 2017-01-25 18:01:18.222177+00
Date Added: 2024-06-11T14:36:52.852067
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MICHAEL P. KOBY, an                     No. 13-56964
individual; MICHAEL SIMMONS,
an individual; and JONATHAN                D.C. No.
SUPLER, an individual, on behalf      3:09-cv-00780-KSC
of themselves and all others
similarly situated,
              Plaintiffs-Appellees,       OPINION

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.

      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 they could
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 of Consumer
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 settlement-
imposed 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 only scenario in which 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 small-
dollar claims like these, even under a statute with a fee-
shifting 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.