In a decision issued this morning, the Third Circuit Court of Appeals vacated an order approving a class action settlement in a case against Sprint and AT&T Mobility involving the practice of charging a flat-rate early termination fee (ETF), regardless of how much time was left on a contract when the customer terminated it. Objectors to the settlement had appealed the district court's approval on two grounds: (1) the notice was inadequate because Sprint did not search its records to identify class members who had paid a flat-rate ETF, and (2) the named plaintiffs were not adequate class representatives because they are no longer Sprint customers. The majority of the Third Circuit's decision addresses the first point and makes a strong statement in support of providing individualized notice.
In the district court, Sprint had submitted a declaration stating that it would take several months and cost $100,000 to search its records to identify effected customers. Although some class members had already received individual notice of the proposed class action settlement, Sprint conceded that searching its records would identify millions of additional class members, who could then be sent notice. Looking to the Supreme Court's 1974 decision in Eisen v. Carlisle, and quoting Eisen's statement that, "individual notice to identifiable class members is not a discretionary consideration to be waived in a particular case. It is, rather, an unambiguous requirement of Rule 23," the Third Circuit held that the district court erred in not requiring the additional effort, given the information before it. Still, the Third Circuit did not itself hold that the notice effort was inadequate. Rather, it remanded the case to the district court to decide the issue "on a more complete record and with a fuller explanation." That said, the Third Circuit made very clear what it thought the lower court should decide: "we are not sure how it can be said that it is unreasonable for Sprint to search any of its billing records, but we leave that determination to the District Court."
As to the adequacy of representation, the Third Circuit expressed some sympathy with the objectors' position, but did not decide the issue. Instead, it suggested that the district court consider the objection again.
Although the court found merit in both objections, it seemed not to fault the settling parties too much, noting its "full appreciation for the considerable efforts that have been invested in the settlement of this class action." The case is called Larson v. AT&T Mobility.
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