A common method to end a TCPA class action is a claims-made class settlement.

In a claims-made settlement a fund is established to provide payment to all class members making claims. Those who make claims get a cut. Those who do not, do not.

It may seem harsh to have some class members waive their claims and get nothing but the truth is most TCPA class claimants lack a valid claim (usually.) So those who actually feel “harmed” by the text or call that lead to the agreement can make a claim and get paid– usually at least $40.00 and sometimes over $1,000.00 depending on the settlement.

A question arises, however, when there is seemingly more money in the settlement fund than is needed to pay claims–particularly when a claims rate is low. In some instances the parties agree to a “reversionary” settlement, which means funds might return to the defendant if too few claims are made.

Without question Courts scrutinize such reversionary settlements as defendant is then set to profit by a poor notice scheme or other means to trick consumers into not making claims. This is particularly true when a “clear sailing” provision exists that assures defendant will make no challenge class counsel’s attorneys fee request.

In Lenrorowtiz v. Mosquito Squad, 2024 WL 5038238 (D. Conn. Dec. 9 2024) both of these elements converged resulting in a court refusing to enforce a TCPA class action settlement.

In Lenrorowitz the parties had resolved the TCPA suit with an agreement Defendant would pay over $300k in fees–to be approved by the court from funds otherwise owed the class–and that any sums remaining from the proposed settlement funds after administration and payment of class claims would return to defendant.

In fact, the defendant did not actually have to set aside the settlement dollars at all. They merely needed t make payments as funds became needed. Essentially Defendant would keep all the money in their pocket– no need for a reversion because the sums would never actually be paid unless a class member made a claim!

The Court was unpersuaded this arrangements was in the class member’s best interest. It rejected the settlement and determined the reversionary nature of the resolution–especially with defendant never actually paying the full amount–was unacceptable. This is especially true as the full value of the settlement was used to justify the large attorney fee award–which would go unchallenged as part of the deal.

While courts often will enforce TCPA settlements–even common fund reversionary deals– class action practitioners need to remember the courts are rightly suspicious when a deal looks too good to be true for a defendant and plaintiff’s counsel, but not the class members who are supposed to be protected. Clear sailing provisions have fallen out of favor, and reversionary common funds are iffy these days. Just keep it in mind.