The defendant’s arguments for reversion, aside from attacks on the telephone call evidence, were familiar procedural arguments often made by class action settlement objectors (and repeatedly rejected by district judges and appellate courts): (1) cy pres distributions are barred as a fluid recovery; (2) cy pres awards are prohibited because cy pres recipients are not parties with Article III standing; and (3) cy pres awards deny due process because they are not provided in the Rules Enabling Act or Rule 23. While rejecting each of these procedural arguments, the court focused on the public policy reasons why reversion was not appropriate: (1) the TCPA is a deterrence statute; (2) the statutory violations were willful; and (3) Dish increased the unclaimed funds problem by obstructing the distribution process.
Arguing for escheat to the states, class counsel pointed to unclaimed property laws requiring holders of unclaimed funds to remit the funds to the states to be held for some specified period. Class counsel suggested that those statutes apply to funds related to identified class members who did not submit claims (some $10 million of the undistributed funds). The court rejected that proposal as too cumbersome and costly to be feasible, because of complications including the different escheat statues of 50 different states. Instead, the court said that escheat to the federal government would be easy to administer and more appropriate, since the funds come from a judgment for violation of a federal statute. The court’s opinion did not discuss whether or not individual class members actually have a statutory property interest in any unclaimed funds floating in a distribution process (or discuss the many decisions finding or assuming that escheat laws do not apply to the undistributed residue of class action settlements).
Turning to cy pres awards, the court recognized that there is almost no case law guidance on what to do with undistributed funds after a class action judgment. It then discussed the considerable case law approving cy pres awards after settlements as a class action remedy and concluded that both cy pres awards and escheat to the federal government would be consistent with the deterrent purpose of the TCPA and would be feasible for administration. However, because the parties had not suggested specific cy pres recipients, the court has appointed a special master to recommend cy pres recipients before a further court decision about any cy pres awards or any federal escheat distribution.
The case is not over. Defendant Dish has lost one appeal on the merits and has filed a second appeal to argue for reversion instead of cy pres awards or federal escheat. As things stand, however, the District Court opinion provides a thoughtful answer to an unusual question in class action administration, with a firm rejection of reversions to losing defendants in consumer class actions and an expansion of the use of cy pres awards to deal with undistributed judgment funds.