JAMES P. TENNILLE; ADELAIDA DELEON; YAMILET RODRIGUEZ; ROBERT P. SMET, individually and on behalf of all others similarly situated, Plaintiffs - Appellees,
THE WESTERN UNION COMPANY; WESTERN UNION FINANCIAL SERVICES, INC., Defendants - Appellees. SIKORA NELSON; PAUL DORSEY, Objectors -- Appellants
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Appeal from the United States District Court for the District of Colorado. (D.C. No. 1:09-CV-00938-JLK-KMT).
John E. Anding (Theodore J. Westbrook with him on the briefs), Drew, Cooper & Anding, Grand Rapids, Michigan, for Objector-Appellant Sikora Nelson.
Paul Dorsey, Pro se.[*]
Jeffrey A. Leon, Complex Litigation Group LLC, Highland Park, Illinois (Jamie E. Weiss, Complex Litigation Group LLC, Highland Park, Illinois, Richard J. Burke, Complex Litigation Group, LLC, St. Louis, Missouri, Jonathan Shub, Seeger Weiss LLP, Philadelphia, Pennsylvania, Seth A. Katz, Burg Simpson Eddredge Hersh & Jardine P.C., Englewood, Colorado, Jim S. Calton, Jr., Calton Legal Services, SP, Eufaula, Alabama, James E. Cecchi, Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C., Roseland, New Jersey, and Mitchell Baker, Denver, Colorado, for Plaintiffs -- Appellees; Charles G. Cole and Thomas M. Barba, Steptoe & Johnson, LLP, Washington, D.C., Jason A Yurasek, Perkins Coie LLP, San Francisco, California, and Jess A. Dance, Perkins Coie LLP, Denver, Colorado), with him on the brief, for Defendants-Appellees.
Before LUCERO, EBEL, and HOLMES, Circuit Judges.
EBEL, Circuit Judge.
These appeals stem from the settlement of a class action. Two unnamed class members challenge the district court's decision to certify the class and approve the settlement. They argue, among other things, that the class representatives can
not adequately represent all of the class members; the settlement is unfair because it uses primarily the money belonging to the class to fund the settlement; and the district court did not adequately notify absent class members of the class action and the settlement. We conclude that their objections lack merit. Therefore, having jurisdiction under 28 U.S.C. § 1291, we AFFIRM the district court's decisions.
I. Factual background
At any given time, Defendants Western Union Company and Western Union Financial Services, Inc. (" Western Union" ) holds over $100 million that belongs to its customers. These funds are comprised of money transfers that customers attempted to send through Western Union which failed to be delivered for some reason. The funds belong to Western Union's customers. After deducting its administrative fees, Western Union would return these funds any time that a customer requested a refund. But, while Western Union usually knows within minutes if a wire transfer fails, the sending customer is often unaware that his wire transfer failed and so does not know to ask Western Union to return his money. And Western Union, although possessing its customer's contact information, does not notify the customer that his wire transfer failed. Instead, Western Union holds the unclaimed money and earns interest on it. Eventually, after several years, the law of the state where the customer initiated the wire transfer requires Western Union to notify the customer that the unclaimed funds will soon escheat to the state. At that time, Western Union uses the contact information that it has had all along to give the customer this required notice. But often Western Union's contact information is no longer accurate. Thus, historically Western Union's customers reclaim only about 15% of the escheating funds. The rest of the unclaimed funds (minus Western Union's administrative fees) eventually escheat to the relevant state, which will continue to hold these unclaimed funds for any customer who later claims them. In the meantime, the state earns interest on the funds for itself.
II. This litigation
Four Western Union customers whose wire transfers failed (" Plaintiffs" or " named Plaintiffs" ) sued Western Union, alleging state-law claims for, among other things, conversion, unjust enrichment, and breach of fiduciary duty. As remedies, Plaintiffs sought declaratory and injunctive relief and damages.
Named Plaintiffs initiated this litigation as a class action on behalf of all Western Union customers whose wire transfers failed. This class included three groups: 1) those customers who, like the named Plaintiffs, had already reclaimed their funds from Western Union; 2) those customers whose funds had already escheated to a state; and 3) those customers whose funds Western Union was currently holding. Named Plaintiffs asserted this class action under, e.g., Fed.R.Civ.P. 23(b)(3), seeking " damages designed to secure judgments binding all class members save those who affirmatively elected to be excluded," Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614-15, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997).
The district court, before deciding whether to certify the class, made several preliminary rulings, including denying Western Union's motion to compel the named Plaintiffs to arbitrate their claims against Western Union individually. Western Union took an interlocutory appeal from that decision. See 9 U.S.C. § 16(a)(1)(A).
III. Settlement agreement
While the interlocutory appeal was pending, Western Union and the named Plaintiffs, aided by the Tenth Circuit's mediator, negotiated a settlement of the class action. Summarizing, that settlement provides for the following: First, Western Union will change its business practices to notify its customers when their wire transfers failed. In addition, Western Union will help customers whose unclaimed funds have already escheated to a state reclaim their money from the relevant state and Western Union will pay these customers interest for the time Western Union held their funds before escheatment.
The rest of the settlement will be funded using approximately $135 million in unclaimed funds belonging to Western Union customers that Western Union continues to hold. From that fund, a neutral administrator will pay (1) an incentive award of $7,500 to each of the four named Plaintiffs; (2) interest to customers who, like the named Plaintiffs, have already reclaimed their money from Western Union, for the time that Western Union held their money after their wire transfers failed; (3) to customers whose money Western Union still holds, the unclaimed funds plus interest for the time Western Union held their money, minus Western Union's administrative fees; and (4) the costs of administering the settlement. In addition, the district court awarded 30% of this settlement fund, or more than $40.57 million, to class counsel as attorneys' fees.
The settlement administrator will disburse money from the settlement fund only to class members who file claims with the administrator. The settlement obviously contemplates that many class members will not file claims because the settlement fund is comprised only of the funds from the failed wire transfers that already belong to class members. Yet the settlement uses this fund, not only to refund money from the failed wire transfers, but also to pay (1) interest to all class members, (2) the costs of implementing the settlement, and (3) attorneys' fees to class counsel. If too many class members file claims, the administrator will not be able to pay class members the full amount to which they are entitled under the settlement agreement. The record, however, indicates that this is unlikely because historically only 15% of customers reclaim money from Western Union once Western Union notifies the customers, prior to escheatment, that it is holding their unclaimed funds. If more class members file claims than the settlement fund can pay, the settlement administrator will pay class members only a pro rata share of the amount to which they are entitled. In return for these payments, either in full or pro rata, class members who do not opt out of the settlement will release Western Union from any liability stemming from its
retention and use of class members' money from the failed wire transfers.
If there is any of the settlement fund remaining after paying all the claims class members file, then the administrator will place that remaining money in a cy pres fund to be distributed by the district court at its discretion. The parties suggest that the court disburse the cy pres fund among the states to which the unclaimed funds would have escheated. The settlement does not take effect until after all appeals have been resolved.
IV. Remand for class certification and approval of the settlement
Because the parties reached their settlement while Western Union's interlocutory appeal was pending, this court remanded the case to permit the district court to consider whether to certify the class and approve the class settlement. On remand, the district court preliminarily certified the class, defined as
[a]ll persons (a) who initiated any Western Union Transaction in the United States on or after January 1, 2001 and on or before the date of Preliminary Approval [January 3, 2013], whose Western Union Transaction was not redeemed within 60 calendar days; and (b) who either (i) have not claimed their money transfer funds (nor had that money claimed on their behalf) from Western Union; or (ii) were informed by written communication that their money was about to escheat to the state, district, territory, or U.S. jurisdiction in which their money transfers were initiated, and who sought and received a refund of their money but did not receive a payment for interest Western Union earned on that money.
(Nelson App. at 451-52 ¶ 3.) The district court also preliminarily approved the settlement, directed that notice of the class action and the proposed settlement be sent to approximately 1.3 million putative class members, gave class members the opportunity to opt out, and gave those choosing to remain in the class an opportunity to object to the terms of the settlement. Unnamed class members Sikora Nelson, represented by counsel, and Paul Dorsey, acting pro se (" Objectors" ), were among one dozen class members who objected to the settlement. After conducting a " fairness hearing," see Fed.R.Civ.P. 23(e)(2), the district court overruled all of the objections; finally certified the class; approved the settlement as fair, reasonable and adequate; and entered final judgment. Nelson and Dorsey each appeal. Although the district court required Nelson and Dorsey each to post an appeal bond of over ...