Koby v. Helmuth, No. 13-56964 (9th Cir. 2017)
Annotate this CasePlaintiffs filed a class action against ARS, a debt collection agency, under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 et seq. The class consists of some four million people nationwide. At issue is whether the magistrate judge had the authority to exercise jurisdiction to approve the class action settlement without obtaining the consent of all four million class members. If so, at issue is whether the magistrate judge abused her discretion by approving the settlement as fair, reasonable, and adequate. The court concluded that the magistrate judge had the authority to enter final judgment pursuant to 28 U.S.C. 636(c); the court joined three of its sister circuits and concluded that the statute requires the consent of the named plaintiffs alone, not the consent of the four million class members not present before the district court; and section 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 court concluded that the magistrate judge abused her discretion by approving the settlement because 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. Furthermore, 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. Therefore, the court reversed and remanded.
Court Description: 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. 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.
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