Summary:
A recent decision from the Western District of North Carolina approving the settlement in Williams & Dantzler v. PHH Mortgage Corp. is worth reading for anyone who litigates consumer class actions. While the court ultimately approved the settlement, it did so only after making unusually pointed observations about the modest value delivered to class members and substantially reducing the requested attorney's fee award.
The Allegations
The lawsuits challenged PHH Mortgage's default notices sent to borrowers whose loans were already in default when PHH acquired servicing rights. According to the plaintiffs, the notices falsely threatened immediate acceleration and foreclosure if the defaults were not promptly cured, allegedly violating the Fair Debt Collection Practices Act and certain state consumer protection laws.
Rather than a single lawsuit, plaintiffs' counsel filed four related class actions around the country—in California, North Carolina, New York, and Georgia. The court noted that the later-filed plaintiffs were already putative members of the earlier nationwide class and questioned why the cases were not consolidated. It also observed that, before settlement, two of the companion cases had been dismissed (or recommended for dismissal), one had survived only in part, and one remained subject to a pending motion to dismiss.
The Settlement
The settlement created three separate funds totaling $1.5 million:
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A nationwide FDCPA fund;
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A California class fund; and
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A North Carolina class fund.
PHH also agreed to pay up to $200,000 in notice and administration costs separate from those settlement funds. Approximately 95,983 loans fell within one or more settlement classes.
The practical effect, however, was that individual recoveries were quite small:
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approximately $4.34 per loan for most nationwide FDCPA claims;
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approximately $16.33 for California class members; and
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approximately $45.46 for North Carolina class members.
Importantly, PHH did not agree to change any of its servicing practices, meaning the settlement provided only monetary relief and no prospective injunction or policy changes.
Settlement Approved...
Despite these limitations, the court approved the settlement.
Why?
Because Rule 23 asks whether the settlement is fair, reasonable, and adequate—not whether it is an overwhelming victory. Given the uncertain merits of the claims, the dismissals in several companion cases, and the expense of continued litigation, the court concluded that the class was "giving up little and getting little in return," making the compromise acceptable.
...But the Fee Request Was Another Matter
The truly noteworthy portion of the opinion concerns attorney's fees.
Class counsel requested:
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$500,000 in attorney's fees (one-third of the settlement fund),
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$8,003.82 in expenses, and
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$5,000 service awards for each named plaintiff.
The court approved the litigation expenses and service awards but reduced the attorney's fee award to $275,536, plus expenses—a reduction of nearly 45%.
"Hyperbolic" May Have Been an Understatement
The opinion contains language that class action practitioners should read carefully.
The court criticized plaintiffs' briefing for describing the settlement as providing:
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"substantial benefits,"
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"a significant and excellent result,"
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"sizeable recovery," and
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"real, meaningful benefits."
The court responded that those descriptions simply were not accurate.
Instead, it characterized the recoveries as:
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"meager,"
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"paltry," and
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"insignificant."
At oral argument, plaintiffs' counsel reportedly acknowledged that some of the briefing had been "hyperbolic." The court observed that "plainly false" might have been a better description.
Degree of Success Still Matters
Relying heavily on Hensley, McDonnell, and other Fourth Circuit precedent, the court emphasized that the "most critical factor" in determining attorney's fees remains the degree of success obtained.
The court also rejected counsel's effort to include time spent litigating two unsuccessful companion cases that ultimately settled separately with only the named plaintiffs.
Applying the lodestar method instead of a percentage-of-the-fund approach, the court reduced the requested fee to account for those unsuccessful matters and the limited success actually achieved for the class.
Commentary
There are several broader lessons here.
First, this opinion is a reminder that federal judges continue to take seriously their fiduciary obligation to absent class members. Rule 23 approval is not merely a rubber stamp, particularly when class members receive only nominal compensation while counsel seek substantial fees.
Second, the court's analysis appropriately distinguishes between settlement approval and fee approval. A settlement may represent a sensible business compromise in light of litigation risks while still not constituting the type of success that justifies awarding counsel one-third of the settlement fund.
Third, the opinion illustrates the value of non-monetary relief in consumer litigation. Had the settlement required PHH to revise its default notices or servicing practices, the court likely would have had a much stronger basis for finding that the litigation produced meaningful benefits beyond a few dollars per borrower. The absence of any prospective relief significantly influenced the court's assessment of the case's overall success.
Finally, the decision is refreshing for another reason: it demonstrates that courts are willing to scrutinize attorney fee requests with the same rigor they apply to the underlying settlement. That scrutiny ultimately protects both absent class members and the integrity of the class action device.
For consumer bankruptcy attorneys, there is an additional takeaway. Mortgage servicing litigation frequently seeks not merely compensation for past misconduct but correction of servicing practices that affect thousands of borrowers. Settlements that achieve prospective changes—even if monetary recoveries are modest—often produce far greater real-world value than those providing only nominal cash payments. This opinion serves as an important reminder that courts recognize that distinction when evaluating whether counsel have truly achieved "success."
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