Opinion
NO. CIV. S-00-0586 WBS GGH.
January 10, 2001.
MEMORANDUM AND ORDER
This is a suit alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, and the California Unfair Business Practices Act ("CUBPA"), Cal. Bus Prof. Code § 17200, et seq. Plaintiffs move for class certification pursuant to Federal Rule of Civil Procedure 23. See Fed.R.Civ.P. 23.
I. Factual and Procedural Background
Defendant JBC Associates ("JBC") is a high-volume debt collection agency that utilizes "computer aided auto strategies" to collect debts on returned checks. Plaintiffs claim that defendants' debt collection methods violate federal and California law. Specifically, plaintiffs accuse defendants of recovering unauthorized "collection fees," and making unlawful threats in three computer-generated letters. See (Pls.' Exs. 1, 2, 3). Each letter was mailed on JBC letterhead naming Marv Brandon, "Attorney at Law," and signed "Marv Brandon, Esq." Id.
The first letter, dated May 24, 1999, allegedly threatened suspension of plaintiff Zoe Littledove's driver's license, stating:
We note that you used your drivers license when you issued or passed dishonored check(s). . . . The Department of Motor Vehicles is authorized to suspend or revoke the driving privileges of any person without preliminary hearing if they have committed an unlawful or fraudulent use of their drivers license.
(Pls.' Ex. 1, Attached to Arons Decl.) The letter requested payment of $874.90 for returned checks totaling $180.60. In response, plaintiff Littledove paid defendants $475.00, and defendants agreed to cease their demands.
The second and third letters, dated January 19 and February 18, 2000, were addressed to plaintiff Young. The second letter requested payment of $78.87, which included a $25.00 "return charge." The letter cautioned that "unless this total amount is paid in full within thirty (30) days after the date this letter is received, you will be subject to statutory penalties equal to triple the amount of each check . . . . These penalties will be in addition to your check amount(s) and service charge(s)." (Pls.' Ex. 2).
The third letter sought $240.48 for the same debt, and added "[y]ou may wish to settle this matter before we seek appropriate relief before a court of proper jurisdiction by a qualified attorney by remitting immediate payment of $248.48 to our offices." (Pls.' Ex. 3). On March 21, 2000, plaintiff Young paid $78.87 to defendants.
Plaintiffs move to certify the following "umbrella" class: "(i) all persons with addresses in California; (ii) to whom any defendant has sent or will send or has caused or will cause to be sent a letter containing demands or representations which are identical or similar to the demand or representations contained in any of the letters attached as Exhibits 1-3 to the First Amended Complaint; (iii) in connection with attempts to collect debts arising from dishonored checks." (Mot. at 6:9-15).
In addition, plaintiffs propose two subclasses. Subclass A, or "the FDCPA class," is defined as "[t]hose members of the umbrella class whose checks were written for personal, family, or household purposes from whom any defendant demanded or collected money at any time on or after March 20, 1999." (Mot. at 6:18-19, 7:2-3). Subclass B, or "the CUBPA class," is defined as "[t]hose members of the umbrella class whose checks were written for any purpose from whom any defendant demanded or collected money at any time on or after March 20, 1996." (Mot. at 7:4-6).
Defendants oppose class certification on the ground that plaintiffs Littledove and Young are not adequate representatives of the putative class. In the alternative, defendants seek a class definition that closes the class as of August 2000, and identifies three separate subclasses according to the recipients of the three form letters.
II. Class Certification
To be maintained as a class, the action must meet the four prerequisites under Federal Rule of Civil Procedure 23(a), in addition to meeting the requirements of at least one of the three subdivisions of Federal Rule of Civil Procedure 23(b). See Fed.R.Civ.P. 23(a),(b).
A district court must conduct a rigorous inquiry before certifying a class. See General Telephone Co. v. Falcon, 457 U.S. 147, 161 (1982); East Texas Motor Freight Sys. v. Rodriguez, 431 U.S. 395, 403-405 (1977). A district court has discretion in determining whether the moving party has satisfied each Rule 23 requirement. See Califano v. Yamasaki, 442 U.S. 682, 701 (1979); Montgomery v. Rumsfeld, 572 F.2d 250, 255 (9th Cir. 1978). Petitioners have the burden of demonstrating that they satisfy the class certification prerequisites. See Mantolete v. Bolger, 767 F.2d 1416, 1424 (9th Cir. 1985).
A. Rule 23(a)
The court must determine if the proposed class satisfies the four prerequisites under Rule 23(a): One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). These requirements are more commonly known as numerosity, commonality, typicality, and adequacy of representation. See Fed.R.Civ.P. 23(a); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).
1. Numerosity
Rule 23(a)(1) requires a class "so numerous that joinder of all members is impracticable" before the action is class certified. East Texas Motor Freight Sys. v. Rodriguez, 431 U.S. 395, 405 (1977) ("Careful attention" to the numerosity requirement is "indispensable."). Courts have established no absolute limitations for a determination of numerosity. See General Telephone Co. v. Falcon, 446 U.S. 318, 330 (1980). However, a class numbering "several thousand" satisfies the numerosity requirement with ease. See Morgan v. Laborers Pension Trust Fund for No. Cal., 81 F.R.D. 669, 676 (N.D.Cal. 1979).
Plaintiffs have met the numerosity requirement. Plaintiffs note that defendants have provided a list of putative class members that includes 8,178 separate accounts, and defendants do not object to class certification on numerosity grounds. (Arons Decl. ¶ 6); (Opp'n. at 3:20-24).
2. Commonality
Rule 23(a)(2) requires "questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). The Ninth Circuit construes commonality liberally. See Hanlon, 150 F.3d at 1019. Commonality is satisfied when there are underlying facts or legal theories common throughout the class even if the common facts support different legal theories or common legal theories rest on different facts. See id. Here, there are common questions of law and fact.
Plaintiffs allege that every class member received a form letter from defendants that violated either the FDCPA or the CUBPA. Thus, the underlying legal theory that defendants engaged in unlawful collection practices is common throughout the class. The class members also share common facts because each member has received or will receive a "demand" letter from defendants in connection with a returned check. Moreover, plaintiffs have limited the proposed class definition to those who have received or will receive letters similar or identical to the three letters attached to the complaint. Accordingly, plaintiffs have met the commonality requirement.
Defendants dispute that plaintiffs have met the commonality requirement, but offer no specific arguments against commonality.
3. Typicality
Rule 23(a)(3) requires that the "claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). Typicality requires that named plaintiffs have claims "reasonably coextensive with those of absent class members" without the claims having to be "substantially identical." Hanlon, 150 F.3d at 1020.
Plaintiffs' claims are typical of the claims of class members because both are based on defendants' alleged collection of unauthorized fees or the receipt of an unlawful "demand" letter. Thus, plaintiffs' claims are more than reasonably coextensive with the those of the class, meeting the typicality requirement.
4. Adequacy of Representation
a. Representative Parties
Rule 23(a)(4) requires representative parties who "will fairly and adequately protect the interests of the class." Fed. Rule Civ. P. 23(a)(4); see Hanlon, 150 F.3d at 1020. A class representative "must be part of the class and possess the same interest and suffer the same injury as the class members." East Texas Motor Freight v. Rodriguez, 431 U.S. 395, 403 (1977) (internal quotations omitted).
Defendants argue that plaintiffs are not adequate representatives of the class because (1) "their counsel appears to be the driving force behind this litigation;" (2) plaintiffs "have conflicting interests with the putative unnamed class members in that they have a vindictive motive for prosecuting this matter;" and (3) plaintiffs "lack any cognizable interest in this matter in light of the offers that [defendant JBC] has extended." The court considers each argument in turn.
First, the court finds no legitimate basis for concluding that plaintiffs' counsel is the "driving force" behind the action. To support this contention, defendants only point to plaintiffs' rejection of their settlement offers. However, the complaint seeks relief that has not yet been offered by defendants. See (Am. Compl. at 10:4) (seeking a declaratory judgment that defendants' specific practices violate the FDCPA). Thus, the court will not question plaintiffs' decision to refuse settlement.
Defendants cite In re Hotel Telephone Charges, 500 F.2d 86 (9th Cir. 1974), in which the court denied class certification in part because it found the attorneys would be the principal beneficiaries. Unlike this case, there, the court emphasized that "the proposed class action [would likely] consume decades of judicial time," where the "average individual recovery . . . [was] estimated to be only two dollars," and "most of the named plaintiffs are attorneys acting as counsel for themselves." Id., 500 F.2d at 90-91.
Second, plaintiffs' refusal of the two offers does not indicate a vindictive motive that is contrary to the interests of the putative class members. Defendants' first offer, which is deemed withdrawn pursuant to Rule 68, only included relief for the two named plaintiffs. Defendants' second offer considers the class, but requires putative class members to present proof of their claims within a specified time limit. Thus, plaintiffs' refusal of the second offer does not support a finding that their interests are contrary to those of the putative class members. See (Arons Supp. Decl.) (noting that the proposed settlement allowed defendants to retain undistributed settlement funds).
In Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1464 (9th Cir. 1995), which is cited by defendants, the Ninth Circuit remanded the district court's finding that certain plaintiffs were not adequate class representatives on the basis of vindictiveness. The court noted "there have been no cases in this circuit in which a plaintiff has been found to be an inadequate class representative on the basis of vindictiveness." Even in situations of "vengeful" plaintiffs, the court emphasized "the vengeance of an aggrieved person more often engenders the zealous prosecution essential to a class action than the over-zealous prosecution which may threaten to strangle a class action." Id. (quoting Lim v. Citizens Savings and Loan Ass'n, 430 F. Supp. 802, 811 (N.D.Cal. 1976).
Third, plaintiffs have a cognizable interest in the outcome of the litigation. In an order filed December 22, 2000, this court rejected defendants' argument that their Rule 68 offer mooted plaintiffs' claims, ruling that plaintiffs "still have a cognizable interest in the outcome of this action." The fact that defendants have made an additional offer to settle the action does not alter this conclusion. See Deposit Guar. Nat'l Bank, Jackson, Miss., v. Roper, 445 U.S. 326, 329, 332-33 (1980) (holding that defendant's tender and plaintiffs' refusal of maximum amount that each plaintiff could have recovered did not moot plaintiffs' claims on the merits so long as they retained an economic interest in class certification).
Defendants cite Spencer-Lugo v. Immigration Naturalization Service, 548 F.2d 870 (9th Cir. 1977), for the proposition that plaintiffs have no cognizable interest in the litigation once defendants offer to satisfy plaintiffs' "entire demand." However, in Spencer, the Ninth Circuit emphasized that "[t]his case is not a class action." Spencer, 548 F.2d at 870.
In sum, plaintiffs are adequate representatives of the putative class. Plaintiffs possess the same interests as the putative class in recovering damages and obtaining declaratory and injunctive relief against defendants' alleged collection of unauthorized charges through intimidating form letters. In addition, plaintiffs have suffered the same injury as the putative class members because they have received the purported "demand" letters and have both paid additional "collection fees."
b. Class Counsel
In addition to the adequacy of representative parties, plaintiffs must also show adequate representation by class counsel. See Crawford v. Honig, 37 F.3d 485, 487 (9th Cir. 1994) (adequate representation depends on qualifications of class counsel). Plaintiffs are represented by Paul Arons and O. Randolph Bragg, who are experienced litigation attorneys. See (Aron Decl. ¶ 1-5) (listing several years of class action experience under the FDCPA and the CUBPA); (Bragg Decl. ¶ 3-8) (listing extensive experience in consumer law and litigation). Defendants do not question the attorneys' capabilities.
B. Rule 23(b)
An action that meets all the prerequisites of Rule 23(a) may be maintained as a class action if it also meets the requirements of at least one of the three subdivisions of Rule 23(b). See Eisen v. Carlisle Jacquelin, 417 U.S. 156, 163 (1974). Plaintiffs seek certification under Rule 23(b)(2).
See Fed.R.Civ.P. 23(b)(2). As an alternative, plaintiffs seek certification of a "hybrid class" under Rule 23(b)(2) "for all claims other than actual damages," and Rule 23(b)(3) "for class members who may be entitled to actual damages because they paid fees above the face amount of the check." (Mot. at 17:18-22). Defendants do not object to class certification under Rule 23(b).
Rule 23(b)(2) provides for a class action when "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole." Fed.R.Civ.P. 23(b)(2). "Class actions certified under Rule 23(b)(2) are not limited to actions requesting only injunctive relief or declaratory relief, but may include cases that also seek monetary damages." Probe v. State Teachers' Retirement System, 780 F.2d 776 (9th Cir. 1986) (noting that the plaintiffs' request for money damages was "merely incidental to their primary claim for injunctive relief"); see Ballard v. Equifax Check Services, Inc., 186 F.R.D. 589, 596 (E.D.Cal. 1999) (certifying a class under Rule 23(b)(2) on "issues of liability, declaratory relief and statutory damages under the FDCPA and injunctive relief and restitution under the CUBPA"); Irwin v. Mascott, 96 F. Supp.2d 968, 979 (N.D.Cal. 1999) (certifying a class seeking statutory and actual damages for violations of the FDCPA and the CUBPA under Rule 23(b)(2)).
Plaintiffs seek a declaratory judgment that defendants' practices violate the FDCPA and an injunction enjoining defendants from "adding or attempting to collect the unauthorized charges," and from engaging in conduct that violates the CUBPA. (Am. Compl. at 10). In addition, plaintiffs seek the maximum amount of statutory damages under the FDCPA, 15 U.S.C. § 1692k, as well as "actual damages equal to all unauthorized charges collected." (Am. Compl. at 10). Defendants' actions are generally applicable to the entire class because each putative member has received or will receive a computer-generated "demand" letter from JBC. Thus, injunctive relief and corresponding declaratory relief is appropriate with respect to the class as a whole.
Further, plaintiffs' request for monetary damages is secondary to their primary claims for declaratory and injunctive relief. According to plaintiffs, defendants collected check fees from approximately 12% of the class. (Mot. at 17:15-16) ("It should be clear, however, that for more than 80% of the class, no substantial monetary relief is available."). Thus, the claims for injunctive relief will affect more members and have consequences over a greater period of time than the claims for monetary damages. See Ballard v. Equifax Check Services, Inc., 186 F.R.D. at 596; Irwin v. Mascott, 96 F. Supp.2d at 979 (noting that statutory damages under the FDCPA, 15 U.S.C. § 1692k, are limited to one percent of the defendants' net worth). Accordingly, class certification under Rule 23(b)(2) is proper.
Certification under Rule 23(b)(3) for class members who have claims for actual damages is also appropriate. A class may be maintained under Rule 23(b)(3) if "the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3).
Here, the only individual questions relate to the identification of putative class members and whether they paid "collection fees" to defendants. Thus, the common questions concerning whether defendants' standardized conduct violates the FDCPA and the CUBPA predominate the action. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997) ("Predominance is a test readily met in certain cases alleging consumer . . . fraud.").
A class action is also superior to the litigation of the putative members' individual claims. Not only are most individual consumers unaware of their rights under the FDCPA, but also the size of individual damages claims is "usually so small there is little incentive to sue individually." Ballard v. Equifax Check Services, Inc., 186 F.R.D. at 600 ("Class action certifications to enforce compliance with consumer protection laws are `desirable and should be encouraged.'") (quoting Duran v. Credit Bureau of Yuma, Inc., 93 F.R.D. 607, 610 (D.Ariz. 1982)); see also Amchem Prods., Inc., 521 U.S. at 625 (1997) (noting that Rule 23(b)(3) was designed to allow the vindication of "the rights of groups of people who individually would be without effective strength to bring their opponents into court.") (quoting Kaplan, A Prefatory Note, 10 B.C. Ind. Com. L. Rev. 497, 497 (1969)).
Accordingly, class certification under Rule 23(b)(3) for putative members having claims for actual damages is also proper.
C. Class Definition
The court has discretion to create subclasses when appropriate. Fed.R.Civ.P. Rule 23(c)(4)(B).
Plaintiffs propose the creation of two subclasses:
"Subclass A" includes members who have claims under the FDCPA, while "Subclass B" includes members who have claims under the CUBPA. See Irwin v. Mascott, 96 F. Supp.2d at 982 (certifying an umbrella class and subclasses identical to those proposed by plaintiffs in this case). Defendants propose an alternative class definition that identifies six subclasses, including an FDCPA class and a CUBPA class for each of the three collection letters.
Plaintiffs argue that the creation of multiple subclasses as proposed by defendants is unnecessary and would create confusion because many members received two or more of the letters. The court agrees. Defendants also request a class cut-off date of August 2000, when JBC claims it ceased collection activity in California. According to defendants, the cut-off date would alleviate (1) discovery concerns regarding counsel's privileged advice to defendants during the litigation on subsequent changes to JBC's collection letters and (2) notice problems that arise when new members enter the class. If it is true that defendants have ceased their collection activity as of August 2000, then the concerns raised by defendants will not be implicated. Such concerns could only be raised in the event that defendants resume their collection activity in California, in which case the court should not, and will not impose a cut-off date.
For example, plaintiffs claim that some members would qualify for all six subclasses because they received all three letters within one year prior to the filing of this law suit. Other members may qualify for up to four subclasses.
During oral argument, counsel for defendants suggested that whether JBC will continue collection activity in California is "up in the air."
IT IS THEREFORE ORDERED that plaintiffs' motion for class certification be, and the same hereby is, GRANTED. The court certifies the following umbrella class: (i) all persons with addresses in California; (ii) to whom any defendant has sent or will send or has caused or will cause to be sent a letter containing demands or representations which are identical or similar to the demand or representations contained in any of the letters attached as Exhibits 1-3 to the First Amended Complaint; (iii) in connection with attempts to collect debts arising from dishonored checks.
The court further certifies the following subclasses:
(A) Those members of the umbrella class whose checks were written for personal, family, or household purposes from whom any defendant demanded or collected money at any time on or after March 20, 1999; and (B) Those members of the umbrella class whose checks were written for any purpose from whom any defendant demanded or collected money at any time on or after March 20, 1996.
The named plaintiffs Zoe Littledove and Salina Young shall represent the umbrella class and both subclasses, with Paul Arons and O. Randolph Bragg serving as class counsel. Class counsel shall, on or before a date ninety days from the date of this Order, cause to be mailed in the name of the clerk by first class mail, postage prepaid, to all class members who can be identified through reasonable efforts, a notice meeting the requirements of Federal Rule of Civil Procedure 23(c)(2). Class members may exclude themselves from the class by filing by a date to be determined appropriate written indication of their request for exclusion in a post office box designated by class counsel, from which class counsel shall receive and tabulate requests for exclusion. Class counsel shall file with the clerk, by a date to be determined, an affidavit identifying the persons to whom notice has been mailed and who have not timely requested exclusion.
IT IS SO ORDERED.