The U.S. District Court for the Northern District of Indiana recently concluded that the objective "unsophisticated consumer" standard applicable in the Seventh Circuit for whether there was a material misrepresentation under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692e (FDCPA) parallels the commonality requirement for class certification under Fed. R. Civ. P. 23(a).
In addition, the District Court concluded that receiving a false and misleading dunning letter from a debt collector, as plaintiff alleged, establishes an injury in fact to the plaintiff. According to the Court, even though the injury was intangible, it was concrete and particularized, thus establishing the requirements under Spokeo.
Finally, the District Court concluded that plaintiff could limit the class to individuals in a single state even though her complaint made allegations on behalf of a putative class consisting of individuals in multiple states. According the Court, the broadest class possible is not require, and instead Rule 23 encourages specific and limited classes. Because the requirements for class certification under Rule 23 were satisfied, and plaintiff alleged an injury in fact, thus giving her standing to represent the proposed class, the District Court granted plaintiff's renewed motion for class certification -- subject to slight revisions to the definition of the proposed class.
A copy of the opinion is available at: Link to Opinion
Plaintiff brought this putative class action against the defendant debt collector, alleging the defendant sent her a dunning letter that was false or misleading in violation of the FDCPA. In particular, the dunning letter represented to plaintiff that no report would be made to the credit reporting agencies if plaintiff availed herself to one of the settlement options the debt collector offered. According to plaintiff, the dunning letter was false and misleading because the debt had already been reported to the credit reporting agencies by the time the dunning letter was sent. Plaintiff alleged that consumers in Indiana, Illinois and Wisconsin had received the dunning letters.
Despite alleging consumers in multiple states had received the dunning letter, plaintiff sought certification of the following proposed class: (a) all individuals in Indiana (b) who were sent a letter by defendant (c) offering a settlement (d) and stating that "your delinquent account may be reported to the national credit bureaus" (e) where the debt was reported to one or more national credit bureaus (Equifax, Trans Union, or Experian) on or before the date in the letter for receipt of the settlement, or first payment thereof, and (f) the letter was sent at any time during a period beginning July 13, 2016 and ending August 3, 2017.
The District Court first set out the requirements plaintiff needed to satisfy in order to have the matter certified as a class action. As you may recall, "Rule 23(a) prescribes requirements of numerosity, commonality, typicality, and a representative that will fairly and adequately protect the interests of the class. Rule 23(b)(3) authorizes the type of class action in which 'the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members' and that is 'superior to other available methods for fairly and efficiently adjudicating the controversy.'"
According to the Court, the numerosity requirement was easily satisfied, as plaintiff had identified over 39,000 individuals meeting the definition of the proposed class.
Next, the Court turned its attention to what it believed was the biggest issue: the commonality requirement. "The predominant legal question posed by the case is common to all members of the class, namely whether this notice violated the FDCPA by misrepresenting that no report would be made to a national credit bureau if the recipient timely availed herself of one of the settlement options offered."
In reliance on the Supreme Court of the United States's ruling in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011), the defendant first challenged the commonality requirement by asserting that determining whether all potential members of the class suffered the same injury could not be done on a class-wide basis.
The District Court rejected defendant's argument. "The question of FDCPA compliance posed here by the same form letter sent to 39,000 debtors is clearly not analogous to the 'literally millions of employment decisions at once' involved in Dukes, in which the challenged decisions were all discretionary and distinctly made."
The next challenge asserted by the defendant was that whether a material misstatement had been made required an individualized inquiry to determine if the alleged misstatement "actually affected the recipient's decision-making." Relying on Seventh Circuit precedent as to the applicable standard for § 1692e claims under the FDCPA, the District Court rejected the challenge. "Claims under § 1692e use an objective 'unsophisticated consumer' standard, under which 'it is unimportant whether the individual that actually received a violative letter was misled or deceived.' Our test for determining whether a debt collector violated § 1692e is objective, turning not on the question of what the debt collector knew but on whether the debt collector's communication would deceive or mislead an unsophisticated, but reasonable, consumer."
The Court continued, "the question will be not whether any particular plaintiff's decision-making was influenced by the challenged text of the notice, but whether 'a significant fraction of the population would be.'"
The defendant also raised a standing defense, asserting that class certification was not appropriate because "detailed and individualized inquiry" would be required to determine each class member's injury in fact supporting standing to sue. In response, plaintiff asserted that, for purposes of class certification, only the plaintiff needs to establish standing.
The Court concluded that only the plaintiff needed to establish standing for class certification. Turning to whether the plaintiff suffered an injury in fact, the District Court again looked to Seventh Circuit precedent as to injuries under the FDCPA. "Claims under the FDCPA challenging a dunning letter as false and misleading present an injury in fact. Though intangible, the injury is both concrete, because it presents an appreciable risk of harm to the plaintiff, and particularized, because the challenged letter was sent directly to the plaintiff."
The Court continued, "the value of receiving truthful information about one's financial affairs" and the ill effects of receiving misleading information "may be hard to quantify, especially where, as here, the plaintiff did not act upon the misinformation, but such a harm is both concrete and particularized, and so is an injury in fact for purposes of standing analysis."
Next, the District Court rejected defendant's argument that class certification was inappropriate based on the necessity to determine whether the dunning letters at issue involved consumer transactions, as required under the FDCPA. "The need to show that the transactions involved in a particular case are consumer transactions is inherent in every FDCPA class action and if that alone precluded certification, there would be no class actions under the FDCPA."
The Court's remedy to cure any potential ambiguity was to include the "consumer debt" limitation within the proposed definition of the class. With that revised definition of the proposed class, the Court concluded that the commonality and typicality requirements under Rule 23 were also satisfied.
The defendant also challenged plaintiff's limitation of the putative class to individuals in Indiana when the complaint made allegations on behalf of individuals in Indiana, Illinois and Wisconsin. The District Court rejected defendant's argument. "The broadest possible class is not required. To the contrary, the class requirements of Rule 23 encourage rather specific and limited classes. Furthermore, there is no provision that limits defendants being exposed to more than one FDCPA class action lawsuit. The statewide scope of the class is perfectly acceptable."
Finally, the District Court concluded plaintiff was an appropriate representative of the putative class. The defendant had asserted plaintiff was not an appropriate representative because the class definition was limited to those members in Indiana but plaintiff lived in Illinois. The Court determined this was a "non-starter" because plaintiff lived in Indiana at the time the dunning letters at issue were sent to her.
In concluding all of the requirements of Rule 23 were satisfied for class certification, the District Court summarized its findings: "The class action is not only the superior method, but the best one for pursuing remedies under the FDCPA. As the Seventh Circuit has observed, '[b]ecause these are small-stakes cases, a class suit is the best, and perhaps the only, way to proceed.'"
Accordingly, the District Court granted plaintiff's motion for class certification subject to revising the class definition to be limited to consumer debt.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Admitted to practice law in Illinois
Alabama | California | Florida | Georgia | Illinois | Indiana | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC | Wisconsin
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
The Consumer Financial Services Blog™
California Finance Law Developments