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SD Fla. Denies FDCPA Class Certification Due to Individual Issues of ‘Actual Damages’

The U.S. District Court for the Southern District of Florida recently denied a consumer’s motion for class certification in a putative class action against a debt collector.

In so ruling, the Court concluded that the plaintiff consumer’s proposed class — which included members who did not make payments to the debt collector while also seeking actual damages as to proposed members who did make payments — presented individual issues concerning causation as to actual payments made in response to the collection letters at issue, and thus failed to overcome the predominance requirement under Fed. R. Civ. P. 23(b)(3).

A copy of the opinion in Gomes v. Portfolio Recovery Associates, LLC is available at:  Link to Opinion.

A plaintiff consumer stopped making payments towards his personal credit card account in 2010.  On May 16, 2017, the defendant debt collector sent the plaintiff a letter, allegedly with knowledge that the debt owed on the account was outside Florida’s five-year statute of limitations for initiating an action on a debt.  Fla. Stat. 95.11(2)(b).

The collection letter identified the balance purportedly due to the collector, and presented the consumer with two offers: the first to “pay the full balance” of the debt in a single or in multiple payments for the debt to be considered “paid in full,” or alternatively, to “choose a saving plan” to make a reduced, lump sum payment of the debt, or six or 12 “consecutive month[ly] payments” at a purported savings in exchange for the debt to be considered “settled in full.”

The letter included a disclosure stating that “[t]he law limits how long you can be sued on a debt” and that it would not sue the consumer because of the age of the debt.  However, the letter did not state that the collector was prohibited by law from suing the consumer, nor that partial payment would renew the statute of limitations.

The consumer filed suit in federal court alleging that the collection letter: (i) violated subsection 1692e of the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692, et seq., by making false, deceptive or misleading representations in connection with the collection of a debt; (ii) violated subsection 1692f of the FDCPA by using unfair or unconscionable means to collect, or attempt to collect, a debt, and; (iii) violated subsection 559.72(9)  of the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. 559.55 et seq., by asserting the existence of a legal right it knew did not exist.

The debt collector’s motion to dismiss the consumer’s complaint was denied, with the Court concluding that the collection letter language could give the least sophisticated consumer the misleading impression that the debt was legally enforceable.

After surviving the debt collector’s motion to dismiss, the consumer subsequently filed his motion for class certification and appointment of class representative and class counsel.

The motion sought to certify classes which included all persons located in Florida who, within one year (for the proposed FDCPA class) and within two years (for the proposed FCCPA class) the collector sent a letter based on the collection letter template regarding a debt from the original credit card creditor where the charge off date preceded the date of the letter by more than five years.

Because the debt collector changed templates for its letter on a quarterly basis, the consumer contended the proposed class members received letters between April 1, 2017 and June 30, 2017, and whether the member received a letter – May 10, 2017 or later or May 9, 2017 or earlier — would control whether the class member is entitled to pro-rata recovery of statutory damages of $500,000 under the FDCPA, and the FCCPA, or no statutory damages at all.

As you may recall, Fed. R. Civ. P. 23(a) provides that one or more members of a class may sue as a representative on behalf of all class members 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).

A proposed class must also satisfy one of three additional requirements of Rule 23(b).  The consumer claimed that class treatment was appropriate here under the predominance inquiry because “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).

In response to the motion, the debt collector did not object to the proposed class definition, nor contest satisfaction of requirements of numerosity (R. 23(a)(1)) and commonality (R. 23(a)(2)).

Instead, the debt collector objected to the consumer’s request for certification of an FDCPA and FCCPA class on the basis that: (i) the consumer’s request for actual damages defeated class certification, as typicality under Rule 23(a)(3) and predominance under Rule 23(b)(3) were not shown; and (ii) the consumer failed to satisfy Rule 23(a)(4)’s adequacy requirement. The Court therefore focused its analysis on these objections.

In challenging the typicality requirement of Rule 23(a)(3), the debt collector argued that the damage component of the case required examination of individualized issues, because each class member would be burdened with proving that the collection letter template proximately caused it to tender payment to the debt collector.

The Court rejected the debt collector’s notion that individualized damage and causation inquiries defeat typicality, because typicality “does not require identical claims or defenses” and “[a] factual variation will not render a class representative’s claim atypical unless the factual position of the representative markedly differs from that of other members of the class.” Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332, 1337 (11th Cir. 1984).  Accordingly, the Court concluded that the proposed class satisfied the typicality requirements under Rule 23(a)(3).

Next, the Court analyzed whether the proposed class met the predominance inquiry under Rule 23(b)(3).  To determine whether predominance is satisfied, a court is tasked with identifying and classifying the parties’ claims and defenses as common questions or individual questions by predicting how the parties will prove them at trial.  See Brown v. Electrolux Home Prods. Inc., 817 F.3d 1225,1234 (11th Cir. 2016).

Here, the Court noted the debt collector’s assertion that causation of payments made in response to the collection letter template would need to be established by each member seeking actual damages at trial, and that the consumer’s own recognition of representations made on the debt collector’s website and telephone communications would also involve individual questions of causation as to actual payments.  Id. at 1234.

The Eleventh Circuit instructs courts to use the following rule of thumb in assessing predominance: “If common issues truly predominate over individualized issues in a lawsuit, then the addition or subtraction of any of the plaintiffs to or from the class should not have a substantial effect on the substance or quantity of evidence offered. If, on the other hand, the addition of more plaintiffs leaves the quantum of evidence introduced by the plaintiffs as a whole relatively undisturbed, then common issues are likely to predominate.”  Id. at 1235.

Here, the Court concluded that the proposed class, which includes members seeking only statutory damages and members seeking actual damages would not “achieve economies of time, effort, and expense” or promote “uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.”  Amchem. Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997).

Although “individual damage calculations generally do not defeat a finding that common issues predominate” and a class action may be maintained despite the need to provide individual damages (Brown at 1239), the Court found that the claims of the proposed class members who sought recovery of actual damages presented individual issues, both as to the nature and content of the debt collector’s communications with each member, and liability to the extent the debt collector is entitled to address questions of causation as to each member.

Seemingly acknowledging the challenge posed by certifying a class seeking statutory damages and others seeking actual damages, the consumer proposed that the Court allow trial to proceed as to liability and statutory damages first, and to then decertify the action and allow class members to individually seek recovery of actual damages.  However, because this argument was raised for the first time by the consumer in his reply brief to the motion, it was rejected by the Court.  See Herring v. Sec’y Dep. Of Corr., 397, F.3d 1338, 1342 (11th Cir. 2005).  Accordingly, the Court concluded that the consumer failed to establish predominance under Rule 23(b)(3).

Lastly, the Court addressed the debt collector’s challenges to the consumer’s ability to adequately represent the proposed class because he was not a member of his proposed class (as he did not sustain actual damages), and generally lacked an understanding of his claims.

Conceding that the consumer’s deposition testimony evidenced his minimal knowledge of his claims, the Court held this was not fatal to his representation of the proposed class, as “it is not necessary for named class representatives to be knowledgeable, intelligent or have a firm understanding of the legal or factual basis on which the cases rests in order to maintain a class action.” Muzuco v. Re$ubmitIt, LLC, 297 F.R.D. 504, 517 (S.D. Fla. 2013).  Therefore, the debt collector’s attacks to certification based upon the consumer’s failure to satisfy the Rule 23(a)(4) adequacy requirement were rejected.

However, because the class definition proposed by the consumer in his motion failed to satisfy the predominance requirement under Rule 23(b)(3), the requested relief for class certification and appointment of class representative and class counsel was denied.

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