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5th Cir. Reverses Class Cert in FDCPA ‘Threat of Legal Action’ Case

class actionThe U.S. Court of Appeals for the Fifth Circuit recently reversed certification of a consumer class alleging that a debt collection letter violated the federal Fair Debt Collection Practices Act (FDCPA).

In so ruling, the Fifth Circuit held that certification of the class was inappropriate because the collection letter’s purported false threats to take legal action were not capable of classwide resolution.  As such, the putative class failed to satisfy Federal Rule of Civil Procedure 23’s commonality, typicality, and predominance requirements. 

A copy of the opinion in Nina Flecha v. Medicredit, Incorporated, et al is available at:  Link to Opinion.

A medical patient (the “patient” or “class representative”) who failed to pay for medical care received a series of collection letters from the medical center’s voluntary debt collection service provider regarding unpaid medical bills.

One such letter advised that the account was delinquent despite past requests for payment, and that if it was the patient’s desire to clear its account, she “need[ed] to promptly remit the balance in full,” and concluded stating “[t]o discuss payment arrangements call our office.” 

The patient did not contact the debt collector to discuss debt repayment programs, but instead contacted the medical center which advised that she could enter a payment plan if she made an upfront payment — which she could not afford.  The patient claims that during the course of these conversations, she was under the impression that the medical center would sue her to collect the outstanding debt.

The patient/class representative brought claims on behalf of herself and all others similarly situated (the “class members”) against the medical center’s debt collector and its surety bondholder (the “debt collector”) alleging that their collection letter violated the FDCPA by falsely threatening legal action against her and class members even though the medical center never intended to file suit over the unpaid medical debt.

The trial court denied the parties’ cross motions for summary judgments concluding that questions of fact remained about (1) whether an unsophisticated consumer would construe the collection letter to threaten legal action, and (2) whether the medical center intended to take legal action against the patient/class representative.

Later in the case, the class representative’s motion for class certification was granted.  The Fifth Circuit subsequently granted the debt collector’s motion for leave to appeal the class certification under Rule 23(f).

As you recall, the FDCPA prohibits the use of “false, deceptive, or misleading representation[s] or means in connection with the collection of any debt” (U.S.C. § 1692e) and expressly forbids debt collectors from making a “threat to take any action . . . that is not intended to be taken.”  15 U.S.C. § 1692e(5). 

Additionally, to certify a putative class, the class must meet all four threshold conditions of Rule 23(a) — that “(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”—conditions commonly known as “numerosity, commonality, typicality, and adequacy of representation.” Fed. R. Civ. P. 23(a); Gen. Tel. Co. of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980))– along with one of the provisions of Rule 23(b). 

Here, the class representative sought certification under Rule 23(b)(3), which additionally requires “that 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”—conditions commonly known as “predominance and superiority.”  Fed. R. Civ. P. 23(b)(3); Amchem Products, Inc. v. Windsor, 521 U.S. 591, 615 (1997).

On appeal, the debt collector argued that the putative class failed the commonality and typicality requirements of Rule 23(a) as well as the predominance requirement of Rule 23(b)(3).

Interpreting these provisions, the Fifth Circuit reasoned that to establish liability under the FDCPA, the class members must prove not only that the collection letter threatened legal action, but that it did so despite the fact that the medical center did not intend to pursue legal action.

Turning first to Rule 23(a)(2)’s “commonality” requirement, the Court reviewed the standard set by the Supreme Court in Walmart v. Dukes, 564 U.S. 338, 348 (2011) that commonality requires more than a shared cause of action or common allegation of fact, but a common legal contention capable of classwide resolution.  Dukes at 349-50.

Here, although every member of the putative class received the same allegedly threatening collection letter, the FDCPA penalizes empty threats, not all threats.  Like the failed putative Title VII sex discrimination class in Dukes, the Fifth Circuit opined that because the record was devoid of the medical center’s debt collection lawsuit filing practices, and no evidence was submitted evidencing its actual intent to sue the class representative or class members, there was no “glue” here “holding the alleged reasons for all those [letters] together”—i.e. a uniform intention for the medical center to file suit.  Dukes at 352. 

Thus, the class representative failed to demonstrate that the debt collector’s purported false threat to take legal action against the class members was capable of classwide resolution, and failed to carry her burden to “affirmatively demonstrate” commonality.  Id. at 350.

For this reason, the Fifth Circuit held, the class representative could not establish typicality under Rule 23(a)(3) because her claim could not be “typical of the claims or defenses of the class” without a common issue, nor predominance under Rule 23(b)(2) without demonstrating common issues that “predominate over any questions affecting only individual class members.”  Fed. R. Civ. P. 23(a)(3); Fed. R. Civ. P. 23(b)(2); Falcon, 457 U.S. at 157 n. 13 (“The commonality and typicality requirements of Rule 23(a) tend to merge.”).

Noting that there was no need to separately analyze whether the class failed under Article III standing, the Fifth Circuit noted that standing issues exist because there are undoubtedly members within the defined class of “all persons in Texas… who received the [collection letter]” who ignored the letter and therefore lack a cognizable injury under Article III. 

However, the Court declined to reach the issue, because the Supreme Court repeatedly instructed that it should first decide whether a proposed class satisfies Rule 23, before deciding whether it satisfies Article III, and that there is no need to answer the latter question if the class fails under the former. See Amchem, 521 U.S. at 612 (“The class certification issues are dispositive; because their resolution . . . is logically antecedent to the existence of any Article III issues, it is appropriate to reach them first.”) (additional citations omitted).

Because the Fifth Circuit determined that the putative class failed under Rule 23 and could not be certified, the order granting class certification was reversed and remanded to the trial court for further proceedings.

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Christopher P. Hahn practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Insurance Recovery and Advisory groups. Prior to joining Maurice Wutscher LLP, he served under the General Counsel at the Florida Office of Financial Regulation. He also obtained extensive experience litigating property insurance claims through all phases of discovery, motion practice and other pre-trial activities. Christopher obtained his Bachelor of Science degree in Business Administration from the University of Southern California, followed by his Juris Doctorate degree from the University of Miami School of Law. He is also a graduate of the University of Miami’s Masters of Business Administration program, completing his degree with an emphasis on finance and mergers and acquisitions.

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