Raymundo Landeros, et al v. Pinnacle Recovery, Inc.

Filing

Opinion issued by court as to Appellants Diana Landeros and Raymundo Landeros. Decision: Affirmed. Opinion type: Non-Published. Opinion method: Per Curiam. The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions.

Case: 16-11975

Date Filed: 05/30/2017

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[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-11975
________________________
D.C. Docket No. 1:14-cv-00473-KD-M

RAYMUNDO LANDEROS,
DIANA LANDEROS,
Plaintiffs - Appellants,
versus
PINNACLE RECOVERY, INC.,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Alabama
________________________
(May 30, 2017)
Before ED CARNES, Chief Judge, ROSENBAUM, and DUBINA, Circuit Judges.
PER CURIAM:

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This is an interlocutory appeal. Raymundo Landeros and Diana Landeros
(the “Landeroses”) appeal the district court’s order denying their joint motion for a
preliminary class certification and mooting their joint motion for approval of a
settlement agreement. After reading the parties’ briefs, reviewing the record, and
entertaining oral argument, we discern no abuse of discretion in the district court’s
order. Accordingly, we affirm.
I. BACKGROUND
The Landeroses, individually and on behalf of all similarly situated
individuals, filed a complaint against Pinnacle alleging violations of the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”). The complaint
asserted that the FDCPA violations arose from Pinnacle’s attempts to collect a debt
through a false, misleading, or deceptive communication. The Landeroses
proposed a class that consisted of all persons in the United States who received
from Pinnacle the form collection letter that stated in part:
Your current real estate interest with Westgate Resorts (our client) is
current[ly] in the foreclosure process. . . . Failure to respond will
continue to force the current foreclosure process. If the foreclosure of
your interest is completed, the foreclosure will be reported to the
credit bureaus and this “forgiveness of debt” will be reported to the
Internal Revenue Service (IRS). When a creditor makes such a report,
you will receive a 1099-C form. The IRS treats the forgiven debt as
income, on which you may owe income tax.

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(R. Doc. 35 at 15.) The complaint sought statutory damages, plus costs and
attorney’s fees for the Landeroses.
Following discovery, the parties sought the district court’s approval of a
class action settlement. According to the proposed settlement, Pinnacle
represented that approximately 13,614 letters were mailed during the relevant time.
The Landeroses were to receive $1,250 each, and their attorneys were to receive
$30,000. The proposed settlement allocated $32,500 for the class on a “pro rata”
basis. This figure was the maximum statutory damages recoverable by the class
because it amounted to 1% of Pinnacle’s net worth as of the relevant date. This
sum would result in a payout of approximately $2.39 for each absent class member
if no one opted out of the settlement agreement.
After receiving the proposed settlement, the district court expressed
reservations about it and ordered a hearing. Before the hearing, the Landeroses
filed a supplemental brief, focusing on the theory that the letter falsely states or
implies that a foreclosure always results in forgiveness of debt and therefore a tax
liability. They also asserted that the letter need only be deceptive as to the least
sophisticated consumer. Following the hearing, the district court denied the
motion for preliminary certification of the class and mooted the proposed

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settlement agreement. The Landeroses appealed, and this court appointed amicus
curiae to defend the district court’s judgment.1
II. DISCUSSION
Federal Rule of Civil Procedure 23 governs class actions. “A class action
may be maintained only when it satisfies all the requirements of [Rule] 23(a) and
at least one of the alternative requirements of Rule 23(b).” Allapattah Servs., Inc.
v. Exxon Corp., 333 F.3d 1248, 1260 (11th Cir. 2003) (quoting Rutstein v. Avis
Rent-A-Car Sys., Inc., 211 F.3d 1228, 1233 (11th Cir. 2000)). There are four
prerequisites that must be satisfied under Rule 23(a): (1) numerosity; (2)
commonality; (3) typicality; and (4) adequacy of representation. See FED. R. CIV.
P. 23(a). The parties sought certification under Rule 23(b)(3), pursuant to which a
court must make two additional findings. Specifically, the court must consider
whether “the questions of law or fact common to class members predominate over
any questions affecting only individual members” and whether “a class action is
superior to other available methods for fairly and efficiently adjudicating the
controversy.” FED. R. CIV. P. 23(b)(3). “In other words, the issues in the class
action that are subject to generalized proof, and thus applicable to the class as a

1

Due to the lack of adversarial briefing, this court appointed John C. Neiman, Jr., Esq. as amicus
curiae to advocate for an affirmance of the district court’s judgment. The court thanks and
compliments Mr. Neiman for his exemplary advocacy, both in the written brief and at oral
argument.
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whole, must predominate over those issues that are subject only to individualized
proof.” Kerr v. City of West Palm Beach, 875 F.2d 1546, 1557‒58 (11th Cir.
1989) (internal quotation marks omitted).
Rule 23(c) directs a district court, “[a]t [the] earl[iest] practicable time after
a person sues or is sued as a class representative, … [to] determine by order
whether to certify the action as a class action.” FED. R. CIV. P. 23(c)(1)(A). While
it is sometimes possible to decide the propriety of class certification from the face
of the complaint, see Mills v. Foremost Ins. Co., 511 F.3d 1300, 1309 (11th Cir.
2008), the Supreme Court has “emphasized that it may be necessary for the court
to probe behind the pleadings before coming to rest on the certification question.”
Comcast Corp. v. Behrend, 569 U.S. ___, 133 S. Ct. 1426, 1432 (2013) (internal
quotation marks omitted). In fact, the determination usually should be predicated
on more information than the complaint itself provides, and it “will frequently
entail overlap with the merits of the plaintiff’s underlying claim.” Id. (internal
quotation marks omitted). After all, “class determination generally involves
considerations that are enmeshed in the factual and legal issues comprising the
plaintiff’s cause of action.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351,
131 S. Ct. 2541, 2552 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S.
147, 160, 102 S. Ct. 2364, 2372 (1982)).
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Moreover, “because class actions are an exception to our constitutional
tradition of individual litigation,” Brown v. Electrolux Home Prods., 817 F.3d
1225, 1233 (11th Cir. 2016), a district court has great responsibility to adhere to
the framework of Rule 23. Id. 2 Hence, if the district court has reservations about
whether the Rule 23 requirements have been satisfied, it should refuse to grant
class certification until the parties have assuaged the district court’s doubts. Id. at
1233‒34. We review the district court’s order denying the class certification for
abuse of discretion. See Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1264 (11th
Cir. 2009).
On appeal, the Landeroses clarify that they assert one claim and one theory
of relief in their FDCPA action: that the Pinnacle letter characterizes the tax
consequences of a foreclosure and loan forgiveness in a false, deceptive and/or
misleading way in violation of § 1692e. The FDCPA prohibits a debt collector
from using “any false, deceptive, or misleading representation or means in
connection with the collection of any debt.” 15 U.S.C. § 1692e. “The use of ‘or’
in [this provision] means that, to violate the FDCPA, a representation by a ‘debt
collector’ must merely be false, or deceptive, or misleading.” Bourff v. Rubin

2

In this case, we applaud the district court for expressing its doubts about the propriety of the
class certification and exercising its great responsibility in determining the appropriateness of
class action certification.
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Lublin, LLC, 674 F.3d 1238, 1241 (11th Cir. 2012). “A false representation in
connection with the collection of a debt is sufficient to violate the FDCPA facially,
even where no misleading or deception is claimed.” Id.
We conclude from the record that the district court correctly declined to
certify the class because it reasoned that whether the contents of the letter were
false, deceptive, or misleading turns on the unique factual circumstances of each
individual who received the letter. In other words, the district court properly
determined that the Landeroses did not satisfy the predominance requirement in
Rule 23. “That common questions of law or fact predominate over individualized
questions means that the issues in the class action that are subject to generalized
proof, and thus applicable to the class as a whole, must predominate over those
issues that are subject only to individualized proof.” Rutstein, 211 F.3d at 1233
(internal quotation marks omitted). These common questions must predominate
such that they “ha[ve] a direct impact on every class member’s effort to establish
liability” that is more substantial than the impact of individualized issues in
resolving the claim or claims of each class member. Klay v. Humana, Inc., 382
F.3d 1241, 1255 (11th Cir. 2004) (citation omitted and alteration in original).
At the hearing before the district court, the Landeroses’ counsel admitted
that he did not know whether the absent class members had in fact had debt
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forgiven or would have been subject to taxes for any such forgiven debt. In their
briefs on appeal, the parties assert that these statements were still deceptive
because a creditor is not obligated to forgive a deficiency and there are exceptions
regarding the tax liability of debt forgiveness. That may be true as to some class
members’ circumstances, but the Landeroses do not show how the statements are
deceptive as to all class members.
Furthermore, Pinnacle’s letter made no unqualified or incomplete statement
about what the law required. Rather, the letter made a factual representation that if
one’s interest is foreclosed, this forgiveness of debt will be reported to the IRS.
Pinnacle even added that the debtor may owe income tax as a result. These
statements could accurately describe some of the individual class members’
circumstances, but these statements are not deceptive as to all class members. We
agree with the district court that a determination about whether the contents of the
Pinnacle letter violated the FDCPA is not possible without inquiry into the factual
circumstances of each recipient’s indebtedness and the intentions of Pinnacle as to
that particular recipient. Accordingly, the district court properly denied class
certification because the predominance requirement was not met.
In an attempt to salvage their FDCPA class action claim and negate the
individualized inquiry, the Landeroses urge the application of the “least
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sophisticated consumer” standard. They contend that under this standard, the least
sophisticated consumer would be deceived by the Pinnacle letter regardless of the
factual circumstances applicable to each recipient of the letter. They argue that the
district court erred by not employing this standard. The district court found that
this standard did not apply in this case because whether the letter was false or
misleading turned on the factual circumstances particular to each recipient. We
agree.
We adopted the “least sophisticated consumer” standard in Jeter v. Credit
Bureau, Inc., 760 F.2d 1168, 1175 (11th Cir. 1985). See LeBlanc v. Unifund CCR
Partners, 601 F.3d 1185, 1193‒94 (11th Cir. 2010) (“We employ the ‘leastsophisticated consumer’ standard to evaluate whether a debt collector’s
communication violates § 1692e of the FDCPA.”). Under this standard, the court
should evaluate whether certain statements by debt collectors are deceitful by
considering how the least sophisticated consumer rather than a reasonable
consumer would perceive them. Jeter, 760 F.2d at 1174‒75. Thus, even when a
reasonable consumer would know that a particular statement was false and would
not be deceived by it, the statement can still violate the FDCPA if it would deceive
the least sophisticated consumer. Id. at 1172‒73 (citing Charles of the Ritz Distrib.
Corp. v. FTC, 143 F.2d 676, 679 (2d Cir. 1944)). This standard attempts to strike a
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balance between “protecting naive consumers” and “prevent[ing] liability for
bizarre or idiosyncratic interpretations of collection notices by preserving a
quotient of reasonableness.” LeBlanc, 601 F.3d at 1194 (quoting United States v.
Nat’l Fin. Servs., Inc., 98 F.3d 131, 136 (4th Cir. 1996)). We noted that the least
sophisticated consumer standard will not apply to FDCPA claims in which the
consumer’s sophistication is irrelevant. Jeter, 760 F.2d at 1175. That is the case
here.
The merits of the Landeroses’ FDCPA claims do not turn on the
sophistication of the person who read the Pinnacle letter. Rather, the merits of the
claims depend on the objective factual circumstances unique to each recipient’s
indebtedness. Pinnacle’s statements about debt forgiveness and the potential tax
consequences would violate the FDCPA because of the fact that Pinnacle did not
intend to report debt forgiveness as to that individual person or because of the fact
that that particular person’s forgiven debt would not be substantial enough to give
rise to taxable income. Thus, the potential falsity or tendency to deceive has
nothing to do with that person’s sophistication. It depends solely upon objective
facts or the intentions of Pinnacle, which may vary from class member to class
member. As such, the least sophisticated consumer standard does not apply in this
case.
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III. CONCLUSION
The district court did not abuse its discretion in denying the parties’ joint
motion for class certification and mooting their joint motion for approval of a
settlement agreement. The district court properly considered the Rule 23 class
certification requirements and found the parties did not satisfy the predominance
element. The district court also properly declined to apply the least sophisticated
consumer standard to the FDCPA claims. Accordingly, we affirm the district
court’s order.
AFFIRMED.

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