Johnson v. Enhanced Recovery Company, LLC
Filing
60
OPINION AND ORDER: Plaintiff Erin Johnson's renewed motion for class certification 46 is GRANTED as outlined in the Opinion and Order. Edelman, Combs, Latturner & Goodwin, LLC is appointed counsel for the class. Signed by Judge Philip P Simon on 5/2/2018. (jss)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
ERIN JOHNSON, on behalf of plaintiff
and a class,
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)
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Plaintiff,
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vs.
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ENHANCED RECOVERY COMPANY, LLC, )
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Defendant.
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2:16CV330-PPS
OPINION AND ORDER
Plaintiff Erin Johnson has brought this case alleging that debt collector Enhanced
Recovery Company sent her a dunning letter that was false or misleading in violation of
the Fair Debt Collection Practices Act, 15 U.S.C. §1692e. The form letter challenged by
Johnson has been described and discussed at length in my previous order denying
ERC’s motion to dismiss. [DE 27.] Now before me is Johnson’s renewed motion to
certify a class of plaintiffs under Fed.R.Civ.P. 23(a) and (b)(3). 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.”
Johnson proposes herself and her attorneys as class representative and class
counsel. She proposes this definition for the 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 (f) and the letter was sent at any time during a
period beginning July 13, 2016 and ending August 3, 2017.
[DE 53 at 2.] The numerosity requirement of Rule 23(a)(1) appears to be easily satisfied.
Johnson represents, without contradiction by ERC, that in discovery ERC has
preliminarily identified 39,196 individuals meeting Johnson’s proposed class definition.
Johnson contends that there are questions of law and fact common to the class as
required by Rule 23(a)(2), and that those common questions predominate over
questions affecting only individual members, as required for a class under Rule 23(b)(3).
Johnson’s class definition specifies the members’ receipt of a particular type of “notice
of debt” that (1) offered to settle a debt, (2) included particular language warning that
“your delinquent account may be reported to the national credit bureaus,” (3) was sent
within a specified period of time, and (4) provided a date for receipt of settlement
payment after the debt was reported to a credit bureau. [DE 53 at 2.] The class
definition therefore prescribes a high level of factual commonality among the members
of the class. There exists a “common nucleus of operative fact” for all class members
because ERC “engaged in standardized conduct towards members of the proposed
class by mailing to them allegedly illegal form letters.” Keele v. Wexler, 149 F.3d 589, 594
(7th Cir. 1998). The predominant legal question posed by the case is common to all
members of the class, namely whether this notice violated the FDCPA by
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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.
ERC challenges the commonality requirement, with reliance on the Supreme
Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). Dukes presented
Wal-Mart’s appeal of the certification of a class of 1.5 million plaintiffs, female
employees who alleged sex discrimination in pay and promotion in violation of Title
VII. Id. at 342. In an effort to satisfy the commonality requirement of Rule 23, the class
framed the theory of their case in a particular way, as described by Justice Scalia: “that
a strong and uniform ‘corporate culture’ permits bias against women to infect, perhaps
subconsciously, the discretionary decisionmaking of each one of Wal-Mart’s thousands
of managers – thereby making every woman at the company the victim of one common
discriminatory practice.” Id. at 345.
As Dukes notes, the commonality requirement is “easy to misread, since ‘[a]ny
competently crafted class complaint literally raises common “questions.”’” Id. at 349,
quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U.L.Rev.
97, 131-132 (2009). More particularly, commonality for purposes of Rule 23 requires
that the class members have “‘suffered the same injury.’” Dukes, 564 U.S. at 350,
quoting General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157 (1982). Further, the
class members’ claims must “depend upon a common contention...of such a nature that
it is capable of classwide resolution – which means that determination of it is truth or
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falsity will resolve an issue that is central to the validity of each one of the claims in one
stroke.” Id.
The Supreme Court concluded that Dukes could not proceed as a class action
because the plaintiffs lacked the requisite “significant proof” that Wal-Mart operated
under a general policy of discrimination, and instead only offered evidence to the
contrary, namely of a policy of “allowing discretion by local supervisors over
employment matters.” Id. at 353, 355. Nothing in Dukes persuades me that the class in
this case lacks commonality. 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, 564 U.S. at 352, in which the
challenged decisions were all discretionary and distinctly made.
ERC contends that Johnson’s stated intention not to rely on extrinsic evidence (an
expert witness or consumer survey evidence) in support of her claims suggests that the
case is not capable of presentation on a classwide basis. [DE 54 at 6.] The adequacy of
Johnson’s evidence to ultimately support the merits of the FDCCPA claim is an issue
separate from considerations of class certification. Although it may be an issue for
summary judgment, the sufficiency of Johnson’s evidentiary support does not enter into
the determination of the appropriateness of class certification.
ERC also argues that the FDCPA claim here depends on a material
misrepresentation, and that “[w]hether any statements resulted in a material
misstatement that actually affected the recipient’s decision-making is an issue that
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cannot be proved on a classwide basis.” [DE 54 at 4.] But 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.”
Lox v. CDA, Ltd., 689 F.3d 818, 826 (7th Cir. 2012). “[O]ur 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.” Turner v. JV.D.B. & Assoc., 300
F.3d 991, 995 (7th Cir. 2003).
This objective analysis applies to the issue of materiality as well as to the
deceptive character of the communication. Lox, 689 F.3d at 826 (materiality means the
ability to influence a consumer’s decision); Afewerki v. Anaya Law Group, 868 F.3d 771,
776 (9th Cir. 2017); Jensen v. Pressler & Pressler, 791 F.3d 413, 421 (3rd Cir. 2015); Elyazidi v.
SunTrust Bank, 780 F.3d 227, 234 (4th Cir. 2015); Mikolajczyk v Universal Fidelity, LP, Case
No. 16-CV-1382, 2017 WL 706301 at *4 (E.D.Wisc. Feb. 22, 2017); Bowse v. Portfolio
Recovery Associates, LLC, 218 F.Supp.3d 745, 753 (N.D.Ill. 2016). 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.” Pettit
v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000). Further, as
Johnson points out, I have already held, in ruling on ERC’s motion to dismiss, that “[i]f
Johnson is correct about how the unsophisticated consumer would interpret ERC’s
letter, the statements are certainly material.” [DE 17 at 14.]
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ERC also raises issues of standing, which of course is constitutionally necessary
for the maintenance of any action. The minimum requirements of standing to pursue a
claim are that: (1) the plaintiff must have suffered an “injury in fact” (2) that is “fairly
traceable to the challenged conduct of the defendant” and (3) that a favorable judicial
result is likely to redress. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016), citing Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). ERC argues that class certification is
inappropriate because “detailed and individualized inquiry” would be required to
determine each class member’s injury in fact supporting standing to sue. [DE 54 at 8.]
Johnson cites Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 676 (7th Cir. 2009), for the
proposition that, “[f]or class certification, only the Plaintiff needs to establish standing.”
[DE 57 at 7.] In Kohen, the Seventh Circuit held that although “injury is a prerequisite
to standing[,] as long as one member of a certified class has a plausible claim to have
suffered damages, the requirement of standing is satisfied.” Id. at 676.
That returns the focus to Johnson herself, who ERC contends lacks standing
because she suffered no injury in fact, citing Meyers v. Nicolet Restaurant of De Pere, LLC,
843 F.3d 724, 727-28 (7th Cir. 2016), and Hahn v. Triumph Partnerships, LLC, 557 F.3d 755,
757-58 (7th Cir. 2009). In Meyers, the Seventh Circuit affirmed the denial of class
certification in an action under the Fair and Accurate Credit Transactions Act after
finding that the named plaintiff had no injury in fact from the alleged violation of the
statute by a credit card receipt that did not truncate the expiration date of his card, but
which no one else ever saw. Citing Spokeo, the Seventh Circuit held that “[m]ore than a
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‘bare procedural violation, divorced from any concrete harm’ is required to satisfy
Article III’s injury-in-fact requirement.” Meyers, 843 F.3d at 727, citing Spokeo, 136 S.Ct.
at 1549.
As for her own injury sufficient to establish standing, Johnson argues that in this
context, materiality and injury are the same analysis. [DE 57 at 8.] Citing Spokeo, 136
S.Ct. at 1548, Johnson contends that intangible injury in this case constitutes an injury in
fact. Johnson also cites a number of district court decisions in the Seventh Circuit
holding that consumers who allege misrepresentations or misleading statements in
violation of §1692e have standing to sue. [DE 57 at 10.] Hernandez v. Midland Credit
Management, Inc., No. 15-CV-11179, 2017 WL 2985764 (N.D.Ill. July 13, 2017), carefully
considers the question, and concludes that 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. Id. at
*2.
In Hernandez, Judge Gottschall notes that a number of FDCPA cases decided by
courts in the Seventh Circuit “uniformly conclude that FDCPA claims satisfy Spokeo’s
standing requirements.” Id., citing Dunham v. Robert Crane & Assocs., LLC, No. 1:16-cv2100-SEB-MPB, 2017 WL 2664287, at *4 (S.D.Ind. June 20, 2017), Pogorzelski v. Patenaude
& Felix APC, No. 16-C-1330, 2017 WL 2539782, at *3 (E.D.Wis. June 12, 2017); Haddad v.
Midland Funding, LLC, No. 16 C 3942, 2017 WL 1550187, at *3 (N.D.Ill. May 1, 2017).
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These cases are persuasive that “[t]he 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.
Johnson persuasively argues that the cases ERC relies on involve different facts
or statutes and don’t support a contrary conclusion here. [DE 57 at 11.] For example,
the Meyers decision notes that the statute involved there – FACTA, a 2003 amendment
to the Fair Credit Reporting Act – was enacted in response to “the increasing threat of
identity theft.” Meyers, 843 F.3d at 725. Because the plaintiff’s immediate discovery of
the violation meant there was no increased risk of his identity being compromised, and
because “Congress has specifically declared that failure to truncate a card’s expiration
date, without more, does not heighten the risk of identity theft,” the Court of Appeals
found that the plaintiff lacked standing. Id. at 727-728. A different statute addressing a
different harm make Meyers distinguishable from Johnson’s claim under the FDCPA.
ERC also cites Jackson v. Abendroth & Russell, P.C., 207 F.Supp.3d 945, 953
(S.D.Iowa 2016), in which the district court found that the plaintiff lacked standing to
bring an FDCPA claim. The claims were that the dunning letter “did not properly
inform [plaintiff] of ‘[his] right to dispute the [d]ebt or to request the name and address
of the original creditor’” and demanded payment several days short of the required 30day validation period. Id. at 953. The court found that the plaintiff lacked standing to
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bring the claim because he did not intend to challenge the amount of the debt and
conceded that the original creditor was correctly identified. Id. at 953-54. This “fact
pattern” meant the plaintiff’s situation did not present “the recurring problem of debt
collectors dunning the wrong person or attempting to collect debts which the consumer
has already paid,” which the legislative history showed was the statutory purpose of
§1692g of the FDCPA. Id. at 954, quoting S. Rep. No. 95-382, at 4 (1977), as reprinted in
1977 U.S.C.C.A.N. 1695, 1699.
First, I note that it appears the Eleventh Circuit may disagree with the Southern
District of Iowa. Describing a similar scenario – a plaintiff complaining of missing
FDCPA-required disclosures but not resulting actual damages – the court in Church v.
Accretive Health, Inc., 654 Fed.Appx. 990 (11th Cir. 2016), held that the statute had created
the right to receive the required disclosures and a new injury of not receiving them, so
that the plaintiff had sufficiently alleged she sustained a concrete injury. Id. at 994-995.
Here, by contrast, Johnson’s claim is brought under §1692e, which prohibits false
or misleading representations in the collection of a debt. Johnson alleges that the
dunning letter was confusing and misleading because it falsely represented or implied
that payment of a proffered settlement would avoid credit reporting when in fact
Johnson’s debt had already been reported to a credit bureau prior to the deadline for a
settlement payment. [DE 1 at 3.] Jackson involved omission of required general
information about debt dispute options in a dunning letter in which the information
presented about the recipient’s particular debt was admittedly correct. Here the fact
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pattern involves a falsehood in the letter that carried a risk of real harm to the debtor, in
that it arguably offered payment of a settlement option in order to avoid credit reporting,
when in fact the reporting had already taken place. This alleged violation of the
FDCPA is distinguishable from Jackson and entails a degree of risk sufficient to meet the
concreteness requirement. The particularity requirement is unquestionably met by the
mailing of the letter to Ms. Johnson, which means its allegedly false, deceptive and
misleading content affected her in a personal and individual way. Spokeo, 136 S.Ct. at
1548.
A post-Spokeo decision of the Second Circuit Court of Appeals supports this
injury in fact conclusion on a broad rationale applicable to all claims under §1692e. In
Papetti v. Does 1-25, 691 Fed.Appx. 24 (2nd Cir. 2017), the Second Circuit considered the
Spokeo decision, concluded that the statutory purpose of §1692e is clearly to protect “an
individual’s concrete interests,” and concluded that alleged violations of that statute,
taken as true, “‘entail the concrete injury necessary for standing.’” Id. at 26, quoting
Strubel v. Comenity Bank, 842 F.3d 181, 189 (2nd Cir. 2016). Both this broad consideration
of §1692e’s purposes and the particulars of Johnson’s allegations here support my
conclusion at this stage that she has standing to bring her claim and to represent a class.
Because standing is a jurisdictional matter lying at the heart of the court’s
authority to entertain and determine the parties’ dispute, it can be raised at any time.
ERC has not previously sought dismissal of the action by contesting Johnson’s standing
to bring the action. Doing so now, ERC cites deposition testimony it contends supports
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the conclusion that Johnson suffered no injury in fact. [DE 54 at 13.] At this stage, I
make the determination that Johnson has standing predicated solely on her pleading’s
factual allegations, taken as true, along with the statute and applicable case law. Berger
v. National Collegiate Athletic Association, 843 F.3d 285, 289 (7th Cir. 2016). If ERC wishes
to further challenge standing with reliance on evidence obtained in discovery, it may do
so in a motion for summary judgment.
The FDCPA defines “debt” as relating to a transaction “primarily for personal,
family, or household purposes.” 15 U.S.C. §1692a(5). Relative to the commonality
requirement, ERC raises an issue about determining that the obligations underlying its
notice to each class member were based on consumer debt, as opposed to commercial
debt, which is not subject to the Act. The manner in which Johnson suggests this can be
done is unsatisfactory, ERC contends, and would result in a class definition that is both
under-representative in one respect and over-inclusive in another. [DE 54 at 16.]
Johnson disagrees with this, suggesting that “whether a debt is a business debt is easily
determined.” [DE 57 at 14.] Johnson also replies that in response to discovery, ERC has
not produced evidence that any of the accounts are business debts, calling ERC’s
argument a “phantom possibility.” [DE 57 at 13, 15.]
Johnson cites decisions remarking that because the FDCPA only governs
consumer transactions, there could be no class actions under the FDCPA if certification
required a demonstration that all transactions in a case were consumer, not business,
transactions. [DE 57 at 15.] I share the view of these courts that “the need to show that
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the transactions involved in a particular case are consumer transactions is inherent in
every FDCPA class action” and “[i]f that alone precluded certification, there would be
no class actions under the FDCPA.” Wilkerson v. Bowman, 200 F.R.D. 605, 609 (N.D.Ill.
2001). See also Sledge v. Sands, 182 F.R.D. 255 (N.D.Ill. 1998) (“The burden rests with
possible class members to prove they are part of the class; that is, to prove they incurred
debts for personal purposes.”); In re CBC Companies, Inc. Collection Letter Litigation, 181
F.R.D 380, 385 (N.D.Ill. 1998). The issue doesn’t preclude certification but does warrant,
as in Wilkerson, inclusion of the consumer debt limitation in the definition of the class.
Wilkerson, 200 F.R.D. at 609. With that modification, I am persuaded that the defined
class meets the requirements of commonality and typicality as to the stated FDCPA
claim under §1692e.
On less substantive grounds, ERC challenges Johnson’s limitation of the class to
“individuals in Indiana,” when her complaint made allegations on behalf of a putative
class consisting of individuals in Illinois, Indiana and Wisconsin. [DE 54 at 19; DE 53 at
2; DE 1 at ¶29.] ERC complains that Johnson now limits the geographic scope of the
class without any explanation for the change. Plaintiff replies that statewide classes are
often certified where a larger class would make recovery even more de minimis. [DE 57
at 16-17.] The “broadest possible class” is not required. Mace v. Van Ru Credit Corp., 109
F.3d 338, 341 (7th Cir. 1997). To the contrary, the class requirements of Rule 23
“encourage rather specific and limited classes.” Id. “Furthermore, there is no provision
that limits defendants being exposed to more than one FDCPA class action lawsuit.”
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Sanders v. Jackson, 209 F.3d 998, 1002 (7th Cir. 2000). The statewide scope of the class is
perfectly acceptable.
ERC’s opposes the selection of Johnson as the representative of an Indiana class,
when she is now a resident of Illinois. This argument is a non-starter. The ERC mailing
on which the FDCPA claim is based was sent to and received by Johnson in Indiana,
where she then lived. The issue calls to my attention the ambiguity of the phrase
“individuals in Indiana” in Johnson’s proposed class definition. To clarify the matter, I
will modify the class definition by altering the proposed “all individuals in Indiana” in
subsection (a) and adding a new subsection referring to mailing addresses in Indiana.
ERC offers no other arguments specifically disputing the appropriateness of Erin
Johnson as representative of the plaintiff class. I am persuaded that Johnson will fairly
and adequately protect the interests of the class, as required by Fed.R.Civ.P. 23(a)(4).
Johnson proposes her attorneys’ firm, Edelman, Combs, Lattuner & Goodwin, LLC, as
class counsel. ERC expresses no opposition to that selection. Edelman, Combs is
known by me to have more than sufficient experience in handling FDCPA and other
consumer rights litigation and serving as class counsel in such cases. Counsel’s
knowledge of the applicable law, the resources of the firm, and the work counsel has
done in identifying and investigating potential claims in the action, all militate in favor
of the firm’s appointment as class counsel under Fed.R.Civ.P. 23(g)(1).
I agree with Judge Pallmeyer that “the class action is not only the superior
method, but the best one for pursuing remedies under the FDCPA.” Wilkerson, 200
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F.R.D. at 610. 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.” Crawford v. Equifax
Payment Services, Inc., 201 F.3d 877, 880 (7th Cir. 2000). I am satisfied that the class to be
certified meets the requirements of Rule 23(a) and (b)(3). With the few changes
explained above and shown here, I will certify a class based on plaintiff Johnson’s
proposal, consisting of:
(a) all individuals in Indiana (b) who were sent a letter by defendant (c)
(b) offering a settlement of a debt incurred primarily for personal,
family, or household purposes, (d) (c) and stating that “your delinquent
account may be reported to the national credit bureaus” (e) (d) 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 (f) (e) and the letter was sent at any
time during a period beginning July 13, 2016 and ending August 3, 2017
(f) to a mailing address in the State of Indiana.
ACCORDINGLY:
Plaintiff Erin Johnson’s renewed motion for class certification [DE 46] is
GRANTED as follows.
A plaintiff class is certified under Fed.R.Civ.P. 23(a) and (b)(3), consisting of:
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(a) all individuals who were sent a letter by defendant Enhanced Recovery Company,
LLC, (b) offering a settlement of a debt incurred primarily for personal, family, or
household purposes, (c) and stating that “your delinquent account may be reported to
the national credit bureaus” (d) 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 (e) the letter was sent at any time
during a period beginning July 13, 2016 and ending August 3, 2017 (f) to a mailing
address in the State of Indiana.
Edelman, Combs, Latturner & Goodwin, LLC is appointed counsel for the class.
SO ORDERED.
ENTERED: May 2, 2018.
/s/ Philip P. Simon
UNITED STATES DISTRICT JUDGE
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