Franke v. Financial Lead Services LLC et al
Filing
115
OPINION ; signed by Judge Robert J. Jonker (Judge Robert J. Jonker, ymc)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CHRISTOPHER FRANKE,
individually and on behalf of others
similarly situated,
Plaintiff,
CASE NO. 1:12-CV-1374
v.
HON. ROBERT J. JONKER
FINANCIAL LEAD SERVICES, et al.,
Defendants.
__________________________________/
OPINION
This matter is before the Court on the parties’ Joint Motion to Certify Class and Approve
Class Settlement (docket # 107).1 A hearing on the motion took place on November 24, 2014. The
Court has thoroughly reviewed the record, including post-hearing supplements, and carefully
considered the applicable law. The motion is ready for decision.
Background
This case arises under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (the “FCRA”).
Defendant Financial Lead Services, LLC (“FLS”) is a marketing company that obtains and resells
marketing lists to debt settlement companies, including a debt consolidation company operating out
of the same location as FLS, Complete Debt Settlement, LLC. (docket # 107, Page ID # 2074.)
Dean Sundrla and Angela Cole are also defendants in this case. Plaintiff alleges that Mr. Sundrla
was President, member, agent, and chief managing officer of both FLS and Complete Debt
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Defendants’ consent to class certification is conditional on the Court’s approval of the
parties’ Settlement Agreement.
Settlement (Am. Compl., docket # 28, at ¶ 6). Plaintiff alleges that Defendant Angela Cole was a
manager of Complete Debt Settlement and an agent for FLS and Dean Sundrla. (Id.) Collectively,
these four defendants are referred to as the “FLS Group.”
Among other things, the FCRA restricts the access and use of consumer reports to certain
“permissible purposes” the statute enumerates. 15 U.S.C. § 1681b. Plaintiff alleges that the FLS
Group used marketing lists containing private financial information about consumers for
impermissible purposes, in violation of the FCRA. (docket # 107, Page ID # 2074.) Plaintiff
Franke’s name and summary credit information appeared on a list of 56,000 names and summary
credit information FLS purchased from Datamyx, LLC, a re-seller of credit reports. (Id. at Page ID
2075.) The names and summary credit information of Franke and approximately 8,000 other
Michigan residents appeared on the list. (Id.) After purchasing the list, FLS (or the FLS Group)
used the list to produce a mailer to promote its debt consolidation services. (Id.) The FLS Group
denies that its purchase and use of the list violated the FCRA. The FLS Group contends that the list
did not qualify as a consumer report and that its use of the list was for a permissible purpose under
the FCRA.
I. Motion to Certify Class
The parties propose certification of a class defined as:
All residents within the State of Michigan whose consumer reports were acquired by
the FLS Group from Datamyx along with Mr. Franke’s and whose names are
memorialized on spreadsheet 70053.
A complete list of class members is included on the record as a Restricted Access filing (docket
# 112). A district court has discretion to determine whether a case may proceed as a class action
under FED. R. CIV. P. 23. Doe v. Lexington-Fayette Urban County Gov’t, 407 F.3d 755, 761 (6th
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Cir. 2005) (citing Mayer v. Malod, 988 F.2d 635, 640 (6th Cir. 1993)). In determining whether class
certification is appropriate, a district court must consider whether the action satisfies all four
prerequisites of Rule 23(a) and at least one of the conditions in Rule 23(b). In re Am. Med. Sys., Inc.,
75 F.3d 1069, 1079 (6th Cir. 1996).
A. Rule 23(a)
To satisfy Rule 23(a), a plaintiff must demonstrate that the proposed class is so numerous that
joinder of all members would be impracticable; that the case presents common issues of law or fact;
that the proposed class representatives’ claims are typical of the class; and that the proposed class
representative will adequately protect the interests of the class. FED. R. CIV. P. 23(a); In re Am. Med.
Sys., Inc., 75 F.3d at 1080-1084.
There is no dispute that Plaintiff has satisfied the pre-requisites of Rule 23(a) in this case.
The putative class numbers over 8,000 members, sufficiently numerous to make joinder
impracticable. See Herbert Newberg & Alba Conte, Newberg on Class Actions,§ 3:5 (4th ed. 2002)
(class comprising 40 or more members presumed to be numerous). Questions of law and fact,
including without limitation questions concerning whether the list at issue is a consumer report and
the FLS Group’s use of the list a permissible purpose under the FCRA, are common to the entire
class. “The commonality requirement is satisfied if there is a single factual or legal question
common to the entire class.” Powers v. Hamilton County Public Defender Comm’n, 501 F.3d 592,
619 (6th Cir. 2007). The class representative’s claims are typical of the entire class, “arising from
the same event or practice or course of conduct that gives rise to the claims of the other class
members” and “based on the same legal theory.” In re Am. Med. Sys., Inc., 75 F.3d at 1082. The
record reflects that “the representative part[y] will fairly and adequately protect the interests of the
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class.” FED. R. CIV. P. 23(a)(4). Here, the proposed class representative possesses the same interest
as the rest of the class in resolution of the claims. “Class representatives are adequate when it
appear[s] that [they] will vigorously prosecute the interests of the class through qualified counsel,
which will usually be the case if the representatives are part of the class and possess the same interest
and suffer the same injury as the class members.” Int’l Union, United Auto., Aerospace, & Agric.
Implement Workers of Am. v. Gen. Motors Corp., 497 F.3d 615, 626 (6th Cir. 2007) (internal
quotations and citations omitted). The qualifications of class counsel, attorney Ian B. Lyngklip,
reflect that he is amply qualified to conduct the litigation. (Lyngklip decl., docket # 107-5.) For all
of these reasons, the Court concludes that Plaintiff has satisfied the pre-requisites Rule 23(a)
establishes.
B. Rule 23(b)(3)
Under Rule 23(b)(3), a class action may be maintained if Rule 23(a) is satisfied and if:
the court finds 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. The matters pertinent to these findings include:
(A)
(B)
(C)
(D)
the class members interests’ in individually controlling the
prosecution or defense of separate actions;
the extent and nature of any litigation concerning the controversy
already begun by or against class members;
the desirability or undesirability of concentrating the litigation of the
claims in the particular forum; and
the likely difficulties in managing a class action.
In this case, the proposed class satisfies the requirements of Rule 23(b)(3).
In particular, common questions predominate. This is obviously true in the context of the
proposed settlement, where the only real question is the fairness of the settlement. But looking
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beyond the settlement issue itself, the merits of the parties’ claims and defenses turn predominantly
on whether the report at issue – which includes the name and information of all the proposed class
members – is a consumer report within the meaning of the FCRA, and if so, whether Defendants had
and used the report for a permissible purpose. Moreover, to the extent liability is established,
damages would be predominantly a statutory matter independent of individual circumstances. The
class mechanism is also superior to any other method of resolving the dispute. The number of
potential plaintiffs is large, but the potential damages for any individual plaintiff is relatively small.
This is the paradigm situation for class treatment. The Court foresees no particular difficulty in
managing the case as a class action of Michigan plaintiffs.
For these reasons, the Court finds that certification of the proposed opt-out class under Rule
23(a) and (b)(3) is appropriate.
II. Motion for Preliminary Approval of Settlement Agreement and Form of Notice
The parties seek preliminary approval of the proposed Settlement Agreement, to be followed
by notice and a fairness hearing. The process used in federal practice involves two steps:
Approval of class action settlements involves a two-step process. First,
counsel submit the proposed terms of settlement and the court makes a preliminary
fairness evaluation . . . . If the preliminary evaluation of the proposed settlement does
not disclose grounds to doubt its fairness or other obvious deficiencies, such as
unduly preferential treatment to class representatives or of segments of the class, or
excessive compensation for attorneys, and appears to fall within the range of possible
approval, the court should direct that notice under Rule 23(e) be given to the class
members of a formal fairness hearing, at which arguments and evidence may be
presented in support of and in opposition to the settlement.
Manual for Complex Litigation, § 30.41, at 236-37 (3d ed. 1995).
In deciding a motion for preliminary approval of a settlement under Rule 23, the Court
“[c]onducts a threshold examination of the overall fairness and adequacy of the settlement in light
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of the likely outcome and the cost of continued litigation.” In re Inter-Op Hip Prosthesis Liability
Litigation, 204 F.R.D. 330, 350 (N.D. Ohio 2001). The Court finds that the proposed Settlement
Agreement satisfies this threshold examination. Under the proposed Settlement Agreement, the FLS
Group would pay a total of $415,000 to a Class Administrator to be held for the benefit of the Class.
That fund includes a common recovery fund of $300,000 (the “Settlement Fund”) and $115,000
allocated for attorney’s fees. The Settlement Fund would pay all costs associated with the
administration of the Settlement Agreement and attorney’s litigation costs.
The Claims
Administrator would pay an incentive award of $5,000 to the Class Representative from the
Settlement Fund. The Settlement Agreement would release Dean Sundrla, together with his
beneficiaries, heirs, and family members, and Angela Cole, together with her beneficiaries, heirs, and
family members (collectively, the Individual Defendants); FLS; Complete Debt Settlement, LLC;
Start New Financial, LLC; Start New Settlement; and any other entity in which the Individual
Defendants have a controlling interest. The Settlement Agreement contains other provisions, which
would also become effective upon final approval; the Court simply highlights the payment and
release provisions because those are at the heart of the proposed Settlement Agreement. The Court
is persuaded that the payment and release reasonably reflect the potential risks and rewards that
would accompany pursuing the litigation to trial. The Court finds no reason to doubt that the parties
reached the proposed settlement in good faith. There is no indication of fraud or collusion on this
record. To the contrary, the record demonstrates intense, arms-length negotiations.
One issue the Court explored with the parties during the hearing is the move from a putative
nationwide class of 56,000 persons, as originally pleaded, to a proposed settlement with a Michiganonly class of about 8,000 persons. The Court is satisfied that good-faith, arms-length negotiations
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precluded any possible settlement of the full nationwide class. The Court is also satisfied that the
interests of the non-Michigan members of the originally pleaded putative class are adequately
protected with a proposed dismissal of those claims without prejudice. The claims of the nonMichigan putative class members have been tolled during the pendency of this case, and so any
interested persons will still be able to bring their actions if they so desire.2
Form of Notice
The parties have filed a proposed form of notice to be mailed to individual class members.
Proper notice of a proposed settlement under Rule 23(e) “must inform class members (1) of the
nature of the pending litigation, (2) of the settlement’s general terms, (3) that complete information
is available from the court files, and (4) that any class member may appear and be heard at the
Fairness Hearing.” Herbert Newberg & Alba Conte, Newberg on Class Actions, § 11:53 (4th ed.
2002). The proposed form of notice meets all of these requirements. The proposed form of notice
and the proposed method of dissemination are “reasonably calculated . . . to apprize interested parties
of the pendency of the settlement proposed and to afford them the opportunity to present their
objections.” Id. The Court finds the proposed form and method of notice proper.
Conclusion
For these reasons, the Court concludes that certification of the proposed opt-out class,
preliminary approval of the Settlement Agreement, and the proposed form and method of notice are
appropriate. The Court will enter an order consistent with this Opinion.
2
For planning purposes, putative class members whose claims will ultimately be dismissed
if the Michigan-only settlement is finally approved should expect the limitations period on their
potential claims to begin running again as of the date of this Opinion. See Plaintiffs’ Supplemental
Brief Concerning Tolling (docket # 113).
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Dated:
December 10, 2014
/s/ Robert J. Jonker
ROBERT J. JONKER
UNITED STATES DISTRICT JUDGE
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