Breitman v. Affiliated Computer Services, Inc. et al
Filing
84
OPINION & ORDER re: 57 MOTION to Certify Class filed by Cindy L. Breitman. Accordingly, the Court denies Plaintiff's class certification motion. This ruling moots Plaintiff's motion to appoint Class Counsel and Class Repres entative. The parties are directed to appear for a status conference on November 18, 2014, at 3:15 p.m. The Clerk of the Court is directed to close out the pending motion in this case (Dkt. 57)., ( Status Conference set for 11/18/2014 at 03:15 PM before Judge Paul A. Crotty.) (Signed by Judge Paul A. Crotty on 10/22/2014) (lmb)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CINDY L. BREITMAN, on behalf of herself and all:
others similarly situated,
Plaintiff,
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: October 22, 2014
12 Civ. 6583 (PAC)
-againstOPINION & ORDER
XEROX EDUCATION SERVICES, LLC, s/h/i as
AFFILIATED COMPUTER SERVICES, INC.,
NEXTSTUDENT, INC., AND U.S. BANK, N.A.
Defendants.
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HONORABLE PAUL A. CROTTY, United States District Judge:
The facts of this case are fully set forth in Breitman v. Xerox Education Services, LLC,
2013 WL 5420532 (S.D.N.Y. Sept. 27, 2013). Lead Plaintiff Cindy Breitman ("Breitman" or
"Plaintiff') alleges that Xerox Education Services, LLC, NextStudent, Inc., and U.S. Bank, N.A.
(collectively, "Defendants") misapplied payments which Breitman made towards her student
loan and failed to apply certain benefits to which Breitman was entitled. Following this Court' s
Opinion and Order of September 27, 2013, Plaintiffhas claims for breach of contract and
violations ofN.Y. General Business Law section 349.
Breitman now moves to certify the following two classes:
The Checkmate II Class: On behalf of federal student loan borrowers enrolled in
defendant Xerox Education Services, LLC's ("Xerox") auto-debit payment program
CheckMate II, or any similar auto-debit payment program offered by Xerox, and who,
since August 28, 2006, made payments in excess of the stated monthly amount due (i.e.
payments other than the regular installment) ("Prepayments") to their loans and had those
Prepayments applied to satisfy (in whole or in part) subsequent installments or prevent
the next month' s auto-debit.
The Benefits Class: On behalf of federal student loan borrowers who were, since August
28, 2006, promised and qualified for borrower benefits applicable to their loans serviced
by Xerox, such as the On-Time Payment Benefit (1% rate reduction after "only" 36
consecutive on-time payments) and Grace Period Benefit (.375% rate reduction to the
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"grace period rate" after 6 months of consecutive on-time payments), but for whom
Xerox failed to apply the earned benefit to decrease as promised the borrowers' loans
(Dkt. 57, at 1-2). The Benefits Class is pursuing claims for breach of contract only, while the
Checkmate II Class is pursuing both breach of contract claims and violations ofN.Y. General
Business Law section 349. Breitman seeks to certify these classes for both damages and
injunctive reliefunder Rule 23(b)(3) and Rule 23(b)(2).
Breitman also moves to appoint herself Class Representative for both classes and to
appoint Bragar Eagel & Squire, P.C. ("BES") as counsel to the Classes. For the reasons that
follow, Breitman' s motion for class certification is denied, mooting the motion to appoint a Class
Representative and Class Counsel.
DISCUSSION
I.
Standards for Class Certification
"In determining whether class certification is appropriate, a district court must first
ascertain whether the claims meet the preconditions of Rule 23(a)," Teamsters Local445 Freight
Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 201 (2d Cir. 2008), namely that:
(1) the class is so numerous that joinder of all members is impracticable; (2) there
are questions oflaw 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). "The requirements of commonality, typicality, and adequacy of
representation are closely related." In re IndyMac Mortgage-Backed Sec. Litig., 286 F.R.D. 226,
233 (S.D.N.Y. 2012). They "serve as guideposts for determining whether under the particular
circumstances maintenance of a class action is economical and whether the named plaintiffs
claim and the class claims are so interrelated that the interests of the class members will be fairly
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and adequately protected in their absence." Gen. Tel. Co. ofSw. v. Falcon, 457 U.S. 147, 157
n.13 (1982).
If the requirements of Rule 23(a) are met, the court "may then consider granting class
certification [under Rule 23(b)(3)] where it 'finds that the questions oflaw 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."' Teamsters, 546 F.3d at 202.
A class may be certified under Rule 23(b)(2) where "the party opposing the class has
acted or refused to act on grounds that apply generally to the class, so that finai injunctive relief
or corresponding declaratory relief is appropriate respecting the class as a whole." A Rule
23(b)(2) class is appropriate only when "a single injunction or declaratory judgment would
provide reliefto each member ofthe class." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541,
2557 (2011). Individualized monetary claims are inappropriate in a class certified under Rule
23(b)(2). Id. at 2558-59; accord Janes v. Triborough Bridge and Tunnel Auth., 2011 WL
10885430, at *5 (S.D.N.Y. Oct. 5, 2011).
"The party seeking class certification bears the burden of establishing by a preponderance
of the evidence that each ofRule 23's requirements has been met." Myers v. Hertz Corp., 624
F.3d 537, 547 (2d Cir. 2010). A district court must conduct a "rigorous analysis" to make that
determination. In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 33 & n.3 (2d Cir. 2006)
(quoting Falcon, 457 U.S. at 161 (1982)). Nonetheless, it has "broad discretion" in doing so.
NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 165 (2d Cir.
2012).
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II.
Analysis
A. Standing
Defendants argue that Plaintiff lacks standing to represent both classes. Defendants'
Memorandum of Law in Opposition to Plaintiffs Motion for Class Certification ("Def. Mem."),
at 9-10, 13. Defendants contend that Plaintiff does not have standing to represent the Benefits
Class because she was ineligible for benefits and therefore "does not fit within her own class
definition"; and that she lacks standing to represent the Checkmate II class because she withdrew
from Checkmate II for five months and because she did not provide written instructions
regarding her extra payments until November 2011.
A plaintiff has standing on behalf of a putative class " if he plausibly alleges (1) that he
personally suffered some actual ... injury as a result of the putatively illegal conduct of the
defendant, and (2) that such conduct implicates the same set of concerns as the conduct alleged
to have caused injury to other members of the putative class by the same defendants." NECA,
693 F.3d at 162 (internal quotation marks and citation omitted). With respect to both classes,
Defendants have failed to show how these factual differences impacts Plaintiffs standing.
Plaintiff has plausibly alleged that she and other putative class members suffered an injury
arising out of the failure to apply benefits and the failure to apply prepayments, and has alleged a
common set of concerns between Plaintiff and the putative class. Defendants' arguments
regarding these differences may have bearing on Plaintiffs ability to represent these classes with
respect to other Rule 23 requirements, but are insufficient to destroy standing.
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B. Rule 23(a) Requirements
1. Numerosity
A class of more than 40 members presumptively satisfies the numerosity requirement of
Rule 23(a). See Torres v. Gristede 's Operating Corp. , 2006 WL 2819730, at *12 (S.D.N.Y.
Sept. 29, 2006). Plaintiffs assert that "Xerox is one of the nation's largest (if not the largest)
student loan servicers. CheckMate II is a repayment program widely offered to borrowers whose
loans are serviced by Xerox." Plaintiffs Memorandum of Law in Support of Motion for Class
Certification ("Pl. Mem."), at 11. Indeed there may be over 40,000 borrowers participating in
the Checkmate II program, and over 12,000 borrowers who may have been eligible to participate
in the On-Time Payment Benefit program. Defendants do not dispute that Plaintiff has met the
numerosity requirement.
2. Commonality
" Commonality is satisfied where a single issue of law or fact is common to the class." In
re lndyMac, 286 F.R.D. at 233 (citing Wal-Mart, 131 S. Ct. at 2256 ("[E]ven a single common
question will do.")). Nonetheless, class certification requires not only " common questions," but
"the capacity of a classwide proceeding to generate common answers apt to drive the resolution
ofthe litigation." Wal-Mart, 131 S. Ct. at 2551.
Here, the common thread among putative Benefits Class members is "whether Xerox
breached the relevant form contracts by failing to apply earned borrower benefits." Pl. Mem. at
21 . A classwide proceeding on this allegation would produce common answers to this question.
For these reasons, Plaintiff has adequately shown commonality among Benefits Class members.
Similarly, despite Defendants' assertion that Plaintiffs circumstances with respect to her
participation in Checkmate II are unique, the Checkmate II Class shares common questions.
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These questions include whether skipping auto-debits after a prepayment constitutes a breach of
contract or a violation of General Business Law section 349. That Plaintiffherselfhad "unique
communications with [Defendants] concerning her individual intentions with respect to the
application of her prepayments," Def. Mem. at 14, does not destroy this common thread.
Accordingly, both classes satisfy the commonality requirement.
3. Typicality
Typicality "is satisfied where ' each class member' s claim arises from the same course of
events and each class member makes similar legal arguments to prove the defendant's liability."'
In re IndyMac, 286 F .R.D. at 233 (quoting In re Flag Telecom Holdings, Ltd. Sec. Litig., 574
F.3d 29, 35 (2d Cir. 2009)). Courts have stated that this is "not [a] demanding" requirement.
See, e.g., Tsereteli v. Residential Asset Securitization Trust 2006-AB, 283 F.R.D. 199, 208
(S.D.N.Y. 2012); In re Prestige Brands Holdings, Inc. Sec. Litig. , 2007 WL 2585088, at *3
(S.D.N.Y. Sept. 5, 2007). Thus, " [w]hen it is alleged that the same unlawful conduct was
directed at or affected both the named plaintiff and the class sought to be represented, the
typicality requirement is usually met irrespective of minor variations in the fact patterns
underlying individual claims." Robidoux v. Celani, 987 F.2d 931, 936-37 (2d Cir. 1993).
With respect to the Benefits Class, Defendants argue that because Plaintiff is subject to
unique defenses concerning her eligibility for the relevant benefits, her claims are not typical of
the class. Def. Mem. at 11. Defendants' argument fails, however, in light of the evidence put
forth by Plaintiff that 92% of the borrowers who did not receive the on-time payment benefit
were disqualified for missing one of their first six payments. Plaintiff's Reply Memorandum of
Law in Further Support of Motion for Class Certification, at 10; Declaration of Justin Kuehn in
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Support of Motion for Class Certification, at Ex. 0. Defendants have not overcome Plaintiffs
showing that these defenses would not be unique to her situation.
The claims of the entire Checkmate II Class arise from the same course of conduct in
which Defendants allegedly failed to allow prepayments without advancing monthly payments to
slow repayment of loans and increase the amount of interest paid. Here, Plaintiffhas shown that
her claims and those of the putative classes concern the same conduct and is premised upon the
same legal theories. As a result, she has met the typicality requirement.
4. Adequate Representation
"Generally, adequacy ofrepresentation entails inquiry as to whether: 1) plaintiffs
interests are antagonistic to the interest of other members of the class and 2) plaintiffs attorneys
are qualified, experienced and able to conduct the litigation." Baffa, 222 F.3d at 60. In addition,
"[a] class representative must ... possess the same interest and suffer the same injury as the class
members." Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625- 26 (1997).
Defendants assert that Plaintiff is an inadequate class representative because she made
"misstatements concerning material facts that go to the core of her class claims, and even her
[Amended Complaint] is not free of them." Def. Mem. at 22. Defendants have not shown that
the statements at issue, some of which have since been corrected in the Amended Complaint, are
the product of lies or subterfuge; instead, they appear to be the result of mere confusion or lack
of memory regarding the precise details of a complicated transaction. Breitman appeared honest
and competent in her deposition, has displayed a willingness to participate in the litigation, and
seeks to protect the interests of the classes. For these reasons, she is an adequate class
representative.
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Accordingly, Plaintiffhas met the requirements of Rule 23(a) for both the Benefits Class
and the Checkmate II Class.
C. Predominance of Common Questions under Rule 23(b)(3)
"The predominance criterion is, in effect, a stricter version of the commonality
requirement of Rule 23(a)(2)." Ansoumana v. Gristede 's Operating Corp., 201 F.R.D. 81, 89
(S.D.N.Y. 2001). "To satisfy the predominance prong of Rule 23(b)(3), a plaintiff must show
that common proof will predominate at trial with respect to the essential elements of liability of
the underlying causes of action." Kottler v. Deutsche BankAG, 2010 WL 1221809, at *3
(S.D.N.Y. Mar. 29, 2010). Courts have a "duty to take a close look at whether common
questions predominate over individual ones." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432
(2013).
Defendants do not reach the requirements of Rule 23(b)(3) in their opposition to
Plaintiffs certification of the Benefits Class, as they believe Plaintiff fails to satisfy the Rule
23(a) requirements. The Court finds, however, that Defendants' arguments against Rule 23(a)
certification for both classes apply with greater force to the Rule 23(b)(3) requirements and,
indeed, demonstrate that neither class can be certified.
Plaintiff cannot show that common issues in the Benefits Class predominate over
individual questions. The threshold question of eligibility for the relevant benefits requires
individualized inquiries regarding putative class members' paying or failing to pay on time and
the circumstances surrounding each payment. Besides showing that a large percentage of
putative class members missed one of the first six payments, Plaintiffhas not demonstrated an
ability to prove on a classwide basis that this was due to a common policy, without necessitating
individualized inquiries. Defendants would ce1tainly be entitled at trial to prove that each class
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member was at fault for missing a payment and therefore ineligible for these benefits, through no
policy or involvement of the Defendants.
A similar issue burdens the Checkmate II Class in several respects. First, individualized
inquiries would be necessary to determine which class members provided instructions regarding
prepayments, which class members sought to advance their next due date, and which set of
contract terms applied to each class member. With respect to damages, Defendants argue that
putative class members differ from Plaintiff because they may not share Plaintiff's intention for
additional payments being applied to principal and not advancing a regular monthly payment.
Defendants have offered a plausible argument that some borrowers seek to advance their due
dates in various circumstances, such as those serving in the military, with seasonal earnings or
inconsistent income streams, or on extended travel. Def. Mem. at 7. Such differences implicate
class members' entitlement to damages, and would necessitate individualized inquiries into each
members' intentions.
Rather than common issues predominating, here individualized inquiries would
predominate with regard to both classes. Accordingly, certification under Rule 23(b)(3) is
Improper.
D. Rule 23(b)(2) Certification
As discussed above, Plaintiff seeks to certify both classes for injunctive relief under Rule
23(b)(2). Plaintiff asserts that the "CheckMate II Class qualifies as a class action[] under Rule
23(b)(2) because Xerox's uniform failure to adhere to the form CheckMate !!terms and
conditions and systematic deceptive business practices are actions of general applicability to all
members of the CheckMate II class ' so that final injunctive relief or corresponding declaratory
relief is appropriate respecting the class as a whole."' Pl. Mem. at 16. Likewise, Plaintiff states
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that the "Benefits Class qualifies as a class action[] under Rule 23(b)(2) because Xerox' s alleged
common pattern of wrongdoing to fail to apply borrower benefits to slow repayment of student
loans, and thereby increase total interest paid by borrowers, is an action of general applicability
to all members ofthe Benefits Class." !d. at 21.
Rule 23(b )(2) certification of the Checkmate II Class is improper. As discussed above,
not all users of Checkmate II intended for prepayments to be used in the way Plaintiff now seeks.
Some putative class members sought to advance their next due date for a multitude of reasons,
and injunctive relief, if granted, would hinder those class members ' ability to do so. This
difference is substantial, and Plaintiff cannot show that injunctive relief would be appropriate
respecting the class as a whole.
With respect to both the Benefits Class and the Checkmate II Class, Plaintiffhas not
shown that the monetary relief sought is incidental to the requested injunctive or declaratory
relief. Certification under Rule 23(b )(2) is improper "'when- despite the suitability of
generalized injunctive or declaratory relief--each class member would [also] be entitled to an
individualized award of monetary damages."' Ackerman v. Coca-Cola Co., 2013 WL 7044866,
at *16 (E.D.N.Y. July 18, 2013) (quoting Nationwide Lif Ins. Co. v. Haddock, 460 F. App' x 26,
e
29 (2d Cir. 2012)). Here, class members seek monetary damages in addition to the injunctive
relief sought. These damages awards, if granted, would involve individual detenninations to
calculate the amount of damages for each class member. 1 Plaintiff has not shown that these
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Plain tiff argues that "damages can be calculated through the repayment histories maintained by Xerox" and that
"CheckMate II Class members are entitled to the difference between the repayment cost of their loans and what the
repayment cost would have been had CheckMate II auto-debits not been skipped." Reply Mem. at 8. Determining
damages in this way requires "a review of each putative class member's file to assess whether the prepayment was
applied to principal or interest, a determination of the new unpaid principal balance, a review of the new payment
schedule, and then a quantification of that amount as a lump sum payment to each putative class member," with the
added complication that the timing, amounts, and interest rates for payments differ for each putative class member,
Def. Mem. at 21. These variations will cause " [q]uestions of individual damages calculations [to] inevitably
overwhelm questions common to the class." Comcast, 133 S. Ct. at 1433.
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monetary damages are merely incidental to the injunctive relief claims, and the crux of the
complaint, that prepayments were misapplied in order to slow repayment of the loan and that
financial benefits were improperly denied, concerns financial losses which Plaintiff seeks to have
repaid.
Plaintiff now argues that "[a]t a minimum, a (b)(2) class should be certified to: (i) enjoin
Xerox from altering the October 2013 change, 2 (ii) extend the October 2013 change to all
CheckMate II borrowers, and (iii) compel Xerox to determine when and what instructions made
by borrowers should be (or should have been) followed." Reply Mem. at 9. This suggestion,
made for the first time in Plaintiffs Reply Brief, does not provide any inforrnation or specificity
with respect to the efficacy or necessity of such certification. 3 Nor has Plaintiff shown that such
relief would be appropriate respecting the class as a whole, or indeed that any putative class
member besides Plaintiff would seek such specific and limited injunctive relief. As a result of
this dearth of specificity and information, the Court cannot determine whether certification by
means of the Court's authority under Rule 23(c)(4) to certify separate issues would be
appropriate. This vague and conclusory suggestion must be rejected.
2 The " October 2013 change" is a reference to an update regarding the Checkmate II program which provided that
for borrowers who enrolled.in Checkmate II after April 5, 20 12, "if the customer makes an additional payment,
regardless of the amount," the monthly auto-debit will continue to be withdrawn. Pl. Mem. at 4-5.
3 The Court notes that the practice of raising an issue for the first time in reply papers is disfavored. See S.E. C. v.
Yorkville Advisors, LLC, 300 F.R.D. 152, 168 (S.D.N.Y. 20 14) (citing cases).
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CONCLUSION
Accordingly, the Court denies Plaintiffs class certification motion. This ruling moots
Plaintiffs motion to appoint Class Counsel and Class Representative. The parties are directed to
appear for a status conference on November 18, 2014, at 3:15p.m. The Clerk ofthe Court is
directed to close out the pending motion in this case (Dkt. 57).
Dated: New York, New York
October 22, 2014
SO ORDERED
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PA~L A~CR01TY
United States District Judge
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