EBNER v. MERCHANTS & MEDICAL CREDIT CORPORATION et al

Filing 36

MEMORANDUM SIGNED BY HONORABLE GERALD J. PAPPERT ON 3/22/17. 3/22/17 ENTERED AND COPIES E-MAILED. (va, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
SUSAN EBNER, individually and on
behalf of all others similarly situated,
CIVIL ACTION
NO. 14-06882

Plaintiff,
v.
MERCHANTS & MEDICAL CREDIT
CORP., et al.,
Defendant.
PAPPERT, J.

March 22, 2017
MEMORANDUM

Plaintiff Susan Ebner, through her proposed class counsel, and Defendant
Merchants & Medical Credit Corporation (“MMCC”), have negotiated and agreed to a
settlement of this class action. On June 15, 2016 the Court preliminarily approved that
settlement. (ECF No. 21.) Class counsel has moved for final approval of the settlement
and for attorneys’ fees and costs. (ECF No. 32.) For the reasons that follow, the Court
grants the motion.
I.
MMCC mailed Ebner debt collection letters in June of 2014 in glassine window
envelopes. (Compl. ¶¶ 17, 24.) Her account number was visible through the window.
(Id. ¶¶ 20, 26.) Ebner filed a class action lawsuit on December 4, 2014, alleging that by
disclosing her account number on the face of the envelope, MMCC violated 15
U.S.C. § 1692f(8) of the Fair Debt Collection Practices Act (“FDCPA”). (ECF No. 1.)
Section 1692(f)(8) provides that “using any language or symbol, other than the debt
collector’s address, on any envelope when communicating with a consumer by use of the

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mails” is an “unfair or unconscionable means to collect or attempt to collect any debt.”
15 U.S.C. § 1692f(8). In Douglass v. Convergent Outsourcing, 765 F.3d 299 (3d Cir.
2014), the Third Circuit Court of Appeals explained that the “plain language of
§ 1692f(8) does not permit [a debt collector’s] envelope to display an account number.
Id. at 303.
On March 21, 2016 Ebner filed a motion for approval of a class settlement and
class certification. (ECF No. 17.) The Court held a hearing on June 14, 2016 and
entered an order the next day preliminarily approving the class action settlement and
directing notice to the class. (ECF No. 21.) The proposed class was defined as “[a]ll
persons located in (i) the Commonwealth of Pennsylvania, (ii) the State of New Jersey,
or (iii) the State of Delaware according to their last known address . . . from December
4, 2013 through August 1, 2015 . . . who received one or more letters from MMCC
seeking to collect a consumer debt for which the . . . account number was visible
through the glassine window of the envelope.” (Id. at 2.)
On September 15, 2016 MMCC moved to continue the final approval hearing and
amend the Court’s preliminary order approving the class action settlement. (ECF No.
25.) MMCC’s motion explained that the number of settlement class members was
smaller than initially thought at the time of the Court’s preliminary order. MMCC
asked for more time to meet the deadlines in the Court’s order. Plaintiffs did not
oppose this motion. The Court granted MMCC’s motion on September 30, 2016. (ECF
No. 28.) On December 29, 2016 Ebner filed a motion for final approval of settlement.
(ECF No. 31.) The Court held a final approval hearing on January 12, 2017. (ECF No.
34.)

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II.
Federal Rule of Civil Procedure 23(e) requires court approval of class action
settlements. FED. R. CIV. P. 23(e)(2). Approval is appropriate “only after a hearing and
on finding that it is fair, reasonable, and adequate.” Id. The Court must (1) determine
if the requirements for class certification under Rule 23(a) and (b) are satisfied; (2)
assess whether notice to proposed class was adequate; and (3) evaluate if the proposed
settlement is fair under Rule 23(e). See In re Nat’l Football League Players Concussion
Injury Litig., 775 F.3d 570, 581 (3d Cir. 2014).
A: Whether Class Certification is Proper
Rule 23(a) requires Plaintiffs to demonstrate 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.” FED R. CIV. P. 23(a). Rule 23(b)(3), under
which Plaintiffs seek class certification, requires that “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.” FED. R. CIV. P. 23(b)(3). For the reasons that follow, the
proposed class may be certified because the Plaintiffs have demonstrated compliance
with Rule 23(a) and 23(b)(3)’s requirements.

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i. Rule 23(a) Factors
1. Numerosity
Rule 23(a)(1) requires that the class be “so numerous that joinder of all members
is impracticable.” FED. R. CIV. P. 23(a)(1). There is no minimum number of plaintiffs
required to satisfy this requirement; a proposed class exceeding 40 members is
sufficient. Stewart v. Abraham, 275 F.3d 220, 226–27 (3d Cir. 2001). Undisputed
records in this case indicate that MMCC sent similar letters to approximately 4,802
individuals between December 3, 2013 and August 1, 2015. (Pl.’s Mot., at 7, ECF No.
31-1.)
2. Commonality
Rule 23(a)(2) mandates the showing of “questions of law or fact common to the
class.” FED. R. CIV. P. 23(a)(2). This element requires that plaintiffs “share at least one
question of fact or law with the grievances of the prospective class.” In re Warfarin
Sodium Antitrust Litig., 391 F.3d 516, 527–28 (3d Cir. 2004). “Generally, courts have
held that the commonality requirement is satisfied in FDCPA actions when the
defendants have engaged in standardized conduct towards members of the proposed
class by mailing them allegedly illegal form letters or documents.” Good v. Nationwide
Credit, Inc., 314 F.R.D. 141, 151–52 (E.D. Pa. 2016). Here, MMC engaged in
standardized conduct by sending similar letters to all members of the proposed class.
(Pl.’s Mot., at 8.) The common question of fact is whether account numbers were visible
through envelope windows. The common question of law is whether MMCC’s conduct
violates § 1692f(8).

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3. Typicality
Rule 23(a)(3) requires the class representative’s claims to be “typical of the
claims or defenses of the class.” FED. R. CIV. P. 23(a)(3). The typicality inquiry is
“intended to assess whether the action can be efficiently maintained as a class and
whether the named plaintiffs have incentives that align with those of absent class
members so as to assure that the absentees’ interests will be fairly represented.” Baby
Neal v. Casey, 43 F.3d 48, 57 (3d Cir. 1994). “Where claims of the representative
plaintiffs arise from the same alleged wrongful conduct on the part of the defendant,
the typicality prong is satisfied.” Good, 314 F.R.D. at 152. Here, MMCC mailed
proposed class members letters with the identical flaw: a visible account number
through the envelope window. (Pl.’s Mot., at 9.)
4. Adequacy of Representation
Rule 23(a)(4) requires that “the representative parties will fairly and adequately
protect the interests of the class.” FED. R. CIV. P. 23(a)(4). The Court must inquire into
the “qualifications of counsel to represent the class,” and then assess whether there are
“conflicts of interest between named parties and the class they seek to represent.” In re
Prudential ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, 312 (3d Cir. 1998).
Class counsel is qualified and MMCC does not contend otherwise. Connolly
Wells & Gray, LLP and Kalikhman & Rayz, LLC have substantial experience in
handling not only class actions, but the specific type of claim asserted here. (Pl.’s Mot.,
at 10.) They have spent more than two years litigating this case. Moreover, district
courts in this circuit have appointed them as class counsel for FDCPA settlement
claims in the past. See, e.g., Magness v. Walled lake Credit Bureau et al., No. 12-06586

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(ECF No. 83) (E.D. Pa. February 18, 2015); Ebner v. United Recovery Systems, LP et al.,
No. 14-06881 (ECF No. 40) (E.D. Pa. September 9, 2016). The Court is unaware of any
conflicts of interest between Ebner and the class she seeks to represent. As explained
above, Ebner’s claims and those of the proposed class are identical.
ii. Rule 23(b)(3) Factors
Plaintiffs seek class certification under Rule 23(b)(3) which requires that
“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.” FED. R. CIV. P. 23(b)(3).
1. Predominance
The predominance inquiry “tests whether proposed classes are sufficiently
cohesive to warrant adjudication by representation.” Amchem Products, Inc. v.
Windsor, 521 U.S. 591, 594 (1997). It also assesses whether a class action “would
achieve economies of time, effort, and expense, and promote uniformity of decision as to
persons similarly situated.” FED. R. CIV. P. 23(b)(3) advisory committee’s note to 1966
amendment. Here, where MMCC sent similarly flawed “debt collection letters to all
members of the putative class, common questions of law and fact predominate due to
the virtually identical factual and legal predicates of each class member’s claim.” Good,
314 F.R.D. at 154.
2. Superiority
The superiority requirement “asks the court to balance, in terms of fairness and
efficiency, the merits of a class action against those of alternative available methods of
adjudication.” Warfarin, 391 F.3d at 533–34. When assessing superiority and

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“[c]onfronted with a request for settlement-only class certification, a district court need
not inquire whether the case, if tried, would present intractable management problems,
. . . for the proposal is that there be no trial.” Amchem, 521 U.S. at 620. The Third
Circuit has explained that class actions are “fundamental to the statutory structure of
the FDCPA.” Weiss v. Regal Collections, 385 F.3d 337, 345 (3d Cir. 2004). Without the
class action device, “meritorious FDCPA claims might go unredressed because the
awards in an individual case might be too small to prosecute an individual action.” Id.
The superiority requirement is “apparent in a case such as this one, in which
thousands of individuals seek relief for violation of the FDCPA regarding a
substantially identical” flaw in debt collection letters. Good, 314 F.R.D. at 154.
MMCC mailed thousands of individuals letters that displayed their account number
through the envelope window. “Even if a mere fraction of the members of the putative
class were to litigate their claims individually, the courts would be significantly
burdened by numerous lawsuits. It is more probable, however, that . . . consumers
would find it uneconomical to litigate their claims individually, thereby hindering the
FDCPA’s private attorney-general enforcement mechanism.” Id. at 155.
B. Whether Notice to the Class Members was Adequate
“In the class action context, the district court obtains personal jurisdiction over
the absentee class members by providing proper notice of the impending class action
and providing the absentees with the opportunity to be heard or the opportunity to
exclude themselves from the class.” Prudential, 148 F.3d at 306. Rule 23(c)(2)(B)
requires “the best notice that is practicable under the circumstances, including
individual notice to all members who can be identified through reasonable effort.” FED.

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R. CIV. P. 23(c)(2)(B). Moreover, the notice must “clearly and concisely state in plain,
easily understood language: (i) the nature of the action; (ii) the definition of the class
certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter
an appearance through an attorney if the member so desires; (v) that the court will
exclude from the class any member who requests exclusion; (vi) the time and manner
for requesting exclusion; and (vii) the binding effect of a class judgment on members
under Rule 23(c)(3). Id. Rule 23(e) requires notification to all members of the terms of
any proposed settlement. FED. R. CIV. P. 23(e). This “notice is designed to summarize
the litigation and the settlement” and “to apprise class members of the right and
opportunity to inspect the complete settlement documents, papers, and pleadings filed
in the litigation.” Prudential, 148 F.3d at 327.
The Court’s order granting preliminary approval of the settlement, (ECF No. 21),
directed Ebner to send notice “directly to the members of the Settlement Class.” (Id.)
Ebner also published notice on a dedicated website. (Pl.’s Mot., at 13.) Ebner
represented to the Court that of 4,802 notices mailed to potential class members, only
392 were returned as undeliverable—a 91.8 percent penetration rate. (Pl.’s Mot., at
13.). In an affidavit, class counsel Arkady Rayz explained that this rate compares
favorably to rates in other class actions on which he has worked. (Rayz Decl. ¶ 73.) At
the final approval hearing, class counsel represented to the Court that they received
calls from over 100 class members. (Tr. of Hr’g, at 15:2–5, ECF No. 35.) This notice
satisfies Rule 23(c)(2)(B) and (e).

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C. Whether the Settlement is Fair
The Court must determine if the proposed settlement is “fair, adequate, and
reasonable,” as required by Rule 23(e)(2). Prudential, 148 F.3d at 316–17. “Where the
parties simultaneously seek certification and settlement approval, the Third Circuit
requires ‘courts to be even more scrupulous than usual’ when they examine the fairness
of the proposed settlement.” Good, 314 F.R.D. at 156 (quoting Prudential, 148 F.3d at
317). “The decision of whether to approve a proposed settlement of a class action is left
to the sound discretion of the district court.” Girsh v. Jepson, 521 F.2d 153, 156 (3d Cir.
1975).
The Third Circuit identified nine factors for a district court to consider when
determining the fairness of a proposed settlement: (1) the complexity, expense, and
likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the
stage of the proceedings and the amount of discovery completed; (4) the risks of
establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining
the class action through trial; (7) the ability of the defendants to withstand a greater
judgment; (8) the range of reasonableness of the settlement fund in light of the best
possible recovery; and (9) the range of reasonableness of the settlement fund to a
possible recovery in light of all the attendant risks of litigation. Girsh, 521 F.2d at 157.
In this case, “the mechanical application of the Girsh factors is perhaps unfitting,
because the settlement affords the class the maximum recovery permitted under the
FDCPA’s damages cap.”1 Good, 314 F.R.D. at 157.

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The FDCPA provides for a statutory cap on damages. See 15 U.S.C. § 1692k(a)(2)(B) (“[I]n the case of a
class action” damages are “not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt
collector.”) Here, one percent of MMCC’s net worth is $29,000. (Pl.’s Mot., at 1.)

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i. Complexity, Expense, & Likely Duration
This first factor aims to take into account the “probable costs, in both time and
money, of continued litigation.” In re Cendant Corp. Litig., 264 F.3d 201, 233 (3d Cir.
2001). This case was filed over two years ago. (ECF No. 1.) Class counsel has
represented to the Court that “much work has been done by counsel” including
document review, written discovery and legal research. (Pl.’s Mot., at 17.) Continued
litigation would entail a potential dispute over class certification, a possible summary
judgment motion, and trial—not to mention the possibility for appeals from a
certification decision or verdict. This factor weighs heavily in favor of settlement.
ii. Reaction of the Class to the Settlement
Class counsel represents that it mailed 4,802 notices to class members and that
no member has objected to the settlement or asked to be excluded. (Pl.’s Mot., at 18.)
“[T]hat the settlement is entirely uncontested is evidence of its fairness.” Good, 314,
F.R.D. at 157; see also Prudential, 148 F.3d at 318.
iii. Stage of Proceedings and Amount of Discovery Completed
This factor requires the Court to evaluate whether Plaintiffs had an “adequate
appreciation of the merits of the case before negotiating” settlement. Prudential, 148
F.3d at 319. “Where, as here, the class obtains the maximum recovery permitted by
law, this factor seems inapplicable.” Good, 314 F.R.D. at 157. Regardless, class counsel
represents to the Court that it has exchanged significant information with MMCC
during the course of settlement negotiations in addition to engaging in significant
written discovery. (Pl.’s Mot., at 19.) This settlement comes after more than two years

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of litigation. The Court is satisfied that the parties have sufficient information to
evaluate the merits of this settlement, something that favors its approval.
iv. Risks of Establishing Liability and Damages and Maintaining the
Class Action Through Trial and the Ability of the Defendant to
Withstand a Greater Judgment
Girsh factors four through seven require the Court to “survey the potential risks
and rewards of proceeding to litigation in order to weigh the likelihood of success
against the benefits of an immediate settlement.” Warfarin, 391 F.3d at 537. Class
counsel represents that “certification, liability, and establishing damages would all
have been hotly contested issues.” (Pl.’s Mot., at 20.) Counsel also represents that,
based on their experience, MMCC was likely to vigorously oppose class certification and
that the “risks associated with class certification increase the risk of maintaining the
proposed class.” (Id.) Because the FDCPA provides for a statutory cap on damages and
the proposed settlement provides the maximum recovery available to the class, the
ability of the defendant to withstand a greater judgment is inapplicable. Overall, these
factors support settlement approval.
v. Range of Reasonableness of the Settlement in Light of the Best
Possible Recovery and the Attendant Risks of Litigation
“The reasonableness of a proposed settlement depends in part upon a comparison
of the present value of the damages the plaintiffs would recover if successful discounted
by the risks of not prevailing.” Boone v. City of Philadelphia, 668 F. Supp. 2d 693, 712
(E.D. Pa. 2009) (citation omitted)). As explained above, the proposed settlement
provides the class the maximum recovery available under the FDCPA. (Pl.’s Mot., at
21.) Moreover, experienced class counsel endorses this settlement. Such an opinion is

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entitled to “significant weight.” Good, 314 F.R.D. at 159 (quoting Boone, 668 F. Supp.
2d at 712).
III.
A.
Class counsel moves for approval of a case contribution award to Ebner of
$2,500. MMCC has agreed to pay this separate and apart from the settlement fund.
(Pl.’s Mot., at 2, ECF No. 31-2.) Class counsel explained that Ebner “searched her files
for relevant records, obtained copies of documents concerning her debt that was the
subject of the collection letter and provided information to Class Counsel to assist in
[the litigation].” (Rayz Decl. ¶ 122.) The FDCPA “specifically allows a higher recovery
for the claims by class representatives than for the claims asserted for the other class
members.” Good, 314 F.R.D. at 160. MMCC does not contest this motion and no class
member has objected to this case contribution award.
B.
Class counsel also moves for approval of attorneys’ fees and costs in the amount
of $42,500. Class counsel submitted documents showing that (1) Arkady Rayz, a
partner in Kalikhman & Rayz, LLC, worked 28.4 hours at an hourly rate of $415, for a
total of $11,786.00 in fees; (2) Gerald D. Wells, III, a partner in Connolly, Wells & Gray,
LLP, worked 47.75 hours at an hourly rate of $550, for a total of $26,262.50 in fees; (3)
Stephen E. Connolly, a partner in Connolly, Wells & Gray, LLP, worked 13.75 hours at
an hourly rate of $550, for a total of $7,562.50 in fees; and (4) Robert J. Gray, a partner
in Connolly, Wells & Gray, LLP, worked 3.15 hours at a hourly rate of $550, for a total
of $1,732.50 in fees. (Rayz Decl. ¶¶ 89 & 91.) This is a total of $47,343.50 and does not

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include the time spent preparing and filing the motions for final approval of the
settlement, case contribution award of plaintiff and approval of attorneys’ fees and
costs. (Id.¶ 86.)
The Third Circuit has explained that attorneys’ fees under the FDCPA are not a
special or discretionary remedy but rather “the Act mandates an award of attorneys’
fees as a means of fulfilling Congress’s intent that the Act should be enforced by debtors
acting as private attorneys general.” Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir.
1991). MMCC does not contest this motion and no class member has objected to the
award of these fees and costs.2 Moreover, the settlement agreement provides that the
attorneys’ fees and costs will be paid separate and apart from the settlement fund.
(Pl.’s Mot., at 1.) “Even if the Court were to approve less than the [$42,000] negotiated
amount, the class would not gain a greater recovery; rather, MMCC would simply keep
the money. Under these circumstances, the Court concludes that the proposed
attorneys’ fees do not offend what is an otherwise fair settlement.” Good, 314 F.R.D. at
161–62.
An appropriate order follows.
BY THE COURT:

/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.

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At the final approval hearing, defense counsel explained that she believed the fee award was fair: “I can
submit to you that that was an item that was negotiated after the class settlement was agreed to in principle, that’s
the appropriate way to do it in class litigation so there’s no suggestion that one tail was wagging the dog. . . . I can
submit to the Court that by virtue of my participation, I do feel like the amount expended was reasonable and
necessary, notwithstanding the fact that we didn’t blow this case up in a way that some—some of those in our
profession like to do.” (Tr. of Hr’g, at 32:15–33:15.)

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