District Court (Wis.) Says FDCPA Class Plaintiff Can Carve Up Same Letter into Multiple Classes by Creditor When 3rd Party Debt Collector Used Same (Allegedly) Defective Letter for Different Creditor Clients

State Collection’s first argument, however, warrants more consideration. In its class action complaint, the Spuhlers allege a class that included all consumers who received the allegedly violative letter. In its class certification briefing, however, the Spuhlers limited the class to include only those consumers who owed debts to Prohealthcare Medical Associates, Waukesha Memorial Center, or Waukesha Memorial Hospital. (Pl.’s Br. at 2.) Amending the class at the class certification stage, in and of itself, is not problematic. See Drinkman v. Encore Receivable Mgmt., No. 07-CV-363, 2007 U.S. Dist. LEXIS 89514, *7 (W.D. Wis. Dec. 3, 2007) (the court amended the class definition in order to remedy the definiteness issue without denying class certification).  State Collection is correct, however, that there is authority for denying class certification when the plaintiff chooses to limit the class by creditor. In Guevarra v. Progressive Financial Services, Inc., No. C-05-3466, 2006 U.S. Dist. LEXIS 89193 (N.D. Cal. Nov. 30, 2006), the plaintiff initially sought class-wide relief on behalf of all debtors who received a letter allegedly violating the FDCPA. However, the plaintiff subsequently amended her complaint to seek relief on behalf of a class of recipients of the offending letter indebted to IKEA, only one of the creditors. In evaluating the superiority prong of Rule 23(b)(3), the court found that the “creditor-specific class” of “IKEA only” would “encourage piecemeal litigation” because it failed to include all potential customers who received the allegedly illegal letters. The court further found that the IKEA-only class exposed the defendants to the risk of “one-way intervention,” meaning the inability to bind all of the absent class members. The court concluded that the plaintiff’s distinction between IKEA and non-IKEA creditors was arbitrary and she offered no justification for limiting the case to a specific creditor. The court stated that the case hinged on claims under the FDCPA arising out of the form of the letters, not the nature of the underlying debts. The court denied the plaintiff’s motion for class certification.  Similarly, in Wenig v. Messerli & Kramer P.A., No. 11-CV-3547, 2013 U.S. Dist. LEXIS 39013 (D. Minn. Mar. 21, 2013), the plaintiff failed to pay a debt owed to Capital One Bank. The defendant sent the plaintiff collection letters allegedly violating the FDCPA, and sent substantially identical letters to thousands of other consumers in Minnesota. The plaintiff’s proposed class included consumers in Hennepin County who received the letter and owed a debt to Capital One Bank. In denying plaintiff’s motion for class certification, the court noted that the plaintiff’s limitations of the proposed class based on geography and creditor made “little sense” because all consumers who received the allegedly offending letter suffered the same violation. The court noted, citing the Seventh Circuit’s decision in Mace, that a proposed class need not always include all possible class members, however, the court found that the “highly artificial limitations … deprive the class-action device of much of its utility.” Id. at *18.  There is also authority, however, to support limiting the proposed class. In McCurdy v. Professional Credit Service, No. 15-CV-1498, 2016 WL 5853721 (D. Or. Oct. 3, 2016), the plaintiff sought to certify a class that was limited to consumers who received an allegedly violative letter under the FDCPA between April 1, 2015 and April 30, 2015. The defendant argued that the proposed class did not meet the superiority requirement because the limitation to individuals who received letters in April 2015 created an arbitrary sub-class and opened the door to serial class action lawsuits. The McCurdy court noted that debt collectors had made the same policy argument before in a “handful” of district court cases, “with mixed results.” Id. at *5. The court specifically noted the Guevarra case. In rejecting the defendant’s superiority argument, the McCurdy court was persuaded by dicta from the Seventh Circuit’s decision in Mace.  In Mace, the Seventh Circuit was presented with the question of whether the FDCPA authorized state-wide (as opposed to nation-wide) class actions. 109 F.3d at 341. The FDCPA provides statutory damages caps in class actions of the lesser of one percent of a debtor collector’s net worth or $500,000. 15 U.S.C. 1692k(a)(2)(B). Thus, the larger the class, the smaller each individual class member’s potential recovery. The district court had declined to certify a statewide class on the grounds that allowing state-by-state suits to proceed would nullify the FDCPA’s statutory damages cap. Mace, 109 F.3d at 344. The Seventh Circuit rejected that argument, noting that other statutes, including the Truth in Lending Act (“TILA”), expressly apply the statutory damages cap to “any class action or series of class actions arising out of the same failure to comply by the same creditor.” Id. at 342. The Mace court noted that TILA’s reference to a “series of class actions” was absent from the FDCPA; thus, the plain text of the FDCPA did not preclude multiple class actions. Id. at 344.  However, the Mace court also stated as follows:

The defendants, however, advance a policy argument, from which the district court constructed a requirement for a nation-wide class. The district court reasoned that, if the damage cap of $500,000 can be applied anew to a series of state-wide (or otherwise limited) class actions, the damage limitation would become meaningless. This contention may be correct as far as it goes, although there is, of course, no way of telling whether such repeated class actions are possible or likely, here or generally. The other side of the coin is that to require a nation-wide class as the district court did here brings with it other problems that will be discussed later. There are other possible problems with the district court’s reasoning. The FDCPA has a short, one-year statute of limitations making multiple lawsuits more difficult. Further, if a debt collector is sued in one state, but continues to violate the statute in another, it ought to be possible to challenge such continuing violations. Given the uncertainty of those policy considerations, there is no compelling reason to ignore the plain words of the statute. In any event, the case before us does not now present multiple or serial class actions to recover for the same misconduct. Hence, it would be premature to require a nation-wide class at this juncture. If and when multiple serial class actions are presented, it will be time enough to rule on such a pattern. At this point, there is no persuasive reason to require a nation-wide class.

Id. at 343-44. Following the Mace court’s reasoning, the McCurdy court found that the plaintiff’s limitation of the class did not cut against the superiority of a class action. The court found that if there truly were multiple lawsuits based on the same underlying conduct, this would be an appropriate factor to consider in evaluating superiority. See Fed. R. Civ. P. 23(b)(3)(B) (expressly directing the consideration of any related, ongoing litigation). Further, the McCurdy court found that Rule 23(b) asks the court to consider whether a class action is superior to other available methods for adjudicating the controversy; thus, the relevant comparison is between the proposed class action and other methods of litigation, not between the proposed class action and other, hypothetical class actions. 2016 WL 5853721, at *5. Thus, the McCurdy court stated that it need not deny class certification “based on the mere possibility another class action will be filed.” Id.; see also Whitten v. ARS National Services, Inc., No. 00 C 6080, 2001 WL 1143238 (N.D. Ill. Sept. 27, 2001) (granting motion for class certification where class was limited to persons who allegedly owed debts to Citibank, where the original complaint was not creditor-specific).  I find that a class action is the superior method for litigating this case given the considerations listed in Rule 23(b)(3). This case is based on the text of form letters, in which individual damages for any given class member would be low, making the cost of litigation difficult for class members to address individually. The parties have identified no ongoing, related litigation and the case presents no apparent manageability problems. Thus, the Spuhlers have shown the class satisfies Rule 23(b)(3).