Demystifying the
FDCPA Class Action For HOA Attorneys
Consumer
attorneys have been filing FDCPA class actions against collection attorneys for
decades, and the pace of those filings has increased sharply in the past ten
years. Attorneys who collect for
national banks, debt buyers or other financial institutions have been regular
targets in FDCPA class actions. Attorneys
who engage in collection work for community associations, however, have managed
to remain off of the FDCPA class action radar.
This may now be changing as consumer attorneys are starting to focus
more on your practice area. This is
another way of saying welcome to the FDCPA Class Action Party – you got here
late.
Any
standardized statement that you make, or any standardized practice that you
engage in, while collecting for your community association clients can be the target of an FDCPA class action. As
you evaluate your firm’s risk to these cases, you will want to review every
consumer-facing interaction of the firm top to bottom, including any letter
forms utilized, your standard telephone practices and voicemail messages, the
complaints, pleadings, discovery requests, and the post-judgment collection
practices you employ. You will also want
to evaluate all third party interactions that your firm engages in, such as
contacts with relatives of the debtor, co-workers, interactions with consumer
reporting agencies, and the procedures of the vendors that your firm employs,
such as process servers. In some jurisdictions, even statements that you make
to a court, or to your opposing counsel, may be governed by the FDCPA, so these
practices should also be evaluated for compliance with the Act.
If
your firm is served with a class action complaint, you certainly must turn your
attention to it immediately. But there
is no reason to panic. There is a long road between the filing of a putative class action and the actual certification of a class by a court, and the plaintiff faces a lot of hurdles along the way. A class action
lawsuit is only as strong as the claim that has been asserted by the class
representative(s) who filed the case, and if their claim is not viable, the
entire case fails. Even if the class
representative has a viable claim, that does not mean the case will necessarily
be certified as a class action, or that it must be settled as one. Class actions are the exception, not the
rule. The normal rule is that the
aggrieved party is only allowed to pursue his or her own claims. If that person can also meet all the
requirements of Rule 23 of the Federal Rules of Civil Procedure, then the case
may be certified as a class action. But
many putative class actions never make it that far.
Conducting
Class Action Triage
If an
FDCPA class action complaint is served on your firm, you will want to do some
immediate triage on the case to ensure that you are taking your defense in the
right direction. Is the FDCPA claim asserted by the named plaintiff legally
viable? For cases that appear to be of marginal merit, your first
instinct may be to file a motion to dismiss the complaint. A motion to dismiss can be a great way to
dispose of class action before it gets off the ground. You should consider the
risks of filing such a motion, however, because in many jurisdictions, FDCPA claims can be
decided by the Court as a matter of law.
You will ask the Court to rule in your favor as a matter of law on the
motion, but are you prepared to lose this case as a matter of law in response
to your motion?
You should consider the entire account history of the
named plaintiff and how that will impact the optics of the case. If the case
optics are favorable for you, then how will they be best presented to the
court? You may be better off developing
the facts of the claim and then presenting your defense in the form of a
summary judgment motion, so the facts of the case can shine in your favor.
What
is the communication or practice that is being challenged by the plaintiff? Is this a case that targets a core part of
your firm’s business model, or a key part of your client’s business? Or is this just a drafting mistake made by
your firm that you need to correct anyway?
The answer to these questions will help you assess the true stakes of
the case, and they can impact your decision on whether to seek to settle the case,
or fight it, and how best to get to your desired goal.
Finally,
you should immediately begin your assessment of whether the case will be able
to meet the Rule 23 requirements. What do you know about the class representative's account history and whether there are unique defenses to his claim? You should
pull his entire file to assess it for
weaknesses in his ability to represent the class. What do we know about the
assigned judge? It makes sense to see
how this judge has ruled on FDCPA cases or other similar consumer protection cases in the past,
and to determine the judge’s track record on certifying class actions of any
type.
Who is the attorney who filed the suit? Some attorneys who file class
actions are simply trying to leverage the case into a larger individual
settlement, and they have no intention of following the case through to class
certification. Other attorneys have an
established track record of pursuing and certifying FDCPA class actions. Is this a dabbler, or a veteran FDCPA class action attorney? Your approach to the case may be
significantly impacted by the identity of the attorney who filed it.
Who is your defense attorney? You should be working with an attorney who is
experienced in defending FDCPA cases generally, but who also has experience
defending class actions. You should take
an active role in your own defense, but resist the urge to represent yourself in an FDCPA class action unless the attorneys in your firm already have significant experience in this
area.
Rule 23
Requirements
In many respects, a defendant is at a distinct
advantage in an FDCPA class action. From
the moment you are served with the complaint, you have access to much of the
evidence the plaintiff needs to pursue class certification. You
can immediately begin your assessment of the named plaintiff in the case, and
you can start gathering evidence to defend against the plaintiff’s class
certification motion, which likely will not be heard for several months. The plaintiff will bear the burden of proof
on the class certification motion, and the courts have made it clear that certifying a class is
not a rubber stamp process. The Supreme Court has held that a district court
must conduct a “rigorous analysis” of all the Rule 23 requirements. General Tel. Co. Of Southwest v. Falcon,
457 U.S. 147, 161 (1982).
Plaintiff attorneys will often argue that the
allegations of the complaint must be assumed true in a class certification
motion, but this is not correct. The Supreme
Court has also observed that “class determination generally involves
considerations that are enmeshed in the factual and legal issues comprising the
plaintiff's cause of action,” and that “it may be necessary for the court to
probe behind the pleadings before coming to rest on the certification
question.” Falcon, 457 U.S. at 160; see
also Powers v. Credit Mgmt. Servs., Inc., 776 F.3d
567, 569 (8th Cir. 2015) (district court abused discretion certifying FDCPA
class “by failing to conduct rigorous analysis . . . of what the parties must
prove that Rule 23 requires”) (citations and quotation marks omitted).
Numerosity
In order to prevail on a motion for class
certification, plaintiff must show the class is “so numerous that joinder of
all members is impracticable.” See Fed.
R. Civ. P. 23(a)(1). Generally this means at least 40 similarly situated class
members, but “classes of fifteen or less are too small.” Gomez
v. Rossi Concrete, Inc., 270 F.R.D. 579, 588 (S.D. Cal. 2010); see also Ikonen v. Hartz Mountain Corp.,
122 F.R.D. 258, 262 (S.D. Cal. 1988) (classes of twenty generally “are too
small” and classes of forty or more are “numerous enough”).
The Court may make reasonable inferences about
numerosity but the Court may not speculate that it exists. Plaintiff needs to provide the court with evidence. Vega v.
T-Mobile USA, Inc., 564 F.3d 1256, 1267-68 (11th Cir. 2009) (district
court’s “inference of numerosity” without supporting evidence “was an exercise
in sheer speculation”); Smith v. City of
Oakland, 2008 WL 2439691, *1 (N.D. Cal. June 16, 2008) (numerosity argument
was “unsupported by anything other than ‘mere speculation’”); Thorne v. ARM, Inc., 2012 WL 3090039
(S.D. Fla. June 28, 2012) (no proof of numerous class members with section
1692d(6) claims).
Commonality
The Plaintiff bears the burden of proving that “there
are questions of law or fact common to the class.” See Fed. R. Civ. P. 23(a)(2). Commonality
requires proof that class members have “suffered the same injury” and evidence
their claims turn on a “common contention” that “must be of such a nature that
it is capable of classwide resolution—which means that determination of its
truth or falsity will resolve an issue that is central to the validity of each
one of the claims in one stroke.” Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011); Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567, 571-73 (8th Cir. 2015) (reversing certification of FDCPA class
where, inter alia, to resolve
plaintiff’s theory of liability, every state-court collection lawsuit needed to
be reviewed).
Typicality/Adequacy
Plaintiff also bears the burden of proving typicality
and adequacy in order to prevail on a motion for class certification. Typicality means evidence that “the claims or
defenses of the representative parties are typical of the claims or defenses of
the class.” Fed.R.Civ.P. 23(a)(3). Adequacy requires proof that named plaintiff
and class counsel will “fairly and adequately protect the interests of the
class.” Fed.R.Civ.P. 23(a)(4).
A defendant should immediately start gathering
evidence regarding the named plaintiff and the particular circumstances of
their account. It is possible to upend
an FDCPA class action if you can prove that the class representative is not
typical of the rest of the class, or if the class rep would not be
adequate. See, e.g., Beck v. Maximus,
Inc., 457 F.3d 291 (3d Cir. 2006) (remanding FDCPA class action to
determine if BFE defense rendered class rep atypical and inadequate); Savino v. Computer Credit, Inc., 164
F.3d 81 (2d Cir. 1998) (denying certification in FDCPA case; class rep
testified inconsistently on whether he received letter at issue); Dotson v. Portfolio Recovery Associates,
2009 WL 1559813 (E.D. Pa. June 3, 2009) (denying certification of FDCPA class
action; unique defenses re: plaintiff’s credibility and cognitive disabilities).
Predominance
Plaintiff also must prove “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.” See Fed. R.
Civ. P. 23(b)(3); see also Vinole v. Countrywide Home Loans, Inc.,
571 F.3d 935, 947 (9th Cir. 2009) (Rule 23(b)(3) not satisfied where proceeding
as a class would “require a fact-intensive, individual analysis of each
employee's exempt status”); Zinser v.
Accufix Research Institute, Inc., 253 F.3d 1180, 1189 (9th Cir.
2001)(affirming denial of cert:
“[i]mplicit in the satisfaction of the predominance test is the notion
that the adjudication of common issues will help achieve judicial economy
(Citation).”).
Courts have denied class certification in FDCPA class
actions when they conclude that resolution of the class claims would require a
series of mini-trials regarding the particular circumstances of each
account. See, e.g., Lee v. Javitch, Block
& Rathbone, 522 F. Supp. 2d 945, 958-59 (S.D. Ohio 2007) (Rule 23(b)(3)
not satisfied: whether affidavit violated FDCPA “would depend upon individual
circumstances that pertain to that class member.”); Corder v. Ford Motor Co., 283 F.R.D. 337, 343 (W.D. Ky. 2012)
(individual inquiries needed to determine if trucks of class members were
purchased “primarily for personal, family or household purposes”; noting “this
court will not certify a class action under the premise that Ford will not be
entitled to fully litigate that statutory element in front of a jury. . . .”); OnStar Contract Litig., 278 F.R.D. 352,
381 (E.D. Mich. 2011) (defendant could not be deprived of the right to litigate
defenses to each class member’s claim to prove that cars were not leased
primarily for “personal, family or household purposes”).
Letter
claims
Collection
attorneys are particularly vulnerable to FDCPA class actions targeting
collection letters, since there is no way to dispute the contents of a letter,
and most collection letters are forms that are used over and over again. There are countless FDCPA class actions and
individual actions filed that have successfully challenged the contents of
collection letters. See, e.g., Janetos v. Fulton,
Friedman & Gullace, LLP, 825 F.3d 317 (7th Cir. 2016) (granting summary
judgment for plaintiff in FDCPA class action where defendant’s letter failed to
specifically identify the name of the current creditor); Avila v. Riexinger & Assoc., LLC, 817 F.3d 72 (2d Cir. 2016)
(reversing dismissal of FDCPA class action where defendant’s letter stated
“current balance” but failed to disclose balance might increase due to interest
and late fees); Roundtree v. Bush Ross,
P.A., 304 F.R.D. 644 (M.D. Fla. 2015) (certifying FDCPA class action; initial
demand letter allegedly overshadowed notice of debtor’s rights required by
section 1692g); Hanson v. JQD, LLC,
2014 WL 3404945 (N.D. Cal. July 11, 2014) (denying motion to dismiss FDCPA
class action complaint; defendant sent letters to class seeking to collect late
fees and threatening foreclosure allegedly in violation of California law); McCarter v. Kovitz Shifrin Nesbit, 2015 WL 74069 (N.D. Ill Jan. 5, 2015) (certifying
FDCPA class action where initial demand letter allegedly overshadowed the
notice required by section 1692g of the Act).
Collection
Complaint claims
Collection
complaints filed in state court, and other discovery or pleadings served in
state court actions, have been a fertile ground for FDCPA class action
attorneys. These suits often argue that
a pleading, or a state court collection practice, does not comply with state
law, and because it does not comply with state law, it also violates the
FDCPA. If a client has provided the
attorney with incorrect information, that can also lead to an FDCPA claim
against the attorney. There are numerous
examples of FDCPA claims that are based on state court pleadings or state court
collection practices. See, e.g., Marquez v. Weinstein, Pinson & Riley, P.S., _F.3d_, 2016 WL
4651403 (7th Cir. 2016) (collection complaints violated FDCPA where they
alleged debt would be “considered valid” if not disputed within 30 days of the
date of the complaint); Tourgeman v.
Collins Fin. Servs., Inc., 755 F.3d 1109 (9th Cir. 2014) (collection
complaints violated the FDCPA where they identified incorrect “original”
creditor that had made the loans to class members); McCollough v. Johnson, et al., 637 F.3d 939 (9th Cir. 2011) (service
of requests for admission on pro se defendant seeking admissions that law firm
knew were false violated FDCPA).
Third
Party Disclosure Claims
The
FDCPA not only regulates the contents of all of your direct communications with
consumers, it also regulates the interactions that you have with third parties
while engaged in debt collection. This
includes conversations with third parties while seeking to collect, such as
family members or co-workers, messages left with third parties (either live, or
on voice mail), interactions with consumer reporting agencies, and the conduct
undertaken by vendors that you may retain, such as process servers. All of your third party practices should be
evaluated to guard against such claims. See, e.g., Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015 (9th Cir.
2012) (sending collection letters to work address “care of” the employer
violated 1692c(b)); Halbertstam v. Global
Credit and Collection Corp., 2016 WL 154090 (E.D.N.Y Jan. 12, 2016)
(leaving a message with a third party with the collector’s callback information
was improper third party disclosure in violation of FDCPA).
Attorneys who collect for community associations have increasingly become targets for FDCPA class actions in recent years. To reduce your exposure to these claims, a fresh look at all of your standardized practices and communications is well worth your time and effort.
