FDCPA Class Actions:

Latest Litigation Developments Bringing and Defending Claims and Understanding the Impact

of New Technologies and Large-Scale Debt Holdings

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THURSDAY, NOVEMBER 8, 2012

Presenting a live 90-minute webinar with interactive Q&A

James A. Francis, Attorney, Francis & Mailman, Philadelphia

Tomio Narita, Partner, Simmonds & Narita, San Francisco

Donald Maurice, President, Maurice & Needleman, Flemington, N.J.

Joshua B. Swigart, Hyde & Swigart, San Diego

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FOR LIVE EVENT ONLY

FDCPA CLASS ACTIONS:

LATEST LITIGATION DEVELOPMENTS

Donald Maurice

Maurice & Needleman

dsm@mnlawpc.com

(908) 237-4570

Tomio Narita

Simmonds & Narita LLP

tnarita@snllp.com

(415) 283-1010

Joshua B. Swigart

Hyde & Swigart

(619) 233-7770

James A. Francis

Francis & Mailman, P.C.

(215) 735-8600

LEGAL DISCLAIMER

This information is not intended to be

legal advice and may not be used as legal

advice. Legal advice must be tailored to

the specific circumstances of each case.

Every effort has been made to assure

this information is up-to-date. It is not

intended to be a full and exhaustive

explanation of the law in any area,

however, nor should it be used to replace

the advice of your own legal counsel

6 REASONS FDCPA CASES UNIQUELY

SUITED FOR CLASS TREATMENT

1) Strict Liability Statute

2) Objective Least Sophisticated Consumer Standard

3) FDCPA specifically contemplates class actions as an enforcement mechanism

4) Class Representatives Can Recover Individual AND Class Damages;

5) Cases Are Premised Upon Form Collection Communications and Automated Practices

6) Damages Factors are Uniform;

6

FDCPA IS A STRICT LIABILITY

STATUTE

Intent/knowledge/scienter irrelevant for most

provisions (some exceptions—1692d(5), e(4) and

e(5) and bona fide error defense);

No need for individualized ―reasonable

person‖/negligence analysis;

See e.g. McCullough v. Johnson, Rodenburg &

Lauinger, LLC, 637 F.3d 939 (9th Cir. 2011)

7

LEAST SOPHISTICATED CONSUMER

STANDARD

Letters/Communications Interpreted by an

objective standard of the ―least sophisticated

consumer‖

No need for individual class member inquiries

See Larocque v. TRS Recovery Services, Inc., __

F.R.D.___, 2012 WL 2921191 (D. Me. July 17, 2012

(certifying 3 classes)

8

FDCPA CONTEMPLATES CLASS ACTIONS

DCs liable for:

―in the case of a class action, such amount for

each named plaintiff as could be recovered [in an

individual action] AND ―such amount as the court may

allow for all other class members, without regarding to

a minimum individual recovery, not to exceed the lesser

of $500,000 or 1 per centum of the net worth of the debt

collector‖. Section 1692k(a)(2)(B).

See also Weiss v. Regal Collections, 385 F.3d 337,

345 (3d Cir. 2004) (―[r]epresentative actions, therefore,

appear to be fundamental to the statutory structure of

the FDCPA‖). 9

CLASS REPS CAN RECOVER BOTH

INDIVIDUAL AND CLASS DAMAGES

Section 1692k(a)(2)(B) Relaxes Fed. R. Civ. P

Rule 23 adequacy requirement;

Reps can explicitly recover more than Class

Members

See Fry v. Hayt, Hayt & Landau, 198 F.R.D. 461,

472 (E.D. Pa. 2000)

10

FORM COMMUNICATIONS AND

AUTOMATED PRATICES

Collection Industry Premised Upon Use of:

•form collection letters

•automated calls

•Use of ―talk offs‖ and

―scripts

11

OVERWHELMING AUTHORITY FOR CERTIFYING FDCPA

CASES PREMISED UPON FORM COLLECTION LETTERS

See Maxwell v. Arrow Fin. Servs., LLC, 2004 WL 719278 (N.D. Ill. Mar. 31, 2004)

(certifying statutory damages MFDCPA class based upon uniform collection

practices); Gordon v. Corporate Receivables, 2010 WL 376386, *2 (D. R.I. Jan. 27,

2010) (commonality requirement ―easily met‖ and R. 23(b)(3) superiority and

predominance found resulting in a certified class of recipients of form letters

which were in violation of the FDCPA); Pettway v. Harmon Law Offices, P.C.,

2005 WL 2365331, *12 (D. Mass. Sep. 27, 2005) (recipients of a form letter in

violation of the FDCPA certified as a class); Silva v. National Telewire Corp., 2000

WL 1480269, *2-4 (D.N.H. Sept. 22, 2000) (class certified where class included

recipients of a form letter found in violation of the FDCPA); Garland v. Cohen &

Krassner, 2011 WL 6010211, *6 (E.D.N.Y. Nov. 29, 2011) (class certification

predicated on a form letter which violated the FDCPA);

12

OVERWHELMING AUTHORITY FOR CERTIFYING FDCPA

CASES PREMISED UPON FORM COLLECTION LETTERS

see also Weiss v. Regal Collections, 385 F.3d 337, 345 (3d Cir. 2004)

(―[r]epresentative actions, therefore, appear to be fundamental to the

statutory structure of the FDCPA‖); Castro v. Collecto, Inc., 634 F.3d 779,

782 (5th Cir. 2011) (certified FDCPA class predicated upon form letters

sent to consumers that violated the FDCPA); Murray v. GMAC Mortg.

Corp., 434 F.3d 948, 952-53 (7th Cir. 2006) (class certification statutory

damages, under sister statute FCRA, appropriate in case of form letter

that allegedly failed to make proper firm offer disclosure); Gonzales v.

Arrow Financial Services, LLC, 233 F.R.D. 577 (S.D. Cal. 2006) (certifying

class of recipients of a form letter issued by defendant debt collector);

Gonzales v. Arrow Financial Services, LLC, 660 F.3d 1055, 1064 (9th Cir.

2011) (Ninth Circuit declined review of class certification); Hunt v. Check

Recovery Systems, Inc., 241 F.R.D. 505 (N.D. Cal. Mar. 21, 2007)

(certification of an FDCPA class predicated on form letter sent to

members to collect for fees stemming from dishonored checks); Petrolito v.

Arrow Financial Services, LLC, 221 F.R.D. 303 (D. Conn. 2004) (uniform

collection practice that violated FDCPA presents certifiable class action). 13

DAMAGES FACTORS UNIFORM

Statutory Damages Factors Are Defendant

Oriented:

•Frequency and persistence of non-

compliance;

•Nature of noncompliance;

•Resources of the debt collector;

•Number of persons adversely affected;

•Extent to which action was intentional;

Section 1692k(b)(2)

14

CHALLENGING THE CLASS REP

The class representative’s claims must be ―typical‖ of other class members and the rep must be ―adequate‖ – i.e., they will ―fairly and adequately protect the interests of the class.‖ See Fed. Rule Civ. Proc. 23(a)(3), 23(a)(4).

Defendants look for ways that the class rep claims will distract from the litigation or arguments that the rep has interests that conflict with class

Careful research prior to deposition and taking a thorough deposition is key

15

CLASS REP HELD NOT ADEQUATE

Beck v. Maximus, Inc., 457 F.3d 291 (3d Cir. 2006) (remanding to determine if BFE defense rendered class rep atypical and inadequate)

Savino v. Computer Credit, Inc., 164 F.3d 81 (2d Cir. 1998) (denying cert; 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 cert; unique defenses re: plaintiff’s credibility and cognitive disabilities) 16

CLASS REP NOT ADEQUATE (CONT.)

Fried v. National Action Financial Servs., Inc., 2011 WL 1547257 (D.N.J. April 20, 2011) (unique defense; class rep consented to third party contact)

Wymer v. Huntington Bank Charleston, N.A., 2011 WL 5526314 (S.D.W.Va. Nov. 14, 2011) (unique defense; whether rep actually owed a ―debt‖ following his bankruptcy)

Richburg v. Palisades Collection LLC, 247 F.R.D. 457 (E.D. Pa. Jan. 28, 2008) (unique defense; whether class rep acknowledged debt and tolled SOL)

17

CLASS REP FOUND ADEQUATE

Meyer v. Portfolio Recovery Associates, _ F.3d _, 2012 WL 4840814 (9th Cir. 2012) (TCPA class certified; class rep had multiple criminal convictions for offenses involving dishonesty)

Sykes v. Mel Harris And Associates, 2012 WL 3834802 (S.D.N.Y. Sept. 4, 2012) (FDCPA class certified; BFE defenses, validity of debt not major focus of case)

Herrera v. LCS Fin. Servs, 274 F.R.D. 666 (N.D. Cal. June 1, 2011) (FDCPA class certified; class rep committed perjury on loan application)

18

HOW CREDITORS ARE BEING SUED

• Creditors generally are not going to be liable under the FDCPA, but minimal collector participation eliminates the creditor exemption. See e.g., Larson v. Evanston Northwestern Healthcare Corp.,

1999 U.S. Dist. LEXIS 11380 (N.D. Ill. July 19, 1999)

• Creditors face FDCPA-type exposure under certain state laws – e.g., CA, FL, GA, PA, TX

• Common law claims – Creditors sued in FDCPA class actions using alternative common law claims, like negligence; IIED; Invasion of Privacy. See Tourgeman v. Collins Financial Services, Inc., 2012 WL 3731807 (S.D. Cal. Aug. 29, 2012)(msj for Dell Financial Services on negligence claim); Colorado Capital v. Owens, 227 F.R.D. 181 (E.D.N.Y. 2005) (negligent hiring)

19

THE NET WORTH LIMITATION PROVIDES A

CEILING, NOT A FLOOR

The net worth cap is a ―protective‖ provision designed to prevent large damage awards. Sanders v. Jackson, 209 F.3d 998, 1002 (7th Cir. 2000).

Court must consider the 1692k(b)(2) factors to determine how much if any to award, including ―the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional.‖

20

JERMAN V. CARLISLE – A ROADMAP TO

ZERO DAMAGES

After the plaintiff prevailed in U.S. Supreme Court in FDCPA class action, zero damages awarded on remand. See Jerman v. Carlisle, et al., 2011 WL 1434679 (N.D. Ohio April 14, 2011)

No frequency or persistence; one letter to each class member

Nature of noncompliance was ―trivial‖

No class member ―adversely affected‖

Noncompliance was not intentional

21

USING DUKES IN FDCPA CLASS ACTIONS

Dukes is a strong reminder that a

―rigorous analysis‖ of Rule 23

requirements must occur and class

certification is never routine. Wal-Mart

Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550

(2011) (―an exception to the usual rule

that litigation is conducted by and on

behalf of the individual parties only‖).

Class members must have ―suffered the

same injury‖ and commonality requires

―common answers‖. Id. at 2551. 22

DENYING FDCPA CLASS WITH DUKES

Thorne v. ARM, Inc., 2012 WL 3090039 (S.D.Fla. June 28, 2012) (no proof of numerous class members with section 1692d(6) claims)

Marshall v. Bonded Adjustment Co., 2012 WL 3044246 (E.D. Wash. July 25, 2012) (individual issues on whether class members improperly billed for ―accepted‖ medical claims)

Soto v. Commercial Recovery Systems, 2011 WL 6024514 (N.D.Cal. Dec. 5, 2011) (individual issues on whether homes were owner occupied) 23

CLASS SIZE

A class action may not be maintained unless ―the class is so numerous that joinder of all members is impracticable.‖ Fed.R.Civ.Pro. Rule 23(a)(1)

Georgine v. Amchem Products, Inc., 83 F.3d 610, 626 n.11 (3rd Cir. 1996), aff’d, Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231 (1997) (millions of members)

Town of New Castle v. Yonkers Contracting Co., 1993 U.S. Dist. LEXIS 17492 (S.D.N.Y. Dec. 13, 1993) (15 members) 24

CLASS SIZE AND DAMAGES

TOO MANY MEMBERS AND NOT ENOUGH

MONEY

Atwood v. Johnson, 2011 U.S. Dist. LEXIS 84988

(D. Minn. Aug. 1, 2011) (paltry recoveries are

against the interests of class members)

Jancik v. Cavalry Portfolio Services, LLC, No. 06-

3104, 2007 U.S. Dist. LEXIS 49500, 2007 WL

1994026 (D.Minn. July 3, 2007)(―Defendant should

not be allowed to avoid paying damages simply

because each individual plaintiff will receive only

a small recovery.‖) 25

CLASS DAMAGES

§ 1692k(a)(2)(B)(ii) – ―[]such amount as the

court may allow for all other class members,

without regard to a minimum individual

recovery . . .‖

Thomas v. NCO Financial Systems, Inc.,

No. Civ.A.00-5118, 2002 WL 1773035, at

*4, n.2 (E.D. Pa. July 31, 2002)

McCall v. Drive Fin. Servs., L.P., 440 F.

Supp. 2d 388 (E.D. Pa. 2006) 26

PUTATIVE CLASSES AND RULE 68 FILINGS

Timing of Filing – Prior to the certification of the

class.

Precertification Effects

Full Individual Relief – Warren v. Sessoms & Rogers,

P.A., 2012 U.S. App. 552 (4th Cir. 2012).

Effects on the Putative Class - Pitts v. Terrible, Inc.,

653 F.3d 1081 (9th Cir. 2011)

27

LOSS OF SUBJECT MATTER JURISDICTION

Does service of Rule 68 to class representative,

prior to class cert., deprive the Court of subject

matter jurisdiction?

Sandoz v. Cingular Wireless, LLC, 553 F.3d 913 (5th

Cir. 2008) – Yes

Damasco v. Clearwire Corp., 662, F.3d 891 (7th Cir.

2011). – Yes

Pitts v. Terrible, Inc., 653 F.3d 1081 (9th Cir. 2011)

– No

28

CLASS DISCOVERY – PRE-CERTIFICATION

Bifurcation of Discovery

The Merits v. Class Paradox; Ryabyshchuk v.

Citibank; 11-CV-1236 IEG(WVG) [Docket No. 31]

(S.D. Cal. 2012), but what was the real effect?

Rule 23 and its Limitations

Is Typicality Going To Be An Issue? Garcia v.

Solomon, Grindle, 11-CV-1805 DMS(BLM) [Docket

No. 40], (S.D. Cal. 2012)

29

CLASS DISCOVERY – PRE-CERTIFICATION

Communication with Putative Class Members

Purposes – What purpose would class counsel need to

contact putative class members pre-certification?

Generally. BelAire – West Landscape, Inc., v.

Superior Court, (2007) 149 Cal.App.4th 554; Pioneer

Electronics (USA), Inc. v. Superior Court, (2007) 40

Cal.4th 360.

Federal Treatment. Bottoni v. Sallie Mae, Inc., 2012

U.S. Dist. LEXIS 76451 (N.D. Cal. 2012).

Limitations, Protective Orders and Burden Shifting.

30

CLASS DISCOVERY – PRE-CERTIFICATION

Specific Examples and Communication

Adams v. AllianceOne, 08-CV-00248 JAH(WVG)

[Docket No. 44]

Initial Communication Approved and Sent

Follow-up Communication

Results?

31

CLASS REPRESENTATIVE REPLACEMENT

Class Representative Lacks Standing

State Court Treatment. CashCall, Inc. v. Superior

Court, 159 Cal. App. 4th 273.

Ability to Substitute Class Representatives

Standing From Inception Issue.

CA State Court – See CashCall

32

CLASS REPRESENTATIVE REPLACEMENT

Federal Courts – Not So Quick……

Lidie v. California, 478 F.2d 552 (9th Cir. 1973)

Lierboe v. State Farm Mutual Automobile Insurance

Co., 350 F.3d 1018 (9th Cir. 2003)

Zapien v. Washington Mutual, Inc., 2008 U.S. Dist.

LEXIS 67137 (S.D. Cal. 2008)

33

ARBITRATION & CLASS WAIVER

AT&T Mobility LLC v. Concepcion, 131 S.

Ct. 1740 (U.S. 2011) (1,488 total cites as of

10/25/2012)

Purpose of FAA is to promote arbitration

Class arbitration would destroy informality of

arbitration

Class arbitration not envisioned by FAA

It would increase risk to defendants

34

POST CONCEPCION

Bellows v. Midland Credit Mgmt., 2011 U.S. Dist. LEXIS 48237 (S.D. Cal. May 4, 2011)

Yaqub v. Experian Info. Solutions, Inc., 2011 U.S. Dist. LEXIS 156427 (C.D. Cal. June 10, 2011)

Lucy v. Bay Area Credit Servs. LLC, 792 F. Supp. 2d 320 (D. Conn. 2011)

Wilson v. Cash Am. Int'l, Inc., 2012 U.S. Dist. LEXIS 12240 (N.D. Tex. Feb. 1, 2012)

35

POST CONCEPCION

Hagy v. Demers & Adams, LLC, 2012 U.S. Dist. LEXIS 12699 (S.D. Ohio Feb. 2, 2012)

Gray v. Suttell & Assocs., 2012 U.S. Dist. LEXIS 77906 (E.D. Wash. Mar. 16, 2012))

Shaffer v. HSBC Bank Nev., 2012 U.S. Dist. LEXIS 69818 (S.D. W. Va. May 18, 2012)

Sweiger v. Calvary Portfolio Servs., LLC, 2012 U.S. Dist. LEXIS 73909 (W.D. Pa. May 29, 2012)

36

POST CONCEPCION

Italian Colors Rest. v. Am. Express Travel

Related Servs. Co. (In re Am. Express

Merchs. Litig.), 667 F.3d 204 (2d Cir.

2012) (“Amex III”) rehearing den. 681 F.3d

139 (2d Cir. 2012), pet. for cert. filed No

12-133, 7/30/12

37