United States District Court, N.D. Illinois
January 20, 2004.
MOISES CARBAJAL; GEORGIA REDD; and RON BUTLER, Plaintiffs,
CAPITAL ONE, F.S.B.; CAPITAL ONE SERVICES, INC.; and WESTMORELAND AGENCY, INC., Defendants
The opinion of the court was delivered by: MATHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Moises Carbajal, Georgia Redd, and Ron Butler have sued
Capital One, FSB, Capital One Services, Inc., and Westmoreland Agency,
Inc., for alleged violations of the Fair Debt Collection Practices Act.
Plaintiffs received solicitations from the defendants to transfer
delinquent debts owed to other creditors to a new Capital One Visa credit
card account. They contend that this constituted debt collection activity
subject to the FDCPA, and they assert that Capital One's solicitation
improperly obscured the FDCPA-required "Validation" notice and
misleadingly advised debtors that they would still be able to dispute the
old debt after its transfer to Capital One. The Court previously denied
defendants' motion to dismiss plaintiffs' third amended complaint for
failure to state a claim. Carbajal v. Capital One, FSB, No. 03
C 1123, 2003 WL 22595265 (N.D. Ill. Nov. 10, 2003). Plaintiffs have
moved to certify two classes, consisting of all persons in Illinois
(Class A) and Indiana (Class B) to
whom defendants sent similar solicitations on or after February 13,
2002. For the reasons stated below, the Court grants plaintiffs' motion.
To obtain class certification, plaintiffs must satisfy the four
requirements of Federal Rule of Civil Procedure 23(a) and one of the
requirements of Rule 23(b). E.g., Harriston v. Chicago Tribune
Co., 992 F.2d 697, 703 (7th Cir. 1993). Rule 23(a)'s four
requirements for class certification are 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 representatives'
claims or defenses are typical of those of the class; and (4) the
representatives will fairly and adequately represent the interests of the
class. See Fed.R.Civ.P. 23(a). Plaintiffs seek certification
of both classes under Rule 23(b)(3), which requires, in addition to the
above, a showing that questions of law or fact common to all class
members predominate over individual issues, and that the class action
mechanism is superior to other available means of adjudicating the
controversy. See Fed.R.Civ.P. 23(b)(3). We deal with each of
these requirements in turn, following the Supreme Court's admonition that
we must conduct a "rigorous analysis" of whether the proposed classes
satisfy Rule 23's requirements. See General Telephone Co. of
Southwest v. Falcon, 457 U.S. 147, 161 (1982).
1. Rule 23(a) requirements
Though plaintiffs have not attempted to quantify the members of the
proposed classes, it is undisputed that Rule 23(a)'s numerosity
requirement is met. The proposed classes also satisfy the Rule's
commonality requirement. Rule 23(a) requires only that there be at least
one issue common to all class members, so long as the issue is one whose
determination will advance the litigation. See, e.g.,
Alkire v. Irving, 330 F.3d 802, 819 (6th Cir. 2003);
Forbush v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir. 1993).
In this case, the claims of each of the class members arise from the
receipt of one or more of a series of mass mailings; the plaintiffs
challenge those mailings' compliance with the FDCPA. This is sufficient
to meet Rule 23(a)'s commonality requirement. "Common nuclei of fact are
typically manifest where, like in the case sub judice, the
defendants have engaged in standardized conduct towards members of the
proposed class by mailing to them allegedly illegal form letters or
documents." Keele v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998).
A named plaintiffs claim is considered typical of the claims of the
class for purposes of Rule 23(a) if the claim arises from the same event
or practice or course of conduct that gives rise to the claims of the
other class members and is based on the same legal theory as those of the
class members. Keele, 149 F.3d at 594; De La Fuente v.
Stokely-Van Camp, Inc., 713 F.3d 225, 232 (7th Cir. 1983). This is
plainly so with regard to the named plaintiffs' FDCPA claims in this
Defendants do not dispute that Redd's claims are typical of those of
the class. Defendants argue, however, that the other named plaintiffs'
claims are not typical because those plaintiffs are subject to unique
defenses not applicable to class members generally. The claims of a
proposed class representative are considered atypical if the
representative is subject to a unique defense that is reasonably likely
to be a major focus of the litigation. See Rainy Lake One Stop, Inc.
v. Marigold Foods, Inc., 195 F.3d 430, 437 (8th Cir. 1999); Koos
v. First National Bank, 496 F.2d 1162, 1164 (7th Cir. 1974). To put
it another way, if the class representative is likely to be preoccupied
with a unique defense, his claims are atypical. In re CBC Companies,
Inc. Collection Letter Litigation, 181 F.R.D. 380, 385 (N.D. Ill.
Defendants contend that the claims of Carbajal and Butler are atypical
because those plaintiffs are subject to setoffs arising from prior
accounts they had with Capital One unrelated to the debts that were the
subject of the solicitations they challenge in this case. Specifically,
Carbajal is claimed to have previously had a "small business" credit card
account with Capital One on which, defendants contend, he defaulted and
on which the balance due is just over $2,000. Carbajal is also claimed to
have had a separate Capital One credit card account on which he defaulted
in 1998; he allegedly obtained a new Capital One credit card account in
September 2002 to which the balance from the old account was transferred.
Defendants contend that the balance due on this account at the time the
present suit was filed was just over $1,000, but they do not contend that
the account is in default. Butler is claimed to have a car loan with
Capital One on which he owes about $6,000; defendants do not contend that
the loan is in default.
Defendants have made only a half-hearted effort to show that these
purported setoffs are likely to become a focus of the litigation, let
alone a major focus. First of all, defendants do not contend that the
referenced prior debts of Carbajal and Butler are in any way related to
their debts that were involved in the solicitations challenged in this
case. Second, Butler's car loan and Carbajal's second ($1,000) credit
card debt are not claimed to be in default; put another way, there is no
contention that either Butler or Carbajal has breached any contract or
other obligation with regard to these debts.
Defendants' suggestion that unrelated, unmatured debts may be set off
against a debt collector's liability under the FDCPA is unpersuasive, and
again defendants have made only the barest of efforts to argue the point.
They cite (in a footnote!) only an Indiana case indicating that under
that state's common law, a bank may set off the account of a depositor
against an unmatured debt owed to
the bank. See First Bank of Whiting v. Samocki Bros. Trucking
Co., 509 N.E.2d 187, 198 (Ind. App. 1987). But Carbajal lives in
Illinois, not Indiana, and the law in Illinois is different: an Illinois
bank may set off funds on general deposit only against matured
debts, absent express authority to the contrary (which defendants have
not suggested exists in Carbajal's case). Tri State Bank of East
Dubuque v. Colby, 141 Ill. App.3d 807, 811, 490 N.E.2d 1037, 1039
Perhaps more importantly, defendants have cited no authority suggesting
that either Illinois' or Indiana's common law rule regarding setoffs
supports allowing a defendant to offset the plaintiffs' unrelated debts
against defendants' alleged liabilities under the FDCPA. The general rule
that applies to common law setoffs is that they are permitted "only when
the debts are `mutual,' and debts arising at different times out of
different circumstances are not mutual." Soo Line R. Co. v. Escabana
& Lake Superior R. Co., 840 F.2d 546, 551 (7th Cir. 1988).
Though supposedly offsetting obligations "held by the same parties in the
same capacity (that is, as obligor and obligee)" may be considered mutual
and thus subject to common law setoff, In re Doctors Hospital of Hyde
Park, Inc., 337 F.3d 951, 955 (7th Cir. 2003), such is not the case
here: an obligation that exists pursuant to a liability imposed by a
federal statute is not held "in the same capacity" as a contractual debt.
Defendants cite no authority for the proposition that an entity liable
for statutory damages for violating a federal statute like the FDCPA
would be entitled to offset unrelated (let alone unmatured) debts.
Rather, the cases they cite involved the offset of the very debts out of
which the plaintiffs' claims arose. See, e.g., Channell v.
Citicorp National Services, Inc., 89 F.3d 379 (7th Cir.
1996). Even if debts of that type satisfy the "mutuality" test, the debts
of Carbajal and Butler identified by defendants are not of that type. In
sum, there is no basis to believe that any defenses particular to
Carbajal and Butler will be a focus of the litigation or will divert
their attention or that of class counsel.*fn2 The Court finds that each
of the named plaintiffs' claims is typical of those of the class within
the meaning of Rule 23(a).
The final requirement of Rule 23(a) is that the proposed
representatives will fairly and adequately represent the interests of the
class. This requirement "has three elements: (1) the chosen class
representative cannot have antagonistic or conflicting claims with other
members of the class,. . . (2) the named representative must have
sufficient interest in the outcome to ensure vigorous advocacy,. . .
and, (3) counsel for the named plaintiff must be competent, experienced,
qualified, and generally able to conduct the proposed litigation
vigorously." Gammon v. GC Services Ltd. Partnership,
162 F.R.D. 313, 317 (N.D. Ill. 1995) (citations and internal quotation marks
omitted). Defendants do not contest the competence of class counsel, the
law firm of Edelman, Combs & Latturner, and the Court has rejected
defendants' argument that Carbajal and Butler have antagonistic interests
due to their other alleged debts owed to Capital One. Defendants argue,
however, that each of the plaintiffs is confused regarding the claims
made in the case, that Redd made misrepresentations in her deposition,
and that Butler has conflicting interests because he wants to keep his
involvement in this case from his employer and because, as a plaintiff in
a number of other consumer-law cases, he is effectively dependent on the
The Court disagrees. What defendants characterize as confusion
regarding the sequence of events is more likely attributable to the
fact that defendants sent repeated similar mailings, and what they
characterize as confusion about legal matters is more likely attributable
to the plaintiffs' lack of sophistication and relative unfamiliarity with
the inner workings of federal civil litigation. In any event, as our
colleague Judge Ruben Castillo noted in the Gammon case,
[t]hese facts are entitled to little weight . . .
when assessing adequacy of representation. As the
Seventh Circuit has stated, "[T]he class
representative's role is limited. It was found not
to be enough to defeat a class certification in
Surowitz v. Hilton Hotels Corp.,
383 U.S. 363, 366 (1966), that the named plaintiff did not
understand her complaint at all, could not explain
the statements in it, had little knowledge of what
the lawsuit was about, did not know the defendants
by name, nor even the nature of the misconduct of
the defendants." Eggleston v. Chicago
Journeymen Plumbers' Local Union No. 130,
657 F.2d 890, 896 (7th Or. 1981) (citations
omitted). . . .
Gammon, 162 F.R.D. at 317.
With regard to plaintiff Butler, the fact that he would prefer that his
employer did not know about his involvement in litigation has no impact
on his adequacy as a class representative. There is nothing to suggest
that this would, for example, cause him to advocate an unfair settlement
in the hopes of an early end to the lawsuit, and in any event the
disposition of the case by settlement or otherwise is subject to the
Court's review for fairness. The fact that Butler has been involved as a
plaintiff in prior consumer litigation likewise does not make him an
inadequate class representative; the Court rejects defendants' contention
that as a repeat plaintiff he is somehow "dependent" on class counsel.
Each of the named plaintiffs has, in his or her deposition,
demonstrated adequate knowledge of the relevant facts and the basis for
the claims, an understanding of the role of a class representative, and
a commitment to fulfill that role. There is no question that a
class representative is required to be conscientious, see Rand v.
Monsanto Co., 926 F.2d 596, 599 (7th Cir. 1991), and to "understand
the basic facts underlying his claims." In re Discovery Zone Sec.
Litig., 169 F.R.D. 104, 109 (N.D. Ill. 1996). But the named
plaintiffs each meet this standard; defendants' arguments (both those
referenced above and those we have not specifically discussed) do not
tilt the scales in the opposite direction.
2. Rule 23(b) requirements
Because plaintiffs have established each of the requirements of
Rule 23(a), we turn to the requirements set forth in Rule 23(b)(3). As
indicated earlier, Rule 23(b)(3) requires plaintiffs to establish that
questions of law or fact common to all class members predominate over
individual issues and that the class action mechanism is superior to other
available means of adjudication.
The Court is persuaded that common issues predominate over individual
issues. The primary focus of the litigation will be the indisputably
common issue of whether the forms of solicitation used by defendants
violate the FDCPA. This plainly can be determined on a class-wide basis.
The only individual issue identified by defendants as undercutting
plaintiffs' claim of predominance of common issues is the selfsame setoff
issue discussed earlier. As the Court has determined, there is no basis
for setoff of the class members' prior, unrelated debts against
defendants' FDCPA liability, and in any event, defendants have made no
effort to show that any significant number of class members are likely to
owe prior debts to the defendants.
The Court is also convinced that a class action is a superior means of
adjudicating the parties' dispute. A class action will allow for a single
adjudication of whether defendants' practices comport with the FDCPA.
This is the most efficient means of determining the legality of mass
consumers who are all similarly situated.
Defendants argue that it is likely, given the large number of class
members, that any class award would amount to a de minimis
recovery by any particular plaintiff due to the FDCPA's limitations on
class recovery of statutory damages. See
15 U.S.C. § 1692k(a)(2)(B)(ii). But the fact that any one individual
plaintiff can recover only a modest amount ($1,000) absent actual damages
actually makes the claims more suitable for determination in a class action,
as no individual plaintiff would have a significant incentive to sue on his
or her own. "Class actions . . . may permit the plaintiffs to pool claims
which would be uneconomical to litigate individually. [In such a case,]
most of the plaintiffs would have no realistic day in court if a class
action were not available." Phillips Petroleum Co. v. Shutts,
472 U.S. 797, 809 (1985). As the Seventh Circuit said in Mace v. Van
Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997), "a de minimis
recovery (in monetary terms) should not automatically bar a class action.
The policy at the very core of the class action mechanism is to overcome
the problem that small recoveries to not provide the incentive for any
individual to bring a solo action prosecuting his or her rights. A class
action solves this problem by aggregating the relatively paltry potential
recoveries into something worth someone's (usually an attorney's) labor."
Id. at 344.
The fact that particular individual plaintiffs could recover $1,000 in
statutory damages if they sued individually does not alter this analysis,
for the reality is that the choice is not between a class action and a
multitude of individual actions, but rather between a class action and
this particular individual action and maybe a handful more. The
class members who might be inclined to shoot for the bigger amount will
be clearly advised in the Court's notice to prospective class members
that they can forego membership in the class and take on the risks and
somewhat larger rewards of
individual litigation if they so choose. But to disallow a class
action simply because of the hypothetical possibility of multiple
individual actions would effectively sound the death knell to use of the
class action in the consumer law context. And as former District Judge
Prentice Marshall put it in rejecting a similar argument in a Truth in
Lending Act case, "[L]arge classes are typical in [such] cases, because
creditors often have hundreds of thousands of customers within a single
jurisdiction. For these creditors the threat of a class action has a
potent deterrent effect. Eliminating that deterrent for all large cases
would emasculate the enforcement provisions of the Act." Sarafin v.
Sears, Roebuck & Co., 73 F.R.D. 585, 588 (N.D. Ill. 1977). The
same is true in this case. And the converse is also true: if defendants'
practices are determined to have complied with the FDCPA, that
determination will foreclose the possibility of further FDCPA litigation
in Illinois and Indiana by those whom defendants have solicited.
Defendants contend that the Seventh Circuit has disapproved of the use
of class actions when class members' recovery is likely to involve a
de minimis amount. But Crawford v. Equifax Payment Services,
Inc., 201 F.3d 877 (7th Cir. 2000), cited by defendants for this
proposition, holds no such thing. In Crawford, the court
reviewed a district court's refusal to permit intervention by class
members objecting to a FDCPA settlement, and its approval of the
settlement over their objection. The class was certified under
Rule 23(b)(2), and thus the 214,000 class members were not to receive personal
notice or the opportunity to opt out of the settlement. The terms of the
defendant barred the defendant from further use of the form collection
letter that the class had challenged; awarded the single named plaintiff
$2,000; and provided for a $5,500 donation by the defendant to a law
school clinic and payment of a fee of $78,000 to class counsel. The other
214,000 class members were to receive nothing, and by virtue of the
settlement they would have been deprived of their ability to file
actions. The intervenors learned of the settlement because they had
filed similar cases that were pending before another judge in the same
The Seventh Circuit overturned the settlement. The critical element in
its reasoning was that the district court had violated settled law by not
requiring notice and an opportunity to opt out of a class action for
money damages. Id. at 881-82. This element is absent in the
present case, in which class members will be notified of the
certification of the class and their rights to opt out and file separate
The court in Craw ford also criticized the terms of the
settlement. It noted that the size of the class, when combined with the
FDCPA's cap of damages in class actions to the lesser of $500,000 or 1%
of the defendant's net worth, see
15 U.S.C. § 1692k(a)(2)(B)(ii), ensured that class members would receive no
more than $2.34 and possibly less. Id. at 882. The smaller classes
certified in the separate cases to which the intervenors were party,
however, could bring each class member as much as $250. Under the
circumstances, the Seventh Circuit was critical of a settlement in which
the class members would receive nothing. It stated that "the fact that
[the named plaintiff] receives $2,000 and the other 200,000 [class
members] nothing is quite enough to demonstrate that the terms should not
have been approved under Rule 23(e)." Id.
In the present case, of course, no proposed settlement is pending; the
question is whether a class should be certified to begin with. The Court
does not believe that Craw ford stands for the proposition that
a class should not be certified when it is likely that a class-wide
settlement would produce a minimal recovery. Rather, the Court believes
that Crawford must be read in light of the primary concern that
gave rise to the rejection of the settlement the lack of notice
and the ability of
class members to opt out. If the class notice clearly spells out
the likely maximum level of awards to class members and advises that they
may choose to file separate actions in which they might recover a larger
amount, the primary problem that gave rise to the Seventh Circuit's
concerns will be eliminated, and individual class members will be able to
make fully informed choices as to how they wish to proceed.
Defendants also argue that they will be entitled to set off the debts
that were the subject of the solicitations against any FDCPA liability
they may have to those who accepted the solicitation and transferred
their debts to Capital One. The Seventh Circuit has, in fact, suggested
that a debt collector sued in an FDCPA case may be able to offset against
its liability the bad debt that it was attempting to collect. See
Crawford, 201 F.3d at 880 (defendant "would be entitled to a setoff
or counterclaim, on account of the bad debts, exceeding any [FDCPA]
recovery"; citing Channell, 89 F.3d 379). But defendants'
argument ignores the fact that their solicitation, if accepted, had the
effect of transforming the recipient's debt into one that was no longer
past due; upon acceptance of the solicitation, the previously past due
debt was rolled into a Capital One Visa credit card account, a form of
revolving credit which the debtor was entitled to pay off over time.
Defendants have provided no support for the proposition that they should
be able to set off (or assert in a counterclaim) debts on which they have
no right, under agreements they themselves drafted, to immediate payment.
And they have not attempted to show that any significant proportion of
those who accepted the solicitation failed to make any payments for the
first three billing cycles, the predicate that defendants' solicitation
said was necessary for collection activities to resume.
In short, the class members who did not accept the solicitation have
no "related" debts that
could be the subject of a setoff or counterclaim, and those who did
accept the solicitation, at least as far as we know at this point, have
no "past due" debts that are properly setoff under Crawford and
Channell as defendants read those cases. Thus we cannot say that
setoffs and counterclaims are likely to become a significant part of this
litigation,*fn3 let alone that they would exceed the possible recovery
of the class. If further developments show otherwise, it might become
appropriate to entertain the possibility of modifying the class
definition to exclude those who accepted the solicitation or those who
accepted the solicitation and then defaulted on their payment obligations
regarding their Capital One Visa account. But at this point, there is no
basis at this point to confine the class to those who did not accept the
For these reasons, the Court finds that plaintiffs have demonstrated
that a class action is a superior means of adjudicating the controversy
than individual actions.
For the reasons stated above, the Court grants plaintiffs' second
amended motion for class certification. Plaintiffs are directed to
provide defendants with a draft form of class notice on or before January
27, 2004, and the parties are directed to confer to attempt to reach
agreement on the form of notice. A proposed agreed notice, or separate
proposals if the parties cannot agree, is to be submitted to the Court
by no later than February 5, 2004. The case is set for a status
hearing on February 9, 2004 at 9:30 a.m.