United States District Court, N.D. Illinois
March 31, 2004.
GEORGIA REDD, Plaintiff;
ARROW FINANCIAL SERVICES, LLC., Defendant
The opinion of the court was delivered by: WAYNE ANDERSEN, District Judge
MEMORANDUM. OPINION AND ORDER
Plaintiff Georgia Redd brings a class action lawsuit against
defendant Arrow Financial Services, LLC ("Arrow") for violations of the
Fair Debt Collection Practices Act, 15 U.S.C. § I692e, 1692e(2),
1692e(8), and 1692e(10), relating to its alleged illegal practices in
connection with the collection of certain debts that are more than seven
years old. This matter is before the Court on Ms. Redd's motion for class
certification. For the reasons stated below, the motion for class
certification is granted.
For the purposes of a motion to certify a class, the allegations in the
complaint are presumed to be true. Johns v. DeLeonardis,
145 F.R.D. 480, 482 (N.D. Ill. 1992). According to Ms. Redd's amended
complaint, she is a consumer who defaulted on a retail installment
contract for the purchase of a car in 1990. Sometime after the purchase
of the car, Ms. Redd failed to make the scheduled payments, the car was
repossessed and the debt was charged off. Defendant Arrow is a limited
liability company that acts as a collection agency and purchases consumer
debts at a portion of the face value for the opportunity to enforce the
debts against the consumers.
On approximately October 18, 2002, Arrow sent Ms. Redd a letter
informing her that her debt had been sent to a debt collection agency.
The outstanding balance on the account was $9,887.41. The letter offered
to settle the past due account for 45 percent of the full balance if the
repayment was made in one payment by November 20, 2002. Relevant to the
claim at issue here, the letter stated: "Upon receipt of the settlement
amount and clearance of funds, the appropriate credit bureaus will be
notified that this account has been settled." Ms. Redd alleges, and
defendant Arrow admitted in response to requests for admission, that the
letter she received was a standard form letter and that there are "more
than 500(a) natural persons (except those with addresses in Maine), (b)
who were sent a letter in the form represented by exhibit A to the
Amended Complaint by Arrow Financial Services, LLC, (c) with respect to a
debt charged off? years or more prior to the date of the letter, (d)
which was sent on or after a date one year prior to the filing of this
action." (Def.'s Resp. to Pl.'s Req. for Admis., ¶ 16).
Based on the statement cited above, Ms. Redd claims that Arrow has
violated the FDCPA, 15 U.S.C. § 1692e, which prohibits debt
collectors from making false or misleading representations to consumers,
because pursuant to the Fair Credit Reporting Act ("FCRA"), "no consumer
reporting agency may make any consumer report containing., accounts
placed for collection or charged to profit and loss which antedate the
report by more than seven years." 15 U.S.C. § 1681c(a)(4). Given that the
age of the debt was greater than seven years old, Ms. Redd claims that
Arrow's reference to a consumer's credit report in the letter it sent is
misleading because it tells an unsophisticated consumer that, absent a
payment, Arrow could have the debt appear on the consumer's credit report
as an unpaid delinquent debt. Ms. Redd proposes a class consisting of
"(a) all natural persons (except those with Maine addresses), (b) who
were sent a
letter in the form represented by Exhibit A by Arrow Financial
Services, LLC, (c) with respect to a debt charged off? years or more
prior to the date of the letter, (d) which letter was sent on or after
February 21, 2002 (one year prior to the filing of this action)." (pl.'s
Mot. for Cl. Cert., at 1). We have a companion case Stewart Maxwell
v. Arrow Financial Services, LLC, Case No. 03 C 1995, in which a
Maine plaintiff is pursuing similar claims under the Maine Fair Debt
Collection Practices Act.
Motions for class certification must meet the requirements set under
Rule 23 of the Federal Rules of Civil Procedure. Rule 23 establishes two
main requirements for class certification. First, the action must satisfy
all four elements of Rule 23(a): numerosiry, commonality, typicality and
adequacy of representation. Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 613 (1997); Harriston v. Chicago Tribune Co.,
992 F.2d 697, 703 (7th Cir. 1993). Second, the proposed class must satisfy
at least one of the three provisions under Rule 23(b). Ms. Redd seeks
certification under Rule 23(b)(3), which requires a plaintiff to
demonstrate that common questions of law or fact predominate over any
questions affecting only individual class members and that a class action
is a superior method of adjudicating the controversy.
As previously stated, for purposes of a motion to certify a class, the
allegations in the complaint are presumed true. Johns,
145 F.R.D. at 482. The court does not reach die merits of the complaint or
weigh evidence. Risen v. Carlisle & Jacquelin,
417 U.S. 156, 177-78 (1974); Koch v. Stanard, 962 F.2d 605, 607 (7th Cir.
1992). The burden is on the party seeking class certification to
demonstrate that the requirements of Rule 23 are satisfied. Gen. Tel.
Co. of S.W. v. Falcon, 457U.S. 147, 161 (1982); Trotter v.
Klincar, 748 F.2d 1177, 1184 (7th Cir.
1984). Failure on the part of the movant to satisfy any one of the
requirements of Rule 23(a) or (b) precludes class certification.
Patterson v. Gen. Motors Corp., 631 F.2d 476, 480 (7th Cir.
1980). The court has broad discretion in ruling on a motion for class
certification. Retired Chicago Police Ass'n v. Chicago,
7 F.3d 584, 596 (7th Cir. 1993). We now consider each element of the
Rule 23 requirements in turn.
A. Requirements of Federal Rules of Civil Procedure 23(a)
Rule 23(a)(1) requires that the class must be "so numerous that joinder
of all members is impracticable." Fed.R.Civ.P. 23(a)(1). Because there is
no mystical number at which the numerosity requirement is established,
courts have found this element satisfied when the putative class consists
of as few as 10 to 40 members. See, e.g., Markham v. White,
171 F.R.D. 217, 221 (N.D. Ill. 1997) (35 40 class members);
Hendricks Robinson v. Excel Corp., 164 F.R.D. 667, 671
(C.D. Ill. 1996) (38 class members). Although the plaintiff need not
allege the exact number or identity of the class members, the plaintiff
ordinarily "must show some evidence or reasonable estimate of the number
of class members." Long v. Thorton Township High Sch. Dist.,
82 F.R.D. 186, 189 (N.D. Ill. 1979). In determining whether the claimed class
contains a sufficient number of members, the court is permitted to "make
common sense assumptions in order to find support for numerosity."
Cannon v. Nationwide Acceptance Corp., 1997 WL 139472, at *2
(N.D. Ill. March 25, 1997) (quoting Evans v. U.S. Pipe &
Foundry, 696 F.2d 295, 930 (11th Cir. 1983)).
This Court previously has found that it is reasonable to assume the
number of potential class members satisfies the numerosity requirement
when the defendant allegedly used "preprinted, standardized debt
collection letters in attempting to collect on the [allegedly
delinquent] debt." Hamid v. Blatt, Hasenmilkr, Leibsker, Moore
& Pellettieri, et al., 2001 WL 1543516, at *3 (N.D. Ill., Nov.
30, 2001), citmg Peters v. AT& T, 179 F.R.D, 564, 567-68
(N.D. Ill. 1998) ("Based on these facts it is reasonable to infer that
many individuals received the form collection letter and that joinder
of all the individuals would be impracticable."). Whether the numerosity
requirement is met in this case is complicated, however, by certain
exceptions to the seven year reporting limitation under specific sections
of the FCRA, 15 U.S.C. § 1681c(b)(1)-(3). Pursuant to the FCRA, "no
consumer reporting agency may make any consumer report containing . . .
accounts placed for collection or charged to profit and loss which
antedate the report by more than seven years." 15 U.S.C. § 1681 c(a)(4).
However, creditors may report the satisfaction of a debt when it is more
than seven years old if: (1) the debtor applied for credit in an amount
exceeding $150,000; (2) the debtor applied for life insurance in an
amount exceeding $150,000; or (3) the debtor applied for employment for a
job with a salary exceeding $75,000. 15 U.S.C. § 1681c(b)(1)-(3).
Arrow argues that class certification is not merited in part because
Ms. Redd has prematurely moved to certify a class without knowing how
many potential members would be subject to these exceptions to the seven
year reporting limitation. However, in response to a request for
admission, Arrow admitted that it sent the standard letter to more than
500 individuals outside of the state of Maine regarding a debt that was
more than seven years old. This admission creates a strong basis to find
that the numerosity requirement has been met by Ms. Redd. In addition,
when identifying the potential class, the class definition can take into
account any potential exceptions to the seven year reporting limitation.
Thus, this Court finds that the numerosity requirement is satisfied in
Under Rule 23(a)(2), "questions of law or fact common to the class"
must be present before a class may be certified. The existence of a
common nucleus of operative facts is usually enough to establish
commonality. Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir.
1992). Courts consistently have found a common nucleus of operative facts
if a defendant has allegedly engaged in standardized conduct directed
toward the putative class members or if the class claims arise out of
standardized documents. Rosario, 963 F.2d at 1018; Johnson
v. Aronson Furniture Co., 1998 WL 641342, at *3 (N.D. Ill. Sept.
11, 1998); Peterson v. H & R Block Tax Serv. Inc.,
174 F.R.D. 78, 81 (N.D. Ill. 1997).
A plaintiff normally is only required to show mat there is "at least
one question of law or fact common to the class." Arenson v.
Whitehall Convalescent & Nursing Home, Inc., 164 F.R.D. 659, 663
(N.D. Ill. 1996). When a "question of law refers to a standardized
conduct by defendants toward members of the class, a common nucleus of
operative facts is typically presented, and the commonality requirement
is usually met." Moore v. Simpson, 1997 WL 570769, at *3 (N.D.
Ill. Sept. 10, 1997) (internal quotations omitted); see also
Rosario, 963 F.2d at 1018 ("A common nucleus of operative fact is
usually enough to satisfy the commonality requirement of
Rule 23(a)(2)."). Further, some factual variations among class members' claims
alone is normally not enough to defeat a motion for class certification.
Patterson v. Gen. Motors Corp., 631 F.2d 476, 481 (7th Cir.
1980); Hamid, 2001 WL 1543516, at *4, citing Keele v.
Wexler, 149 F.3d 589, 594 (7th Cir. 1998).
We conclude that Ms. Redd satisfies the requirements of Rule 23(a)(2).
Specifically, we find that this case presents the following two
questions, among others, that all arise from Arrow's
standardized conduct in sending the form letter to all of the
individuals against whom it attempted to collect: (1) whether Arrow
regularly sends the letter at issue in this case to individuals with
debts more than seven years old who do not meet any of the exceptions
allowing their credit to be reported under 15 U.S.C. § 1681c(b)(1)-(3);
and (2) if so, whether has Arrow violated the FDCPA by misrepresenting
to debtors that it would report settlement and repayment of
debts more than seven years old. The first question is a common
question of fact and the second is a common question of law shared by the
potential class of plaintiffs and defendant Arrow. These common questions
both derive from Arrow's standardized conduct in attempting to collect on
purported past due debts. Accordingly, we conclude that because the
claims arise from Arrow's standardized collection notices, the claims are
appropriate for treatment as a class action. Keele v. Wexler,
1996 WL 124452, at *4 (N.D. Ill. March 19, 1996), citing Haroco, Inc.
v. Am. Nat'l Bank & Trust, 121 F.R.D. 664, 669 (N.D. Ill. 1988).
Under Rule 23(a)(3), the claims or defenses of the party representative
must be typical of those of the class as a whole. The claim of a named
plaintiff is typical of the class if "it arises from the same event or
practice or course of conduct that gives rise to the claims of other
class members and his or her claims are based on the same legal theory."
Johnson, 1998 WL 641342, at * 3, quoting De La Fuente v.
Stokely Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983)
(internal quotation omitted). The typicality requirement is closely
related to the commonality requirement under Rule 23(a).
Rosario, 963 F.2d at 1918. Arrow argues that Ms. Redd is not a
typical member of the class of recipients of this debt collection letter
because the letter was not only sent to individuals whose debts were
seven years or older. Therefore, unlike Ms. Redd,
some recipients legally would have a debt repayment reported to
their credit agencies as promised in the letter. This Court finds that
this is not a problem, however, because the class can be defined to
include only those individuals who received the letter and who had a debt
that was more than seven years old which was not reportable under the
FCRA. We find that Ms. Redd's claims and defenses are typical of those of
the class as a whole, and the class may be limited to individuals who
received the letter from Arrow and who had debts that were at least seven
Under Rule 23(a), the adequacy of representation requirement mandates
that both the class representative and counsel for the named plaintiff
must be able to zealously represent and advocate on behalf of the class
as a whole. Retired Chicago Police Ass'n, 1 F.3d at 598. The
class representative, in this case Ms. Redd, must not have "antagonistic
or conflicting claims with other members of the class," and she must have
a "sufficient interest in the outcome of the case to ensure vigorous
advocacy." Sebo v. Rubenstein, 188 F.R.D. 310, 316 (N.D. Ill.
1999) (citation omitted). We have found no evidence in any of the filings
in this case indicating that Ms. Redd's claims conflict with or are
antagonistic to the claims of the proposed class members. This Court
finds that Ms. Redd has demonstrated that she has a sufficient stake in
the outcome of the litigation to ensure that she will be a zealous
advocate as the named representative on behalf of the class.
In addition to the adequacy of representation of the class
representative, the class counsel must also meet requirements for
adequacy of representation. Counsel for the named plaintiff must be
experienced and qualified and generally be able to conduct the
litigation. Id. at 598;
Gammon v. GC Servs. Ltd. P'ship, 162 F.R.D. 313, 317 (N.D.
Ill. 1995) (citations omitted). Counsel for the named plaintiff in this
case are experienced in handling class action lawsuits and have
competently handled many cases before this Court in the past. This Court
finds that the adequacy of representation requirement under Rule 23(a)
has been met.
B. Requirements of Federal Rules of Civil Procedure 23(b)(3)
We now turn to the requirements for class certification under
Rule 23(b). Certification under Rule 23(b)(3) is appropriate if (1) questions
of law or fact common to the members of the class predominate over any
questions affecting only individual members and (2) a class action
is superior to other available methods for the fair and
efficient adjudication of the controversy, Szabo v. Bridgeport
Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001); Kremnitzer v.
Cabera & Rephen, P.C., 202 F.R.D. 239, 242 (N.D.Ill. 2001).
1. Predominance of class issues over individual issues
Arrow argues that Ms. Redd fails to meet the predominance requirement
under Rule 23(b)(3) because individual issues predominate over class
issues. Arrow claims that Ms. Redd's allegations are wholly conclusory
and that discovery may reveal additional defenses to her claims in which
individual issues may predominate. However, under the predominance
requirement of Rule 23(b), common questions of law or fact must
predominate, but they need not be exclusive. Scholes v. Moore,
150 F.R.D. 133, 138 (N.D. Ill. 1993).
In determining whether common questions predominate, the court looks to
whether there is a "common nucleus of operative facts." Ziemack v.
Centel Corp., 163 F.R-D. 530, 535 (N, D. Ill. 1995). Arrow's alleged
misleading statement in a debt collection letter sent to members of the
class is at the core of Ms. Redd's complaint. The issues of law and fact
that flow from
Arrow's alleged misleading statement predominates over any
individual issue or potential exception and forms the core of this
complaint. Because the common issues of fact and law previously
identified are likely to dominate this Court's attention, common
questions of law and fact predominate. Tatz v. Nanophase Tech.
Corp., 2003 WL 21372471, at *9 (N.D. Ill. June 13, 2003).
Arrow also argues that class certification is premature because
additional discovery is needed to determine whether class or individual
issues predominate. We find that Arrow's arguments are not sufficient to
merit a finding that Ms. Redd has failed to establish that class issues
predominate over individual issues. The only issue currently before the
Court is whether Ms. Redd has pled in her motion the required elements of
Rule 23, and we decline to speculate about additional facts
that may be developed during discovery. Hamid, 2001 WL 1543516,
at *7. Therefore, we conclude based on the pleadings that the class
issues predominate over any perceived individual issues.
2. Superiority of class action to other available methods for fair and
efficient adjudication of the controversy
Under Rule 23(b)(3), a class action must also be superior to other
available methods for the fair and efficient adjudication of the
controversy. Szabo, 249 F.3d at 676. We find that a class action
in this case is superior to other means of adjudication for three
reasons. First, as discussed previously, this conflict contains a set of
legal and factual issues that are shared by the members of the class, and
class certification is more efficient than multiple individual suits at
dealing with these common questions. Tatz, 2003 WL 21372471, at
*9. The FDCPA was established to protect consumers from overly aggressive
debt collection practices that are false or
misleading, and courts often have relied on the class action
mechanism to facilitate enforcement of the FDCPA.
Second, a class action is superior to individual action in this case
because litigation costs are high, the likely recovery is limited. Thus,
recipients of the letter are unlikely to prosecute individual claims
without the availability of cost sharing efficiencies through a
class action. Tatz, 2003 WL 21372471, at *10, citing Haynes
v. Logan Furniture Mart, Inc., 503 F.2d 1161, 1164-65 (7th Cir.
1974). A class action is superior under Rule 23(b) when class members
would be overwhelmed by the defendant's resources if they attempted to
bring individual claims. Tatz, 2003 WL 21372471, at *10, citing
Chandler v. S.W. Jeep Eagle, Inc., 162 F.R.D. 302, 310
(N.D. Ill. 1995); Alexander v. Centrafarm Group, N.Y., 124 F.R.D. 178,
185 (N.D. Ill. 1988). Here, the defendant is a large collection
agency and purchaser of bad debts that is likely to have extensive
resources that could far outpace those of the potential class of
Third, a class action is the superior method to resolve this case
because it is a more efficient use of judicial resources than trying
individual cases. Tatz, 2003 WL 21372471, at *10, citing
Scholes, 143 F.R.D. at 189 ("Under these circumstances, class
certification is the best way to manage this situation which could
otherwise disintegrate into piecemeal adjudication of many individual
actions involving essentially identical questions of law and fact.").
Denial of the motion for class certification would potentially result in
courts becoming consumed with many individual cases that seek to litigate
an essential core of the same legal and factual issues.
Finally, Arrow has failed to demonstrate why other methods for fair and
efficient adjudication of the controversy would be superior to a class
action. Thus, we conclude that a class action is superior to other
available methods for the fair and efficient adjudication of this
controversy. Therefore, this Court finds that the
Rule 23 requirements for class certification have been met in this case
in their entirety, and we grant Ms. Redd's motion for class
certification. We propose the following class definition:
All natural persons except those with Maine
addresses who received a letter in the form
represented by Exhibit A from Arrow Financial
Services, LLC with respect to a debt charged off 7
years or more prior to the date of the letter,
which letter was sent on or after February 21,
2002, except those cases in which satisfaction of
the debt identified in the letter was reported in
connection with either (1) a credit transaction
involving, or which may reasonably be expected to
involve, a principal amount of $150,000 or more,
(2) the underwriting of life insurance involving,
or which may reasonably be expected to involve, a
face amount of $150,000 or more or (3) the
employment of any individual at an annual salary
which equals, or which may reasonably be expected
to equal $75,000 or more.
For all of the foregoing reasons, we grant the plaintiff's motion for
class certification. This matter is set for status on April 15, 2004 at
9:00 a.m. at which we can discuss the proposed definition and/or the
parties may submit a modified class definition.
It is so ordered.
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