United States District Court, N.D. Illinois
March 31, 2004.
STEWART W. MAXWELL, Plaintiff,
ARROW FINANCIAL SERVICES, Defendant
The opinion of the court was delivered by: WAYNE ANDERSEN, District Judge
MEMORANDUM, OPINION AND ORDER
Plaintiff Stewart W. Maxwell ("Mr. Maxwell") brings a class action
lawsuit against defendant Arrow Financial Services, LLC ("Arrow") for
violations of the Maine Fair Debt Collection Practices Act ("Maine
FDCPA"), 32 MRSA § 11001 et seq., 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 Mr.
Maxwell'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 Mr. Maxwell's motion for
class certification, he is a resident of Maine whose debt on a Citibank
credit card was charged off in approximately April 1991 after he failed
to make the payments. 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
On approximately October 21, 2002, Arrow sent Mr. Maxwell a letter
informing him that his debt had been sent to a debt collection agency.
The alleged outstanding balance on the account was $6,707.24. The letter
offered to settle the past due account for 40 percent of the full balance
if the repayment was made in one payment by November 13, 2002. Relevant
to the claims 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." Mr. Maxwell
alleges, and Arrow admitted in response to requests for admission, that
the letter Mr. Maxwell received was a standard form letter and that there
are "more than 500 persons with Maine addresses who meet the following
criteria: (a) Defendant sent them a letter in the form represented by
Exhibit A; (b) on or after February 3, 2002; (c) seeking to collect a
debt charged off more than seven years previous to the date of the
letter; (d) which was not returned by the Postal Service." (Def.'s Resp.
to pl.'s Req. for Admis. ¶ 12).
Based on the statement cited above, Mr. Maxwell filed an amended
complaint claiming that Arrow has violated the Maine FDCPA, 32 MRSA §§
11013(2)(E) and (J), which prohibits debt collectors from making false or
misleading representations, 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." 15U.S.C.
§ 1681c(a)(4). The Maine FDCPA relevant to the claims at issue prohibits
the same false, deceptive, or misleading representations as the
corresponding section of the federal Fair Debt Collection Practices Act
(the "federal FDCPA"). See Notice of Maine Exemption from the
Fair Debt Collection Practices Act, 60 Fed. Reg.
66,972 (Dec. 27, 1995). The damages portion of one of plaintiff s
claims is supplied by the federal FDCPA, 15 U.S.C. § 1692(k).
Given that the age of the debt was greater than seven years old, Mr.
Maxwell 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. Mr. Maxwell
proposes a class consisting of "all natural persons with Maine addresses
who meet the following criteria: a. Defendant sent them a letter in the
form represented by Exhibit A; b. On or after a date one year prior to
the original filing of this action in state court; c. Seeking to collect
a debt charged off more than 7 years previous to the date of the letter;
d. Which was not returned by the Postal Service." (pl Mo. ford. Cert., at
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): numerosity, 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). Mr. Maxwell 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 the merits of the complaint or
weigh evidence. Eisen 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, 457 U.S. 147, 161 (1982); Trotter v.
Klincar, 748 F.2d 1177, 1184 (7th Cir. 1984). Failure on 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 a 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, Hasenmitter, Leibsker, Moore &
Pellettieri, et al, 2001 WL 1543516, at *3 (N.D. Ill. Nov. 30,
2001), citing 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. § 1681c(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
Mr. Maxwell 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, Arrow has admitted
in its responses to Mr. Maxwell's requests for admissions that it
sent the letter to at least 500 individuals with Maine addresses seeking
to collect a debt charged off more than seven years before the letter was
sent. (Def.'s Resp. to pl.'s Req. for Admis. ¶ 12). This admission
creates a strong basis to find that the numerosity requirement has been
met. 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 this case.
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 directed standardized conduct 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 that 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. Hamid, 2001
WL 1543516, at *4, citing Keele v. Wexler, 149 F.3d 589, 594
(7th Cir. 1998); Patterson, 631 F.2d 476, 481 (7th Cir. 1980).
We conclude that Mr. Maxwell satisfies the requirements of
Rule 23(a)(2). Specifically, we find that this case presents the following two
questions 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 Arrow violated the
Maine 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 v. Aronson Furniture Co.,
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 Mr. Maxwell cannot meet the typicality
requirements under Rule 23(a)(3) because "whether the act of satisfaction
of an outstanding debt by any particular putative class member is
reportable by Arrow under the FCRA depends in the individual
circumstances of the recipient," (Def. Resp. to Mot. for Cl. Cert., at
12). We disagree with Arrow and find that this is not a problem 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. Thus, we conclude that Mr. Maxwell's
claims are typical of the class because they arise from the same course
of conduct and are based on the same general legal theory.
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, 7 F.3d at 598. As the
class representative, Mr. Maxwell must not have "antagonistic or
conflicting claims with other members of the class," and he 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 Mr. Maxwell's claims conflict with or are
antagonistic to the claims of the proposed class members.
This Court finds that Mr. Maxwell has demonstrated that he has a
sufficient stake in the outcome of the litigation to ensure that he 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). 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). In addition to meeting class certification requirements under
Rule 23(a), the plaintiff's proposed class must satisfy the requirements of
one of the three subsections of Rule 23(b). Fed.R.Civ.P. 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. Fed, R. Civ. P. 23(b)(3); 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
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 Mr. Maxwell'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,
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 Mr. Maxwell has failed to establish that class
issues predominate over individual issues. The only issues currently
before the Court is whether Mr. Maxwell has pled in his motion the
required elements of Rule 23, and we decline to speculate about
additional facts that may be developed during discovery. 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,
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. III. 1995); Alexander v. Centrafarm Group, N.V.,
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
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.
Arrow, however, argues that the class action mechanism is not superior
to individual Maine FDCPA causes of action or federal FDCPA causes of
action on two theories. First, Arrow argues that certifying a two
separate classes in this case of all Maine residents who received the
letter and met the other class requirements, and all other United
States citizens who received the letter and met the other class
requirements is "duplicative and a waste of both the Court's and the
parties' resources." (Def. Resp. to Motion for Class Certif. at p. 14).
Arrow also claims that the pursuit of two parallel classes contradicts
the primary purpose of class actions to reduce administrative and
litigation costs. However, we have concluded that Maine's decision to
establish its own standards under the Maine FDCPA as authorized under the
federal FDCPA necessitates the establishment of two separate classes. In
addition, we have taken steps to reduce duplicative costs by finding
these matters related under Local Rule 40.4 and streamlining discovery,
and we will continue to be mindful of these costs issues as the case
progresses. Thus, we conclude that a class action is superior to other
available methods for the fair and efficient adjudication of this
C. The Maine FDCPA Creates an Alternate Cause
of Action for Maine Residents
Arrow also challenges the motion for class certification on the basis
that the Maine version of the FDCPA does not preclude a national class
action. (Def.'s Sur Reply in Opposition to Mot. of Pls, for Cl.
Certif. at 1-2). We agree with the defendant that a national class action
is not precluded under all sections of the FDCPA when a state receives a
statutory "exemption" from the Federal Trade Commission ("FTC"). In
Shapiro v. Haenn, 176 F. Supp.2d. (D.Me. 2002), the court found
Maine's exemption from the federal FDCPA did not eliminate the plaintiffs
federal private right of action under the statute. In Haenn, the
plaintiff brought his claim under section 813 of the FDCPA, which creates
a private right of action in federal courts against debt collectors who
violate the provisions of the FDCPA. Id. at 44;
15 U.S.C. § 1692k.
The FTC expressly stated when it granted Maine the exemption to
create the Maine FDCPA that the state was not exempted from section 813.
See Notice of Maine Exemption from the Fair Debt Collection
Practices Act, 60 Fed. Reg. 66,972, 66,976 (Dec. 27, 1995) ("Section 813
of the FDCPA is not included within the scope of the exemption
granted by the Commission in response to Maine's request."); 16 C, F.R.
§ 901.6(d) ("no exemption shall extend to the civil liability
provisions of Section 813 of the Act").
Section 813 of the FDCPA provides the civil liability provisions for
both the federal Act and the Maine FDCPA because the FTC declined to
grant the state an exemption on that provision. We do not believe,
however, that plaintiffs from Maine should be required to join in a
single national class action under the federal FDCPA. While Maine was not
granted a civil liability exemption from the federal Act, it was granted
an exemption on the substantive cause of action under which this claim
was filed (MRSA § 11013(2)(E) and (J)). To limit Maine residents to a
national class action under the federal FDCPA would undermine the purpose
of creating the separate Maine FDCPA with enhanced consumer protections
in some areas. See Notice of Maine Exemption from the Fair Debt
Collection Practices Act. 60 Fed. Reg. at 66,978.
Based on all of the reasons discussed above, this Court finds that the
Rule 23 requirements for a class certification have been met in this case
in their entirety, and we grant Mr. Maxwell's motion for class
certification. We propose the following class definition:
All natural persons 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 3, 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
For all 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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