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IOSELLO v. LAWRENCE

August 18, 2005.

CHRISTOPHER IOSELLO, Plaintiff,
v.
VICTOR LAWRENCE, doing business as LEXINGTON LAW FIRM, Defendant.



The opinion of the court was delivered by: RONALD GUZMAN, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff filed a class action complaint alleging violations of the Credit Repair Organizations Act ("CROA"), 15 U.S.C. § 1679 et seq., and the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILL. COMP. STAT. 505/2 et seq. Before the Court is plaintiff's objection to Magistrate Judge Michael T. Mason's Report and Recommendation in which he recommends that plaintiff's motion for class certification be denied. For the following reasons, the Court adopts Magistrate Judge Mason's Report and Recommendation and denies plaintiff's motion to certify a class.

FACTS

  In this class action, Christopher Iosello has sued Victor Lawrence d/b/a Lexington Law Firm ("Lexington") alleging that Lexington's business practices do not comply with the CROA or ICFA. He alleges that he contracted with Lexington Law Firm for credit repair services via the Internet, mail and telephone during 2002. (Second Am. Compl. ¶ 6.) The terms of the contract were set forth on an Internet site maintained by Lexington. (Id. ¶ 6; id. Exs. A & B.) Plaintiff paid approximately $145.00 to Lexington for credit repair services pursuant to such contract, which was refunded in full by Lexington. (Id. ¶ 8.) Plaintiff alleges that Lexington's contract violates the CROA in three ways: (1) it has insufficient and improper disclosures; (2) it makes false or misleading representations; and (3) it contains an unlawful payment scheme. (Id. ¶¶ 11-44.) Plaintiff further alleges that the CROA violations also constitute violations of the ICFA as deceptive and unfair business practices. (Id. ¶¶ 53-59.)

  He alleges that Lexington's procedures do not comply with three separate statutorily required disclosure statements of the CROA. First, plaintiff alleges that Lexington's written disclosure statement does not mirror the language and direction of 15 U.S.C. § 1679c(a) and (b). Second, plaintiff alleges that Lexington's contract cancellation disclosure does not comply with 15 U.S.C. § 1679d(b)(4). Third, plaintiff alleges that Lexington does not properly disclose the right of consumers to cancel their contract as required by a "Notice of Cancellation" under 15 U.S.C. § 1679e.

  Fourth, plaintiff alleges that Lexington made false or misleading representations in violation of the CROA, 15 U.S.C. § 1679d(a)(3), which states that no person may "make or use any untrue or misleading representation of the services of the credit repair organization." These allegations center on claims that Lexington's website, contract and disclosures imply it will write letters on a Lexington letterhead signed by a Lexington attorney, but instead Lexington sends letters to credit bureaus in its customers' names. (Id. ¶¶ 21-26.)

  Finally, plaintiff alleges that Lexington's fee structure, charging a $75.00 file initialization fee and $35.00 per month charge for services performed thereafter, violates several provisions of the CROA. Plaintiff alleges this violates 15 U.S.C. § 1679b(b), which states that "[n]o credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed." (Id. ¶¶ 27-34.) Plaintiff also alleges that Lexington's fee structure does not disclose, in writing, "the total amount of all payments to be made by the consumer to the credit repair organization or to any other person" as required by 15 U.S.C. § 1679d(b)(1). (Id. ¶¶ 35-40.) In addition, plaintiff alleges that Lexington's estimated length of period to perform does not comply with 15 U.S.C. § 1679d(b)(2)(B). (Id. ¶¶ 41-42.)

  Plaintiff's Second Amended Complaint also alleges two class action claims. Plaintiff's CROA claim is brought on behalf of a class consisting of all persons who contracted with Lexington on or after a date five years prior to the filing of this action. (Id. ¶ 45.) Plaintiff's ICFA claim is brought on behalf of a class consisting of all persons with an Illinois address who contracted with Lexington on or after a date three years prior to the filing of this action. (Id.)

  Plaintiff seeks certification of two classes. The CROA Class is defined as "all consumers who paid a fee to, or were charged a fee by, Lexington Law Firm or Victor Lawrence for the purpose of challenging inaccurate, misleading, or unverifiable negative items on their credit reports between Feb. 10, 1998 and the present." (Pl.'s Mot. Incorporating Mem. Supp. Mot. Class Certification ("Pl.'s Obj.") at 2.) The ICFA Class is defined as "all consumers located in Illinois who paid a fee to Lexington Law Firm or Victor Lawrence for the purpose of challenging inaccurate, misleading, or unverifiable negative items on their credit reports between Feb. 10, 2000 and the present." (Id.) DISCUSSION

  Federal Rule of Civil Procedure ("Rule") 72 provides for the referral of pretrial matters to a magistrate judge. FED. R. CIV. P. 72. However, a motion for class certification may not be decided independently by a federal magistrate judge. 28 U.S.C. § 636(b)(1)(A). Accordingly, the district court has the authority to make the final determination on the motion and must "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1).

  For a class to be certified, the party seeking certification must first satisfy each of the four requirements of Rule 23(a): "(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 claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class." FED. R. CIV. P. 23(a). Once these requirements are satisfied, the plaintiff must also satisfy one of Rule 23(b)'s requirements. Cwiak v. Flint Ink Corp., 186 F.R.D. 494, 496 (N.D. Ill. 1999). Because plaintiff has moved to certify the classes under Rule 23(b)(3), plaintiff must show that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that 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). A failure of any of the requirements of Rule 23 results in a denial of class certification. Gen. Tel. Co. v. Falcon, 457 U.S. 147, 161 (1982).

  Plaintiff objects to Magistrate Judge Mason's recommendation regarding the absence of numerosity, typicality and commonality under Rule 23(a). Specifically, plaintiff raises three objections: (1) Magistrate Judge Mason's determination that "plaintiff has not provided sufficient proof of numerosity was premature because plaintiff's objection to the Magistrate's prior recommendation denying plaintiff's motion to compel information about the class members had not yet been resolved," (2) notwithstanding the previous objection, plaintiff argues it has submitted sufficient evidence of numerosity, and (3) the requirements of typicality and commonality are met because defendant "does not dispute the terms of the standard form contract plaintiff is challenging, and the majority of plaintiff's claims are . . . dependent on the terms of Lexington's form contract and Lexington's standard business practices." (Pl.'s Obj. at 1-2.)

  A. Discovery Issues at the Time of Magistrate Judge Mason's 10/8/04 Report and Recommendation Have Since Been Resolved

  On July 1, 2004, the day after discovery closed, plaintiff moved to compel discovery of documents plaintiff now claims are essential to establishing numerosity. On that same day, Magistrate Judge Mason denied plaintiff's motion to compel or alternatively for rule to show cause. Plaintiff then sought review of that order by this Court, and such review remained pending as of October 8, 2004, the date of Magistrate Judge Mason's Report and Recommendation to deny class certification. Plaintiff contends that "it was erroneous for Judge Mason to deny class certification ...


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