FOLEY v. STUDENT ASSISTANCE CORP (2020)

ORDER

On December 5, 2017, plaintiff filed this putative class action under the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692, alleging that defendant engaged in a form letter campaign that unlawfully sought debtors' email addresses from third parties. See ECF Nos. 1 & 18. In plaintiff's circumstance, this involved defendant sending two form letters to a friend, seeking plaintiff's contact information in the form of her home address, telephone number, and/or email address. See ECF Nos. 1-2 & 1-3.¹ Plaintiff moves for entry of an order certifying a class under Fed. R. Civ. P. 23, appointing Jennifer Foley as the class representative, and appointing her attorneys, Bock, Hatch, Lewis & Oppenheim, LLC, as class counsel. ECF No. 30.² For the reasons that follow, I grant the motion for class certification.

I. DISCUSSION

To be certified, a proposed class must satisfy the requirements of Fed. R. Civ. P. 23(a), as well as one of the three alternatives in Rule 23(b). Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012) (citing Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010)). As a threshold matter, a proposed class must always meet the Rule 23(a) requirements of numerosity, typicality, commonality, and adequacy of representation. Id. When certification is sought under Rule 23(b)(3), as plaintiff does here, see ECF No. 30 at 4-5, proponents of the class must also show predominance and superiority. Messner, 669 F.3d at 811. Defendant opposes class certification by attacking the adequacy and superiority requirements, arguing that (1) the plaintiff and class counsel have a relationship that creates a conflict of interest that defeats adequacy; and that (2) defendant's lack of assets means that a class action is not a superior method for resolving this controversy. See ECF No. 33 at 5-11.³

A. Numerosity

Under Rule 23(a)(1), a class must be “so numerous that joinder of all members is impracticable.” The numerosity requirement is met where it is reasonable to believe that the class is “large enough to make joinder impracticable and thus justify a class action suit.” Gordon v. Caribbean Cruise Line, Inc., 2019 WL 498937, at *6 (N.D. Ill. Feb. 8, 2019) (quoting Arnold Chapman & Paldo Sign & Display Co. v. Wagener Equities Inc., 747 F.3d 489, 492 (7th Cir. 2014)). Courts usually consider classes of forty or more members as sufficiently numerous to warrant certification. Id. (citing Pruitt v. City of Chi., 472 F.3d 925, 926–27 (7th Cir. 2007)).

Here, defendant has admitted to sending letters, either similar or identical to the letters sent to plaintiff's friend, to more than forty different borrowers with primary addresses in the State of Wisconsin. ECF No. 31-3 at 1. See also ECF No. 31-4 at 1 (“117 such letters were sent during the relevant time period to addresses in Wisconsin.”). I am satisfied that the proposed class is large enough to make joinder impracticable and to warrant certification.

B. Commonality

Under Rule 23(a)(2), the asserted claims must present common questions of law or fact. A question is common to the class if it generates a common answer, such that determination of the question will “resolve an issue that is central to the validity of each one of the claims in one stroke.” Gordon, 2019 WL 498937, at *7 (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011)). Common nuclei of fact are typically manifest where 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) (citations omitted). See also, e.g., Blarek v. Encore Receivable Mgmt., Inc., 244 F.R.D. 525, 528 (E.D. Wis. 2007); Hazelwood v. Bruck Law Offices SC, 244 F.R.D. 523, 524 (E.D. Wis. 2007); Vandehey v. Client Servs., Inc., 390 F.Supp.3d 956, 960 (E.D. Wis. 2019). Here, defendant engaged in standardized conduct by mailing allegedly illegal form letters. Plaintiff has satisfied the commonality requirement.

C. Typicality

The question of typicality is met if the named plaintiff's claim arises from the same event, practice, or course of conduct that gives rise to the claims of other class members, and her claim is based on the same legal theory. Keele, 149 F.3d at 595 (citations and quotations omitted). Here, the members of the proposed class were the subject of the same form letters sent to third parties requesting email addresses. The claims of plaintiff and the other members of the proposed class are all based on the same legal theory, that defendant's letters were unlawful under the FDCPA because they sought the subject's email address, and thus typicality is satisfied. See, e.g., Gordon, 2019 WL 498937, at *7 (“Because CCL's purported conduct with respect to the class․ is identical throughout the class, the typicality requirement is satisfied.”).

D. Adequacy of Representation

Adequacy under Rule 23(a)(4) requires (1) the adequacy of the named plaintiff's counsel,⁴ and (2) the adequacy of representation provided in protecting the different, separate, and distinct interest of the class members. Id. at *8 (citing Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 598 (7th Cir. 1993)). See also Susman v. Lincoln Am. Corp., 561 F.2d 86, 90 (7th Cir. 1977) (“Adequate representation depends on two factors: (a) the plaintiff's attorney must be qualified, experienced, and generally able to conduct the proposed litigation, and (b) the plaintiff must not have interests antagonistic to those of the class.”) (citing cases). Courts have refused to permit class attorneys, their relatives, or business associates from acting as the named class representative. Susman, 561 F.2d at 90. This is due to a potential conflict of interest; because possible recovery of the class representative is far exceeded by potential attorneys' fees, courts fear that a class representative who is closely associated with the class attorney would allow settlement on terms less favorable to the interests of absent class members. Id. at 91 (citations omitted). See also In re Southwest Airlines Voucher Litig., 799 F.3d 701, 714 (7th Cir. 2015) (“Class representatives need to be capable of saying no if they believe counsel are failing to act in the best interests of the class.”).

Whether a close relationship renders a particular class representative inadequate is a fact-intensive inquiry to be determined on a case-by-case basis. Susman, 561 F.2d at 90 (citing Schy v. Susquehanna Corp., 419 F.2d 1112, 1116 (7th Cir. 1970)). Courts have found a conflict of interest that defeats adequate representation is present where familial ties exist between class counsel and the named representative or long-standing, non-familial relationships are intermingled with financial, business, or professional interests.⁵ District courts outside of this circuit have found that friendship alone is not enough to create a disqualifying conflict of interest.⁶ Doubts as to the ethics or character of either counsel or representative can also be relevant in determining adequate representation.⁷

Here, defendant argues that adequacy is defeated because of the relationship between Foley and a member of the putative class counsel team, Tod A. Lewis. Lewis is the husband of Foley's longtime friend and former roommate, Carrie Lewis, who is also the recipient of the form letters at issue in this case. See ECF Nos. 1-2 & 1-3; ECF No. 33-1 at 34:6–35:6 & 53:10–54:1. Mrs. Lewis, upon receiving the letters, called Foley and suggested that an upset Foley talk to her husband “who is familiar with these types of claims.” ECF No. 33-1 at 34:9-17. Foley has known Mr. Lewis since 1992. Id. at 35:1-6. Defendant points to a 2012 district court decision from within this circuit; there, a mere friendship between the class representative and class counsel's wife meant that plaintiff failed the adequacy requirement under Rule 23(a)(4). See In re Yasmin & Yaz (Drospirenone) Mktg., Sales Practices & Prod. Liab. Litig., 2012 WL 865041, at *17–18 (S.D. Ill. Mar. 13, 2012) (“[Putative class representative] works with and is a ‘good friend’ of class counsel's wife” and “states that she has become better friends over the last six months.”).⁸

Defendant is correct that certain relationships between a class representative and class counsel, such as a familial or business relationship, can be cause for concern because “such representatives may be more interested in ensuring counsel's fee than in protecting the class's interests.” Newberg on Class Actions § 3:70 (5th ed.). However, “a pre-existing relationship is not inevitably disabling.” Id. (emphasis added). See also Southwest Airlines, 799 F.3d at 715 (declined to decertify on appeal despite undisclosed conflict of interest between named plaintiff and class counsel, who were co-counsel in a separate class action, where “class has been made whole” and achieved “unusual degree of success” in settlement). I do not share the Yasmin & Yaz court's concerns regarding adequate representation. Here, the circumstances are not such that there is a per se disqualifying conflict of interest under controlling Seventh Circuit precedent. Foley has no familial tie to Tod Lewis or his wife, nor has evidence been shown that her personal relationship to Mr. or Mrs. Lewis is coupled with a pre-existing or potential business, financial, or professional association. Further, I have no reason to question the credibility or character of either Foley or class counsel. Foley appears to understand her role in this proceeding, appreciate her obligation to absent class members, and ultimately selected well-qualified counsel. See ECF No. 31-6 at 33:3-6 (“I am the representative. I'm their champion, and that I am the voice for those that do not have a choice, and that I have retained expert counsel to help with this case.”); ECF No. 31-7 (firm resume). Further, concerns regarding adequate representation are mitigated by judicial scrutiny in a class action proceeding where the court can “undertake a stringent and continuing examination of the adequacy of representation․ at all stages of the litigation where absent members will be bound by the court's judgment.” Susman, 561 F.2d at 89–90. See also Southwest Airlines, 799 F.3d at 715 (“The adequacy of class representatives is an issue that can be examined throughout the litigation.”).

I conclude that Foley and class counsel are not so closely related as to create a conflict of interest that renders Foley unable to adequately represent the class's interests. Plaintiff has satisfied the adequacy requirement.

E. Predominance

Rule 23(b)(3) requires that common questions “predominate over any questions affecting only individual members.” To establish predominance, a plaintiff must be able to prove her case with “evidence that is common to the class rather than individual to its members.” Gordon, 2019 WL 498937, at *9 (quoting Messner, 669 F.3d at 811). Rule 23(b)(3)'s predominance inquiry tests whether proposed classes are “sufficiently cohesive.” Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Here, the issue is whether defendant violated the FDCPA by sending form letters that sought email addresses of purported class members from third parties. This question predominates over any individual questions of the purported class members and plaintiff has therefore satisfied this requirement. See, e.g., Vandehey, 390 F.Supp.3d at 961 (finding that question of whether defendant violated the FDCPA by sending form letters that were materially false, deceptive, and misleading predominated over any individual questions).

F. Superiority

Rule 23(b)(3) also requires that a class action be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Class actions are particularly appropriate for actions involving the FDCPA. Randolph v. Crown Asset Mgmt., LLC, 254 F.R.D. 513, 520 (N.D. Ill. 2008) (citing Crawford v. Equifax Payment Servs., 201 F.3d 877, 880 (7th Cir. 2000)) (“Because [FDCPA cases] are small-stakes cases, a class suit is the best, and perhaps only way to proceed.”). See also Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997) (plaintiff knowing her rights, being willing to subject herself to all the burdens of suing, and being able to find an attorney willing to take her case are all “considerations that cannot be dismissed lightly in assessing whether a class action or a series of individual lawsuits would be more appropriate for pursuing the FDCPA's objectives.”); Pawelczak v. Fin. Recovery Servs., Inc., 286 F.R.D. 381, 387 (N.D. Ill. 2012) (“[T]he potential recovery for an individual plaintiff is unlikely to provide sufficient incentive for individual members to bring their own claims. Moreover, courts have held that FDCPA class actions are usually superior for reasons of judicial economy.”).

Defendant argues that the superiority requirement is not met because plaintiff has failed to establish that Student Assistance Corporation (“SAC”) has a positive net worth. ECF No. 33 at 9-10. SAC is no longer in business, has no employees, and does not perform any function whatsoever as a company, making a class action less superior to individual litigation because class members would be entitled to little or no recovery if SAC was found liable. See ECF No. 33-2 at 25:6–17 (SAC is no longer in business), 29:24–30:2 (same), & 30:11–32:19 (SAC no longer has assets). However, SAC is a subsidiary of Navient Solutions, LLC (“Navient”), and Navient has “agreed to continue to support the operations and obligations of SAC, if required, for the foreseeable future.” Id. at p. 51 (SAC_JF0000182). And, having reviewed the submitted exhibits, it appears that Navient has assumed all of SAC's assets and liabilities. It would defeat the purpose of the class action device to allow a corporation to wrap up operations, merely shift remaining assets to a parent or other affiliate, and defeat the superiority requirement by subsequently arguing that members of a successful class would recover little or no damages.⁹

Beyond this net worth issue, I find that, like many FDCPA cases, a class action is superior to individual litigation for reasons of judicial economy and the small-stakes nature of the claims at issue. Plaintiff has satisfied the superiority requirement.

II. CONCLUSION

THEREFORE, IT IS ORDERED that plaintiff's motion for class certification (ECF No. 30) is GRANTED. The following class is hereby certified:

All persons in the States of Wisconsin, Illinois, and Indiana who were the subject of a letter Student Assistance Corporation sent on or after December 6, 2016, requesting their email address from a third party.

IT IS FURTHER ORDERED that Foley is appointed class representative and her attorneys, Bock, Hatch, Lewis & Oppenheim, LLC, are appointed class counsel.

In accordance with the court's initial scheduling order, ECF No. 16 at ¶ 4, the parties may move for dispositive relief, including summary judgment, no later than April 10, 2020. The parties are directed to reevaluate their settlement positions and to exhaust all efforts to settle this case.

FOOTNOTES

1.   Plaintiff also alleges an individual claim under the Telephone Consumer Protection Act, however this claim is not implicated by the motion at issue. ECF No. 18 at ¶¶ 8-13.

2.   Plaintiff proposes the following class definition:All persons in the States of Wisconsin, Illinois, and Indiana who were the subject of a letter Student Assistance Corporation sent on or after December 6, 2016, requesting their email address from a third party.ECF No. 30 at 2.

3.   Defendant does not contest any of the other required elements under Rules 23(a) and 23(b).

4.   Defendant does not contest this part of the adequacy requirement. Indeed, plaintiff has shown that class counsel is sufficiently experienced and qualified to satisfy this aspect. See ECF No. 31-7.

5.   See, e.g., Gordon, 2019 WL 498937, at *9 (inadequate representation where plaintiff and putative class counsel jointly represented class action plaintiffs five times previously, shared an office suite, class counsel's landlord was owned in part by plaintiff's cousin, plaintiff and class counsel's families socialized together); London v. Wal–Mart Stores, Inc., 340 F.3d 1246, 1255 (11th Cir. 2003) (rejecting proposed class representative, who was close friend and former stockbroker of class counsel, “because the personal and financial ties between London and Ader are very close․”) (emphasis original); Eubank v. Pella Corp., 753 F.3d 718, 721–22 (7th Cir. 2014) (rejecting class representative who was father and father-in-law of class counsel); Susman, 561 F.2d at 95 (rejecting class representative who was member of class counsel's law firm and another who was brother of class counsel). London was cited with approval by the Seventh Circuit in Southwest Airlines, 799 F.3d at 715.

6.   See In re Currency Conversion Fee Antitrust Litig., 230 F.R.D. 303, 309 (S.D.N.Y. 2004) (adequacy requirement met even where class representative was “close personal friend of his attorney”); Golan v. Veritas Entm't, LLC, 2017 WL 193560, at *5 (E.D. Mo. Jan. 18, 2017) (“A friendship and shared passion for running do not create a conflict of interest.”). See also In re Cardizem CD Antitrust Litig., 200 F.R.D. 326, 337–38 (E.D. Mich. 2001) (employment of named representative's son at class counsel's firm “insufficient to create a conflict of interest and thus render him an inadequate class representative․ Moreover, the fact that the courts have the power to review settlement agreements for fairness will further protect any potential conflict that may arise in that context.”).

7.   See, e.g., Eubank, 753 F.3d at 724 (court noted that one class counsel's “ethical troubles should have disqualified him even if his father-in-law hadn't been in the picture.”); Kolish v. Metal Techs., Inc., 2017 WL 525965, at *12 (S.D. Ind. Feb. 8, 2017) (“[T]he Court finds that [plaintiff's] inconsistent statements to the Court render her an inadequate class representative.”).

8.   The In re Yasmin & Yaz court explained that, even though the relationship at issue was not directly identified by the Seventh Circuit in Susman, it still cast enough doubt to justify denying certification:In the instant case, the disputed relationship does not rise to the level of a familial relationship and Ms. Burns and class counsel are not direct business associates. Nonetheless, the close relationship between Ms. Burns and counsel's wife raises serious concerns as to Ms. Burns's adequacy to represent the instant class. Given that the potential recovery for plaintiffs is minimal compared to the potentially high amount of attorneys' fees that may be awarded, Ms. Burns may be more concerned with helping to maximize the monetary return of her “good friend” and co-worker (counsel's wife) than with her duty to zealously advocate on behalf of the class interests. This is the type of situation that creates a conflict of interest.2012 WL 865041, at *18.

9.   See, e.g., Mund v. EMCC, Inc., 259 F.R.D. 180, 187 (D. Minn. 2009) (“[T]here are substantial questions about [defendant's] true net worth, and about whether the threat of consumer protection actions in the debt collection context has colored a parent corporation's handling of its subsidiaries․ this Court concludes that the appropriate course is to certify the class, and address any outstanding issues related to EMCC's net worth either at a phase of this case when damages are determined, or when information emerges clearly demonstrating [defendant's] true worth and its impact on the wisdom of class-wide proceedings.”).

LYNN ADELMAN, District Judge