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Geary v. Green Tree Servicing, LLC

United States District Court, S.D. Ohio, Eastern Division

June 16, 2017

BRIAN & CONNIE GEARY, on behalf of Themselves and all others similarly situated Plaintiffs,

          Magistrate Judge, Deavers

          OPINION & ORDER


         This matter is before the Court on Plaintiffs' Motion to Certify Class. (Doc. 42.) Plaintiffs seek class certification under Federal Rule of Civil Procedure 23(a) and 23(b)(3). Defendant opposes on several grounds. (Doc. 45.) For the reasons set forth herein, the Court GRANTS Plaintiffs' motion with modifications.

         I. BACKGROUND

         This case arises from the Fair Debt Collection Practices Act (“FDCPA”) consequences of letters that Defendant Green Tree Servicing, LLC (“Green Tree”) sent to Plaintiffs and others similarly situated.

         Defendant is a limited liability company registered as active in the state of Ohio. Defendant is in the business of, among other things, servicing defaulted loans. Around the time Defendant acquires the servicing rights to these loans, it sends the debtors an initial communication letter (“Initial Communication”) which, among other things, informs them that Green Tree has acquired the loan. During the applicable time period (June 3, 2013 to present), Defendant sent eleven (11) different versions of Initial Communication to 31, 000 borrowers-in-default. (Doc. 42-3.) Plaintiffs contend that six (6) of these letters were “not sent by Green Tree strictly for informational purposes. Rather, they were aimed to make collection of the debts more likely to succeed.” (Doc. 42 at 2.) Accordingly, Plaintiffs contend that within five days of these six letters, the FDCPA required Defendant to include a written notice containing the following:

(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

15 U.S.C. § 1692g(a). None of Defendant's eleven Initial Communications contained the 30-day debt validation notice (“Validation Notice”) required by subsections (3) through (5), nor did Defendant provide the Validation Notice within five days of the Initial Communications. (Doc. 42-2.) For these provisions to apply to each letter, however, Defendant must be a “debt collector” as defined by the FDCPA, [1] and the Initial Communication must be “in connection with the collection of any debt.” Id. A “debt” is defined by the FDCPA to include only those obligations owed “primarily for personal, family, or household purposes[.]” 15 U.S.C. § 1692a(5). In other words, the FDCPA applies only to what are colloquially known as consumer debts.

         Plaintiffs are Ohio residents who took out a loan from CitiFinancial, Inc. to finance the purchase of an automobile. Following a bankruptcy and a reaffirmation agreement, Plaintiffs paid off the loan with CitiFinancial. Then, Green Tree acquired the loan from CitiFinancial, and sent Plaintiffs an Initial Communication on October 16, 2013 that did not include the Validation Notice.[2] Plaintiffs extrapolate from their experience, Defendant's admissions that the eleven Initial Communications did not contain the Validation Notice, Plaintiffs' contention that six of the eleven letters required the Validation Notice, and the 31, 000 debtors-in-default to whom Defendant sent the eleven initial communications, that Defendant violated the FDCPA by sending these letters to several thousand borrowers-in-default without the Validation Notice. Plaintiffs filed their complaint on June 3, 2014, alleging four individual counts and four class counts of FDCPA violations. (Doc. 1.)

         Defendant filed a motion to dismiss individual Counts II, III, and IV of Plaintiffs' complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Doc. 3.) In the alternative, Defendant asked the Court to strike Plaintiffs' class allegations in Class Counts I and II under Federal Rule of Civil Procedure 23(c)(1)(A). The Court granted Defendant's motion to dismiss Count IV and Class Count II and denied Defendant's motion to dismiss individual Counts II and III, and Class Count I. (Doc. 14 at 14, 21, 29.) In denying the motion to dismiss, the Court found that Plaintiffs alleged sufficient facts that Defendant was a “debt collector” in connection with Plaintiffs' loan and Defendant's Initial Communication to Plaintiffs was a “communication in connection with the collection of a debt under the FDCPA.” (Id. at 14, 21.) The Court declined, without the benefit of a fully briefed motion for class certification, to strike the class allegations associated with Class Count I. (Id. at 29.) Therefore, individual Counts I, II, and III, and Class Counts I and III remain to be adjudicated. (See id.)

         Individual Count I asserts a violation of 15 U.S.C. § 1692e(2)(A) for the use of false, deceptive, or misleading representations in connection with the collection of a debt and for falsely representing the character, amount, or legal status of the Plaintiffs' loan debt, in billing statements, collection calls, and/or other correspondence. (Doc. 1 at ¶¶ 60-73.) Individual Count II alleges a violation of 15 U.S.C. § 1692g(a) for failing to send a Validation Notice within five days of sending the Initial Communication. (Id. ¶¶ 74-80.) Individual Count III asserts a violation of 15 U.S.C. § 1692g(b) for Defendant's failure to send written documentation providing verification of the debt it sought to collect. (Id. ¶¶ 81-90.) Class Count I alleges systemic violations of 15 U.S.C. § 1692g(a) for Defendant's failure to send borrowers a Validation Notice within five days of sending the Initial Communication. (Id. ¶¶ 102-32.) Class Count III requests declaratory relief for the alleged violation described in Class Count I. (Id. at ¶¶ 164-65.)

         After the parties engaged in class discovery, Plaintiffs brought the instant Motion to Certify Class under Federal Rule of Civil Procedure 23(a) and (b)(3). (Doc. 42.) Plaintiffs seek to certify the following class:

All persons who were sent by Defendant Green Tree Servicing, LLC, from June 3, 2014 to present, one or more letters in the form of the exemplars attached hereto as Exhibits 4 through 9.

(Doc. 42 at 6.) Defendant opposes Plaintiffs' motion to certify class and requested oral argument. (Doc. 45.) The motion is fully briefed and is ripe for review, and the Court held oral argument on June 12, 2017.

         II. STANDING

         A prerequisite to Plaintiffs' lawsuit is establishing standing under Article III of the United States Constitution. To establish constitutional standing, Plaintiffs must show that they suffered: “(1) [] an injury in fact that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” McGlone v. Bell, 681 F.3d 718, 729 (6th Cir. 2012) (internal quotation omitted).

         Defendant argues that Plaintiffs have failed to establish a “concrete” injury in fact because Count II alleges a “bare procedural violation.” (Doc. 45 at 15.) In Spokeo, Inc. v. Robins, the Supreme Court discussed the concreteness requirement of injury in fact in the context of statutory violations. 136 S.Ct. 1540, 1549-50 (2016). In particular, the Supreme Court held that a Plaintiff generally does not meet this requirement “whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Id. at 1549. There are some circumstances, however, in which “the violation of a procedural right granted by statute can be sufficient . . . to constitute injury in fact. In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress identified.” Id. (emphasis in original). The Court cites two examples of such cases. In each, the injury resided in plaintiffs' inability to obtain information that Congress had decided to make available to the public. Id. In circumstances such as these, the Supreme Court held that the “risk of real harm” may “satisfy the requirement of concreteness.” Id.

         Like the examples cited by Spokeo of statutory violations that established the concreteness prong of injury in fact, Plaintiffs' injuries in Count II are also sufficiently concrete. Plaintiffs' injuries, too, involve the failure to disclose required information, the disclosure of which was the purpose of the statute. The failure to disclose in this case also involves the risk of real harm in the form of consumers potentially waiving their rights to dispute and seek validation of their debts.

         The one court of appeals to address this precise issue-the failure to include FDCPA-required disclosures in a debt-collection letter-found that this failure to disclose satisfied the concreteness prong of injury in fact. Church v. Accretive Health, Inc., 654 F. App'x 990, 995 (11th Cir. 2016).[3] The plaintiff in Church had alleged that the defendant had sent her a letter advising her that she owed a debt, but that the defendant had “violated the FDCPA by not including in its letter certain disclosures required by the Act.” Church, 654 F. App'x at 991. The Eleventh Circuit found this alleged violation (not receiving the FDCPA-required disclosures) to be “concrete” because:

The invasion of Church's right to receive the disclosures is not hypothetical or uncertain; Church did not receive information to which she alleges she was entitled. While this injury may not have resulted in tangible economic or physical harm that courts often expect, the Supreme Court has made clear an injury need not be tangible to be concrete. See Spokeo, Inc., 578 U.S. at ___, 136 S.Ct. at 1549; Havens Realty Corp., 455 U.S. at 373, 102 S.Ct. 1114. Rather, this injury is one that Congress has elevated to the status of a legally cognizable injury through the FDCPA. Accordingly, Church has sufficiently alleged that she suffered a concrete injury, and thus, satisfies the injury-in-fact requirement.

Id. at 995. The Eleventh Circuit also found that the failure to disclose was a “substantive” rather than a “mere procedural” violation, stating that “Congress provided Church with a substantive right to receive certain disclosures and Church has alleged that Accretive Health violated that substantive right.” Id. at 995 n.2.

         Defendant cites two FDCPA cases in opposition, both of which, apart from their nonbinding nature on this court, are distinguishable because they involved facts that expressly showed that the plaintiff lacked injury. In Jackson v. Abendroth & Russell, P.C., the court found that alleging a violation of the disclosure obligations of the FDCPA did not satisfy concreteness because the plaintiff “d[id] not indicate that he ever intended to dispute [or verify] his debt in any way.” 207 F.Supp.3d 945, 953 (S.D. Iowa 2016). The Jackson court indicated that it could have reached a different conclusion “[i]f a consumer contends the alleged debt owed is incorrect, or merely wishes to verify the debt, ” because “then a deficient disclosure of their FDCPA rights could create a risk of real harm because a consumer could inadvertently forfeit their right to validate the debt.” Id. at 954. Such was the case here. Plaintiffs' intent to exercise their rights to dispute and verify their debt was clear because they actually did so once they received the required notifications.

         The plaintiff in Tourgeman v. Collins Financial Services, Inc. did not even receive the letter containing the alleged FDCPA violations, “and he admittedly suffered neither pecuniary loss nor mental distress related to it.” 197 F.Supp.3d 1205, 1209 (S.D. Cal. 2016). If Tourgeman had actually received the letter, the court found that potential risk that he could be confused and act to his detriment “could suffice to demonstrate Article III standing.” Id. Unlike Tourgeman, Plaintiffs here in fact received the letter.

         Plaintiffs cite to six other district court cases that find concrete injuries in technical FDCPA allegations. Four of the cases find either a “risk” of harm or actual harm to the plaintiff arising from the FDCPA violation. Hayes v. Convergent Healthcare Recoveries, Inc., No. 14- 1467, 2016 WL 5867818, at *5 (C.D. Ill. Oct. 7, 2016) (finding material risk of harm); Macy v. GC Services Limited Partnership, No. 3:15-cv-819, 2016 WL 5661525, at *3 (W.D. Ky. Sept. 29, 2016) (finding substantial risk of harm); Lane v. Bayview Loan Servicing, LLC, No. 15 C 10446, 2016 WL 3671467, at *4 (N.D. Ill. July 11, 2016) (finding a risk of depriving plaintiff of his right to verification); Mogg v. Jacobs, No. 15-CV-1142-JPG-DGW, 2016 WL 1029396, at *5 (S.D. Ill. Mar. 15, 2016) (finding emotional trauma, costs incurred to defend a lawsuit). Two additional cases find, like Church, that the statutory violation alone was sufficient to establish concreteness. Prindle v. Carrington Mortgage Services, LLC, No. 13-cv-1349, 2016 WL 4369424, at *11 (M.D. Fla. Aug. 16, 2016); Quinn v. Specialized Loan Servicing, LLC, No. 16-C-2021, 2016 WL 4264967, at *4 (N.D. Ill. Aug. 11, 2016).

         The Court finds that Plaintiffs have established concreteness, although the Court need not go so far as Church, Prindle and Quinn in finding it in the statutory violation alone. Plaintiffs have alleged that Defendant deprived them of their right to receive the timely validation notice, which violation created the real risk of Plaintiffs forfeiting their rights to dispute or require Defendant to verify their debt. These disclosures go to the heart of the FDCPA, the goal of which is, broadly, to “eliminate the abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e). There was a “risk of real harm” in this case because Plaintiffs did not dispute or seek validation of their debt following their receipt of the Initial Communication, even though their debt was invalid. Spokeo, 136 S.Ct. at 1549. Plaintiffs clearly would have exercised their rights had they known about them, because they actually did dispute and seek validation of the debt once they finally received the required disclosures.[4]

         The Court also finds that in this case Plaintiffs need not establish that each class member suffered an injury sufficient to demonstrate standing. Although the Sixth Circuit has thus far declined to “enter a circuit split over whether it is sufficient that the named class plaintiff has standing, regardless of whether unnamed class members do, ” Rikos v. Procter & Gamble Co., 799 F.3d 497, 524 n.9 (6th Cir. 2015), the Court notes that for each unnamed plaintiff in this case to whom Defendant failed to send the Validation Notice, there is the same “risk of real harm” that Plaintiffs suffered. The FDCPA envisions enforcement by the use of a class action. 15 U.S.C. § 1692k(a)(2)(B). Requiring Plaintiffs to establish more on behalf of each class member individually would eviscerate the class action device. See Macy v. GC Services Ltd. Partnership, 318 F.R.D. 335, 338 (W.D. Ky. 2017) (in an FDCPA class action, declining to require Plaintiffs to demonstrate that each class member suffered an injury sufficient to confer standing).[5]

         Plaintiffs have established standing.


         Plaintiffs seek certification of the proposed class under Federal Rules of Civil Procedure 23(a) and 23(b)(3). Rule 23(a) allows one or more members of a class to sue as representative parties only if: “(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 class.” Fed.R.Civ.P. 23(a) (referred to by the shorthand of “(1) numerosity, (2) commonality, (3) typicality, and (4) adequacy”). In addition, under Rule 23(b)(3), class certification is appropriate if “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3) (referred to by the shorthand of “predominance and superiority”). Finally, courts have applied an ascertainability requirement, ...

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