Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03466/USCOURTS-cand-3_05-cv-03466-2/pdf.json

Parties Involved:
Carol P. Guevarra
Plaintiff
Progressive Financial Services, Inc.
Defendant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CAROL P GUEVARRA,

Plaintiff,

v

PROGRESSIVE FINANCIAL SERVICES,

INC, et al,

Defendants. /

No C-05-3466 - VRW

ORDER

Defendants are a collection agency and one of its

employees who sent a collection letter that allegedly violates the

Fair Debt Collection Practices Act (“FDCPA”), 15 USC §§1692 et seq,

and California’s Rosenthal Fair Debt Collection Practices Act (“the

Rosenthal Act”), Cal Civ Code § 1788 et seq. Doc #1. Defendants

sent the allegedly offending letter to collect debts incurred to

numerous creditors. When this case was initially filed, the

complaint sought class-wide relief on behalf of all debtors who

received the letter at issue here. Subsequently, plaintiff amended

her complaint to seek relief for herself and a class of those

Case 3:05-cv-03466-VRW Document 45 Filed 11/30/06 Page 1 of 7
United States District Court

For the Northern District of California

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recipients of the offending letter indebted to IKEA, only one of

the creditors. It appears that plaintiff’s counsel carved out the

IKEA debtors as part of some agreement with other counsel who are

proceeding against defendants for letters sent to collect debts

owed to other creditors. 

Plaintiff has moved for class certification pursuant to

FRCP 23. Doc #25. In an opposition filed three days late, see Civ

L R 7-3(a), defendants approve certification but oppose plaintiff’s

class definition. Doc #38. For reasons that follow, the court

DENIES without prejudice plaintiff’s motion for class

certification. 

I

On October 9, 2004, plaintiff received an initial

collection letter from defendants concerning a debt due to creditor

IKEA for an overdrawn check issued to purchase goods for her

personal use. Doc #1. The form collection letter sent by

defendants stated that “[u]nless [plaintiff] notifies [defendant]

in writing within 30 days after receiving this notice that

[plaintiff] dispute[s] the validity of this debt or any portion

thereof, this office will assume this debt is valid.” Doc #1, Ex

A. According to plaintiff, this letter violates both the FDCPA and

the Rosenthal Act. 

Plaintiff brings this action as a class action, proposing

the class be defined as: 

(i) all natural persons in California;

(ii) to whom defendants sent a letter in the form

represented by Exhibit A;

Case 3:05-cv-03466-VRW Document 45 Filed 11/30/06 Page 2 of 7
United States District Court

For the Northern District of California

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(iii)concerning a debt allegedly owed to IKEA;

(iv) which was incurred for personal, family or

household purposes;

(v) which letter was sent on or after August 26, 2004,

and 

(vi) was not returned as undeliverable by the USPS. 

Doc #25 at 2. 

II

FRCP 23(a) sets forth the preliminary requirements to

certifying a class action: (1) the class must be so numerous that

joinder of all members is impracticable; (2) there must be

questions of law or fact common to the class; (3) the claims or

defenses of the representative parties must be typical of the

claims or defenses of the class and (4) the representative parties

must be able fairly and adequately to protect the interests of the

class. FRCP 23(a); see also, e g, Armstrong v Davis, 275 F3d 849,

868 (9th Cir 2001); Walters v Reno, 145 F3d 1032, 1045 (9th Cir

1998). 

In addition to satisfying the Rule 23(a) prerequisites,

the class must also satisfy one of the three alternatives listed

under Rule 23(b). Walters, 145 F3d at 1045. Plaintiffs bear the

burden of demonstrating that they have satisfied all four FRCP

23(a) elements and one FRCP 23(b) alternative. Zinser v Accufix

Research Institute, Inc, 253 F3d 1180, 1186 (9th Cir 2001). 

Failure to carry the burden on any FRCP 23 requirement precludes

certifying a class action. Burkhalter Travel Agency v MacFarms

Int’l, Inc, 141 FRD 144, 152 (ND Cal 1991) (Jensen, J) (citing

Rutledge v Electric Hose & Rubber Co, 511 F2d 668 (9th Cir 1975)).

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United States District Court

For the Northern District of California

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“In determining the propriety of a class action, the

question is not whether the plaintiff or plaintiffs have stated a

cause of action or will prevail on the merits, but rather whether

the requirements of Rule 23 are met.” Eisen v Carlisle &

Jacquelin, 417 US 156, 178 (1974) (quoting Miller v Mackey Intl,

452 F 2d 424 (5th Cir 1971)) (internal quotation marks omitted). 

Nonetheless, the court is “at liberty to consider evidence which

goes to the requirements of Rule 23 even though the evidence may

also relate to the underlying merits of the case.” Hanon v

Dataproducts Corp, 976 F 2d 497, 509 (9th Cir 1992). On a motion

for class certification, the court “is bound to take the

substantive allegations of the complaint as true.” Blackie v

Barrack, 524 F2d 891, 901 n17 (9th Cir 1975).

III

The court finds that the FRCP 23(a) requirements of

numerosity, commonality, typicality and adequacy are met. 

Plaintiff has established that the proposed class will include

approximately two thousand members who received the same debt

collection letters at issue in this matter. Doc #35 (Bragg decl). 

Plaintiff’s claims satisfy the commonality requirement because they

arise out of the form of the letters, not the nature of the

underlying debts. Doc #1. Moreover, plaintiff maintains she

received the same debt collection letter from defendant as those

received by the class members and was subject to the same demands. 

Doc #26 (Gueverra decl). 

Turning to FRCP 23(b), plaintiff asserts she meets the

requirements of both Rule 23(b)(2) and (3) and seeks certification

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United States District Court

For the Northern District of California

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as a hybrid class under both, as this action seeks declaratory

relief and statutory damages. Doc #25. 

Defendants contend that plaintiff’s proposed class action

would not be “superior” under FRCP 23(b)(3), noting that

plaintiff’s creditor-specific class (IKEA only) would encourage

piecemeal litigation because it fails to include all potential

customers who received the allegedly illegal letters. Doc #35 at

2. The court agrees. Defendants collect debts throughout

California, for a variety of creditors. Hence, plaintiff’s IKEAonly class definition contravenes the central purpose of class

actions: avoiding multiple lawsuits. See Crown, Cork & Seal Co v

Parker, 462 US 345 (1983). 

Further, plaintiff’s IKEA-only class exposes defendants

to the risk of “one-way intervention,” i e, the inability to bind

all of the absent class members. See Schwarschild v Tse, 69 F3d

293, 295 (9th Cir 1995). If plaintiff prevails in an IKEA-creditor

action, that determination could bind defendants in other actions

involving the same collection letter through offensive non-mutual

issue preclusion. See Parklane Hosiery Co v Shore, 439 US 322, 331

(1979) (sanctioning the use of offensive non-mutual issue

preclusion and granting to trial courts “broad discretion to

determine when it should be applied”). But the same is not true if

defendants prevail. Individuals with debts to creditors other than

IKEA could disregard defendants’ judgment and sue over the same

letter. 

Finally, plaintiff’s arbitrary distinction between IKEA

and non-IKEA creditors imposes the aforementioned costs without

advancing fairness or efficiency. Nowhere in plaintiff’s motion

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United States District Court

For the Northern District of California

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does she offer a justification for limiting the case to a specific

creditor. Indeed, limiting the case to IKEA creditors contradicts

plaintiff’s argument concerning commonality under FRCP 23(a), which

hinges on the fact that claims under FDCPA and the Rosenthal Act

arise out of the form of the letters, not the nature of the

underlying debts. Accordingly, the court concludes that a class

action pursuant to plaintiff’s proposed definition is not

“superior” to other means available.

At the November 21, 2006, hearing on the present motion,

in response to the court’s questioning, counsel for plaintiff

admitted to coordinating with plaintiff’s counsel in a separate

action pending in the Central District of California concerning the

same letter as the one at issue here, see Hertado v Progressive

Financial Services, 05-635-VAP-SGL. Apparently, plaintiff’s

counsel agreed with counsel in the Hertado matter to divide up the

class between IKEA and non-IKEA creditors. 

During this hearing, plaintiff’s counsel insisted that

this division of the class nearly one year after suit serves the

interests of the class. But this argument belies the fact that

counsel in both the present action and the Hertado case initially

sued on behalf of the entire class. Counsel also cited Mace v Van

Ru Credit Corp, 109 f3d 338 (7th Cir 1997), as authorizing their

tactics. But in Mace, the court declined to impose a duty on the

plaintiff to bring suit on behalf of the broadest possible class. 

Mace does not, however, condone post-suit collusion between counsel

in separate actions in order to cut a class in two. 

It appears to the court that counsel have divided this

class action in order to maximize attorney fees without significant

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For the Northern District of California

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benefit to their clients. Accordingly, the court orders

plaintiff’s counsel to SHOW CAUSE in writing on or before December

15, 2006, why the court should not refer this matter to the State

Bar of California and the Northern District’s Standing Committee on

Professional Conduct. See Civil LR 11-6(a)(3)-(4). 

IV

In sum, the court DENIES without prejudice plaintiff’s

motion for class certification. For plaintiff to continue her

action as a class action, she must redefine her class to satisfy

FRCP 23(b)(3)’s requirement of “superiority.” The court also

orders plaintiff’s counsel to SHOW CAUSE in writing on or before

December 15, 2006, why the court should not refer this matter to

the State Bar of California and the Northern District’s Standing

Committee on Professional Conduct.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:05-cv-03466-VRW Document 45 Filed 11/30/06 Page 7 of 7