necessary for collection activities to resume.

In short, the class members who did not accept the solicitation have no “related” debts
that could be the subject of a setoff or counterclaim, and those who did accept the solicitation, at
least as far as we know at this point, have no “past due” debis that are properly setoff under
Crawford and Channell as defendants read those cases, Thus we cannot say that setoffs and
counterclaims are likely to become a significant part of this litigation,’ let alone that they would
exceed the possible recovery of the class. If further developments show otherwise, it might
become appropriate to entertain the possibility of modifying the class definition to exclude those
who accepted the solicitation or those who accepted the solicitation and then defaulted on their
payment obligations regarding their Capital One Visa account. But at this point, there is no basis
at this point to confine the class to those who did not accept the solicitation.

For these reasons, the Court finds that plaintiffs have demonstrated that a class action is a
superior means of adjudicating the controversy than individual actions.

Conclusion

For the reasons stated above, the Court grants plaintiffs’ second amended motion for class
certification. Plaintiffs are directed to provide defendants with a draft form of class notice on or
before January 27, 2004, and the parties are directed to confer to attempt to reach agreement on
the form of notice. A proposed agreed notice, or separate proposals if the parties cannot agree, is

to be submitted to the Court by no later than February 5, 2004. The case is set for a status

3 Furthermore, as suggested in Channell, any such setoffs might require nothing more
than “a mechanical calculation” which would not impact on whether the case should be
maintained as a class action. Channell, 89 F.3d at 387.

13


Collection Letter Litigation, 181 F.R.D. 380, 385 (N.D. Ill. 1998).

Defendants contend that the claims of Carbajal and Butler are atypical because those
plaintiffs are subject to setoffs arising from prior accounts they had with Capital One unrelated to
the debts that were the subject of the solicitations they chal in this case. Specifically,
Carbajal is claimed to have previously had a “small busines} redit card account with Capital

One on which, defendants contend, he defaulted and on whigh the balance due is just over

$2,000. Carbajal is also claimed to have had a separate Capi One credit card account on which

hile]
he defaulted in 1998; he allegedly obtained a new Capital One credit card account in September

2002 to which the balance from the old account was transferred. Defendants contend that the
balance due on this account at the time the present suit was filed was just over $1,000, but they
do not contend that the account is in default. Butler is claimed to have a car loan with Capital
One on which he owes about $6,000; defendants do not contend that the loan is in default.

Defendants have made only a half-hearted effort to show that these purported setoffs are
likely to become a focus of the litigation, let alone a major focus. First of all, defendants do not
contend that the referenced prior debts of Carbajal and Butler are in any way related to their debts
that were involved in the solicitations challenged in this case. Second, Butler’s car loan and
Carbajal’s second ($1,000) credit card debt are not claimed to be in default; put another way,
there is no contention that either Butler or Carbajal has breached any contract or other obligation
with regard to these debts.

Defendants’ suggestion that unrelated, unmatured debts may be set off against a debt
collector’s liability under the FDCPA is unpersuasive, and again defendants have made only the

barest of efforts to argue the point. They cite (in a footnote!) only an Indiana case indicating that



practices comport with the FDCPA. This is the most efficient means of determining the legality
of mass solicitations to consumers who are all similarly situated.

Defendants argue that it is likely, given the large number of class members, that any class
award would amount to a de minimis recovery by any particular plaintiff due to the FDCPA’s
limitations on class recovery of statutory damages. See 15 U.S.C. § 1692k(a)(2)(B)ii). But the
fact that any one individual plaintiff can recover only a modest amount ($1,000) absent actual
damages actually makes the claims more suitable for determination in a class action, as no
individual plaintiff would have a significant incentive to sue on his or her own. “Class actions ...
may permit the plaintiffs to pool claims which would be uneconomical to litigate individually.
[In such a case,] most of the plaintiffs would have no realistic day in court if a class action were
not available.” Phillips Petroleum Co, v. Shutts, 472 U.S. 797, 809 (1985). As the Seventh
Circuit said in Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997), “a de minimis
recovery (in monetary terms) should not automatically bar a class action. The policy at the very
core of the class action mechanism is to overcome the problem that small recoveries to not
provide the incentive for any individual to bring a solo action prosecuting his or her rights. A
class action solves this problem by aggregating the relatively paltry potential recoveries into
something worth someone’s (usually an attorney’s) labor.” Jd. at 344,

The fact that particular individual plaintiffs could recover $1,000 in statutory damages if
they sued individually does not alter this analysis, for the reality is that the choice is not between
a class action and a multitude of individual actions, but rather between a class action and shis
particular individual action and maybe a handful more. The class members who might be

inclined to shoot for the bigger amount will be clearly advised in the Court’s notice to


offset of the very debts out of which the plaintiffs’ claims arose. See, e.g., Channel v. Citicorp
National Services, Inc., 89 F.3d 379 (7th Cir. 1996). Even if debts of that type satisfy the
“mutuality” test, the debts of Carbajal and Butler identified by defendants are not of that type. In
sum, there is no basis to believe that any defenses particular to Catbajal and Butler will be a
focus of the litigation or will divert their attention or that of class counsel? The Court finds that
each of the named plaintiffs’ claims is typical of those of the class within the meaning of Rule
23(a).

The final requirement of Rule 23(a) is that the proposed representatives will fairly and
adequately represent the interests of the class. This requirement “has three elements: (1) the
chosen class representative cannot have antagonistic or conflicting claims with other members of
the class, ... (2) the named representative must have sufficient interest in the outcome to ensure
vigorous advocacy, ... and, (3) counsel for the named plaintiff must be competent, experienced,
qualified, and generally able to conduct the proposed litigation vigorously.” Gammon v. GC
Services Ltd. Partnership, 162 F.R.D. 313, 317 (N.D. Ill, 1995) (citations and internal quotation
marks omitted). Defendants do not contest the competence of class counsel, the law firm of
Edelman, Combs & Latturner, and the Court has rejected defendants’ argument that Carbajal and
Butler have antagonistic interests due to their other alleged debts owed to Capital One.
Defendants argue, however, that each of the plaintiffs is confused regarding the claims made in
the case, that Redd made misrepresentations in her deposition, and that Butler has conflicting

interests because he wants to keep his involvement in this case from his employer and because,

? Even if setoffs of Carbajal’s and Butler’s unrelated debts were allowed, there is no
treason to believe that they would end up as a significant focus of the case; the setoff would likely
involve nothing more than a mere calculation.


under that state’s common law, a bank may set off the account of a depositor against an
unmatured debt owed to the bank. See First Bank of Whiting v. Samocki Bros. Trucking Co., 509
N.E.2d 187, 198 (Ind. App. 1987). But Carbajal lives in Illinois, not Indiana, and the law in
Illinois is different: an Illinois bank may set off funds on general deposit only against

matured debts, absent express authority to the contrary (which defendants have not suggested
exists in Carbajal’s case). Tri State Bank of East Dubuque v. Colby, 141 Ill. App. 3d 807, 811,
490 N.E.2d 1037, 1039 (1986).!

Perhaps more importantly, defendants have cited no authority suggesting that either
Illinois’ or Indiana’s common law rule regarding setoffs supports allowing a defendant to offset
the plaintiffs’ unrelated debts against defendants’ alleged liabilities under the FDCPA. The
general rule that applies to common law setoffs is that they are permitted “only when the debts
are ‘mutual,’ and debts arising at different times out of different circumstances are not mutual.”
Soo Line R. Co, v. Escabana & Lake Superior R. Co., 840 F.2d 546, 551 (7th Cir. 1988).

Though supposedly offsetting obligations “held by the same parties in the same capacity (that is,
as obligor and obligee)” may be considered mutual and thus subject to common law setoff, Jn re
Doctors Hospital of Hyde Park, Inc., 337 F.3d 951, 955 (7th Cir. 2003), such is not the case here:
an obligation that exists pursuant to a liability imposed by a federal statute is not held “in the
same capacity” as a contractual debt. Defendants cite no authority for the proposition that an
entity liable for statutory damages for violating a federal statute like the FDCPA would be

entitled to offset unrelated (let alone unmatured) debts. Rather, the cases they cite involved the

' Indeed, it appears that unmatured debts are not subject to setoff under Illinois common
law at all. See Bank of Chicago-Garfield Ridge v. Park Nat’! Bank, 237 Ill. App. 3d 1085, 1091,
606 N.E.2d 72, 76 (1993).


knowledge of the relevant facts and the basis for the claims, an understanding of the role of a
class representative, and a commitment to fulfill that role: There is no question that a class
representative is required to be conscientious, see Rand v, Monsanto Co., 926 F.2d 596, 599 (7th
Cir. 1991), and to “understand the basic facts underlying his claims.” Jn re Discovery Zone Sec.
Litig., 169 FR.D. 104, 109 (N.D. Ill, 1996). But the named plaintiffs each meet this standard;
defendants’ arguments (both those referenced above and those we have not specifically
discussed) do not tilt the scales in the opposite direction. |:
2. Rule 23(b) requirements

Because plaintiffs have established each of the requirements of Rule 23(a), we turn to the
requirements set forth in Rule 23(b)(3). As indicated earlier, Rule 23(b)(3) requires plaintiffs to
establish that questions of law or fact common to all class members predominate over individual
issues and that the class action mechanism is superior to other available means of adjudication.

The Court is persuaded that common issues predominate over individual issues. The
primary focus of the litigation will be the indisputably common issue of whether the forms of
solicitation used by defendants violate the FDCPA. This plainly can be determined on a class-
wide basis. The only individual issue identified by defendants as undercutting plaintiffs’ claim
of predominance of common issues is the selfsame setoff issue discussed earlier. As the Court
has determined, there is no basis for setoff of the class members’ prior, unrelated debts against
defendants’ FDCPA liability, and in any event, defendants have made no effort to show that any
significant number of class members are likely to owe prior debts to the defendants.

The Court is also convinced that a class action is a superior means of adjudicating the

parties’ dispute. A class action will allow for a single adjudication of whether defendants’



« Order Form (06/97)

Name of Assigned Judge
or Magistrate Judge

Sitting Judge if Other
than Assigned Judge

CASE NUMBER DATE 1/20/2004
CASE Carbajal vs. Capital One
TITLE
{In the following box (a) indi¢ate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plainciff, and (b) state briefly the nature
AOTION: of the motion being reppmen J
ae
a |
DOCKET ENTRY: im
1) Filed motion of [ use ms “Motion” box above.]
2) 2 _ Brief in support of motic i
(3) Qa Answer brief to motion r ( 1 Reply to answer briefdue___. _.
|
(4) oO Ruling/Hearing on ! i for
(5) im Status vou d) | to) [set for/re-set for] on set for at
(6) i) Pretrial conference[hel atinved to] [set for/re-set for] on set for at .
(7) Oo Trial[set for/re-set for] ot
(8) a {Bench/Jury trial) {Heatine] } Held/continued to_____at .
(9) Qa This case is dismissed ae prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) O Lo ule 41.1 OC) FRCP41(a)(i)  FRCP41(a)(2).
do «=f [Other docket entry) [Fort the reasons set forth on the attached Memorandum Opinion and Order,
the Court grants plaintiff's écond amended motion for class certification. Plaintiffs are directed to
provide defendants with a draft form of class notice on or before 1/27/04, and the parties are directed to
confer to attempt to reacl ement on the form of notice. A proposed agreed notice, or separate
proposals if the parties cannot jagree, is to be submitted to the Court by no later than 2/5/04. Status
hearing set to 2/9/04 at 9:30) a.m,
{Ql [For further detail see by fer jttached to the original minute order.)
No notices required, advised in open cou | | Document
No notices required.
Notices mailed by judge's staff.
Notified counsel by telephone.
av | Docketing to mail notices.
Mail AQ 450-form.
Copy to judge/magistrate judge. wine) paw
courtroom . .
OR deputy's ‘ cranny

initials

Date/time received in
c central Clerk's s Office |

mailing deputy initials

———e



provided for a $5,500 donation by the defendant to a law schoo) clinic and payment of a fee of
$78,000 to class counsel. The other 214,000 class members were to receive nothing, and by
virtue of the settlement they would have been deprived of their ability to file separate actions.
The intervenors learned of the settlement because they had filed similar cases that were pending
before another judge in the same district. :

The Seventh Circuit overturned the settlement. The critical element in its reasoning was
that the district court had violated settled law by not requiring notice and an opportunity to opt
out of a class action for money damages. Id. at 881-82. This element is absent in the present
case, in which class members will be notified of the certification of the class and their rights to
opt out and file separate actions.

The court in Crawford also criticized the terms of the settlement. It noted that the size of
the class, when combined with the FDCPA’s cap of damages in class actions to the lesser of
$500,000 or 1% of the defendant’s net worth, see 15 U.S.C. § 1692k(a)(2)(B)(ii), ensured that
class members would receive no more than $2.34 and possibly less. Jd. at 882. The smaller
classes certified in the separate cases to which the intervenors were party, however, could bring
each class member as much as $250. Under the circumstances, the Seventh Circuit was critical
ofa settlement in which the class members would receive nothing. It stated that “the fact that
[the named plaintiff] receives $2,000 and the other 200,000+ {class members] nothing is quite
enough to demonstrate that the terms should not have been approved under Rule 23(e).” Jd.

In the present case, of course, no proposed settlement is pending; the question is whether

aclass should be certified to begin with. The Court does not believe that Crawford stands for the

proposition that a class should not be certified when it is likely that a class-wide settlement

11


prospective class members that they can forego membership in the class and take on the risks and
somewhat larger rewards of individual litigation if they so choose. But to disallow a class action
simply because of the hypothetical possibility of multiple individual actions would effectively
sound the death knell to use of the class action in the consumer law context. And as former
District Judge Prentice Marshall put it in rejecting a similar argument in a Truth in Lending Act
case, “[{I]arge classes are typical in [such] cases, because creditors often have hundreds of
thousands of customers within a single jurisdiction. For these creditors the threat of a class

action has a potent deterrent effect. Eliminating that deterrent for all large cases would
emasculate the enforcement provisions of the Act.” Sarafin v. Sears, Roebuck & Co., 73 F.R.D.
585, 588 (N.D. Ill. 1977). The same is true in this case, And the converse is also true: if
defendants’ practices are determined to have complied with the FDCPA, that determination will
foreclose the possibility of further FDCPA litigation in Illinois and Indiana by those whom
defendants have solicited.

Defendants contend that the Seventh Circuit has disapproved of the use of class actions
when class members’ recovery is likely to involve a de minimis amount. But Crawford v.
Equifax Payment Services, Inc., 201 F.3d 877 (7th Cir. 2000), cited by defendants for this
proposition, holds no such thing. In Crawford, the court reviewed a district court’s refusal to
permit intervention by class members objecting to a FDCPA settlement, and its approval of the
settlement over their objection. The class was certified under Rule 23(b)(2), and thus the
214,000 class members were not to receive personal notice or the opportunity to opt out of the
settlement, The terms of the defendant barred the defendant from further use of the form

collection letter that the class had challenged; awarded the single named plaintiff $2,000; and

10



as a plaintiff in a number of other consumer-law cases, he is effectively dependent on the
Edelman finn.

The Court disagrees. What defendants characterize as confusion regarding the sequence
of events is more likely attributable to the fact that defendants sent repeated similar mailings, and
what they characterize as confusion about legal matters is more likely attributable to the
plaintiffs’ lack of sophistication and relative unfamiliarity With the inner workings of federal civil
litigation. In any event, as our colleague Judge Ruben Castillo noted in the Gammon case,

I
(t]hese facts are entitled to little weight . . . when assessing adequacy of

representation. As the Seventh Circuit has stated, “[T]he class representative's

role is limited. It was found not to be enough to defeat a class certification in

Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 366 (1966), that the named

plaintiff did not understand her complaint at all, could not explain the statements

in it, had little knowledge of what the lawsuit was about, did not know the

defendants by name, nor even the nature of the misconduct of the defendants.”

Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, 657 F.2d 890,

896 (7th Cir.1981) (citations omitted) ....

Gammon, 162 F.R.D. at 317.

With regard to plaintiff Butler, the fact that he would prefer that his employer did not
know about his involvement in litigation has no impact on his adequacy as a class representative.
There is nothing to suggest that this would, for example, cause him to advocate an unfair
settlement in the hopes of an early end to the lawsuit, and in any event the disposition of the case
by settlement or otherwise is subject to the Court’s review for faimess. The fact that Butler has
been involved as a plaintiff in prior consumer litigation likewise does not make him an
inadequate class representative; the Court rejects defendants’ contention that as a repeat plaintiff

he is somehow “dependent” on class counsel.

Each of the named plaintiffs has, in his or her deposition, demonstrated adequate


litigation. See, e.g., Alkire v. Irving, 330 F.3d 802, 819 (6th Cir. 2003); Forbush v. J.C. Penney
Co., 994 F.2d 1101, 1106 (Sth Cir. 1993), In this case, the claims of each of the class members
arise from the receipt of one or more of a series of mass mailings; the plaintiffs challenge those
mailings’ compliance with the FDCPA. This is sufficient to meet Rule 23(a)’s commonality
requirement. “Common nuclei of fact are typically manifest where, like in the case sub judice,
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).

A named plaintiff's claim is considered typical of the claims of the class for purposes of
Rule 23(a) if the claim arises from the same event or practice or course of conduct that gives rise
to the claims of the other class members and is based on the same legal theory as those of the
class members. Keele, 149 F.3d at 594; De La Fuente v, Stokely-Van Camp, Inc., 713 F.3d 225,
232 (7th Cir. 1983). This is plainly so with regard to the named plaintiffs’ FDCPA claims in this
case.

Defendants do not dispute that Redd’s claims are typical of those of the class.
Defendants argue, however, that the other named plaintiffs’ claims are not typical because those
plaintiffs are subject to unique defenses not applicable to class members generally. The claims of
a proposed class representative are considered atypical if the representative is subject to a unique
defense that is reasonably likely to be a major focus of the litigation. See Rainy Lake One Stop,
Ine. v. Marigold Foods, Inc., 195 F.3d 430, 437 (8th Cir. 1999); Koos v. First National Bank,
496 F.2d 1162, 1164 (7th Cir. 1974). To put it another way, if the class representative is likely to

be preoccupied with a unique defense, his claims are atypical. In re CBC Companies, Inc.



hearing on February 9, 2004 at 9:30 a.m.

MATTHEW F. KENNEL)
Date: January 20, 2004 United States District Judge

14


similar solicitations on or after February 13, 2002. For the reasons stated below, the Court grants
plaintiffs’ motion.
Discussion

To obtain class certification, plaintiffs must satisfy the four requirements of Federal Rule
of Civil Procedure 23(a) and one of the requirements of Rule 23(b). E.g., Harriston v. Chicago
Tribune Co, 992 F.2d 697, 703 (7th Cir. 1993). Rule 23(a)’s four requirements for class
certification are that (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 representatives’ claims or defenses
are typical of those of the class; and (4) the representatives will fairly and adequately represent
the interests of the class. See Fed. R. Civ. P. 23(a). Plaintiffs seek certification of both classes
under Rule 23(6)(3), which requires, in addition to the above, a showing that questions of law or
fact common to all class members predominate over individual issues, and that the class action
mechanism is superior to other available means of adjudicating the controversy. See Fed. R. Civ.
P. 23(b)(3). We deal with each of these requirements in tum, following the Supreme Court’s
admonition that we must conduct a “tigorous analysis” of whether the proposed classes satisfy
Rule 23's requirements. See General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 161
(1982).
1. Rule 23(a) requirements

Though plaintiffs have not attempted to quantify the members of the proposed classes, it
is undisputed that Rule 23(a)’s numerosity requirement is met. The proposed classes also satisfy
the Rule’s commonality requirement. Rule 23(a) requires only that there be at least one issue

common to all class members, so long as the issue is one whose determination will advance the


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
DOCKETED

MOISES CARBAJAL; GEORGIA REDD; JAN 23 2004

and RON BUTLER,
Plaintiffs,
vs. Case No. 03 C 1123

CAPITAL ONE, F.S.B.; CAPITAL ONE
SERVICES, INC.; and WESTMORELAND
AGENCY, INC.,

we wm ws Se SSS SSD

Defendants.

MEMORANDUM OPINION AND ORDER
MATTHEW F, KENNELLY, District Judge:

Plaintiffs Moises Carbajal, Georgia Redd, and Ron Butler have sued Capital One, FSB,
Capital One Services, Inc., and Westmoreland Agency, Inc., for alleged violations of the Fair
Debt Collection Practices Act. Plaintiffs received solicitations from the defendants to transfer
delinquent debts owed to other creditors to a new Capital One Visa credit card account. They
contend that this constituted debt collection activity subject to the FDCPA, and they assert that
Capital One’s solicitation improperly obscured the FDCPA-required “validation” notice and
misleadingly advised debtors that they would still be able to dispute the old debt after its transfer
to Capital One. The Court previously denied defendants’ motion to dismiss plaintiffs’ third
amended complaint for failure to state a claim. Carbajal v. Capital One, FSB, No. 03 C 1123,
2003 WL 22595265 (N.D. Ill. Nov. 10, 2003). Plaintiffs have moved to certify two classes,

consisting of all persons in Illinois (Class A) and Indiana (Class B) to whom defendants sent



would produce a minimal recovery. Rather, the Court believes that Crawford must be read in
light of the primary concern that gave rise to the rejection of the settlement — the lack of notice
and the ability of class members to opt out. If the class notice clearly spells out the likely
maximum Jevel of awards to class members and advises that they may choose to file separate
actions in which they might recover a larger amount, the primary problem that gave Tise to the
Seventh Circuit’s concerns will be eliminated, and individual class members will be able to make
fully informed choices as to how they wish to proceed.

Defendants also argue that they will be entitled to set off the debts that were the subject of
the solicitations against any FDCPA liability they may have to those who accepted the
solicitation and transferred their debts to Capital One. The Seventh Circuit has, in fact,
suggested that a debt collector sued in an FDCPA case may be able to offset against its liability
the bad debt that it was attempting to collect. See Crawford, 201 F.3d at 880 (defendant “would
be entitled to a setoff or counterclaim, on account of the bad debts, exceeding any [FDCPA]
recovery”; citing Channel, 89 F.3d 379). But defendants’ argument ignores the fact that their
solicitation, if accepted, had the effect of transforming the recipient’s debt into one that was no
longer past due; upon acceptance of the solicitation, the previously past due debt was roiled into
a Capital One Visa credit card account, a form of revolving credit which the debtor was entitled
to pay off over time. Defendants have provided no support for the proposition that they should
be able to set off (or assert in a counterclaim) debts on which they have no right, under
agreements they themselves drafted, to immediate payment. And they have not attempted to
show that any significant proportion of those who accepted the solicitation failed to make any

payments for the first three billing cycles, the predicate that defendants’ solicitation said was

12