Court Opinion

ID: 4470522
Source: CourtListenerOpinion
Date Created: 2020-01-09 01:01:37.096674+00
Date Added: 2024-06-11T15:03:08.640477
License: Public Domain

Case: 18-50551   Document: 00515263511        Page: 1   Date Filed: 01/08/2020

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                    Fifth Circuit

                                                                           FILED
                                                                        January 8, 2020
                                    No. 18-50551
                                                                        Lyle W. Cayce
                                                                             Clerk

NINA FLECHA, on behalf of herself and all others similarly situated,

             Plaintiff - Appellee

v.

MEDICREDIT, INCORPORATED; FIDELITY AND DEPOSIT COMPANY
OF MARYLAND,

             Defendants - Appellants

                Appeal from the United States District Court
                     for the Western District of Texas

Before JONES, HO, and OLDHAM, Circuit Judges.
JAMES C. HO, Circuit Judge:
      As the Supreme Court has repeatedly reminded us, “the class action is
‘an exception to the usual rule that litigation is conducted by and on behalf of
the individual named parties only.’” Wal-Mart Stores, Inc. v. Dukes, 564 U.S.
338, 348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700–1 (1979)).
As Rule 23 of the Federal Rules of Civil Procedure makes clear, multiple
conditions must be met before a district court may certify a class. The putative
class certified here failed to satisfy several of those conditions, including
commonality, typicality, and predominance. In addition, the putative class
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presents substantial questions of Article III standing. Accordingly, we reverse
the class certification order and remand for further proceedings.
                                       I.
      Nina Flecha neglected to pay for the medical care she received from
Seton Medical Center Hays. To help Seton collect on that debt, Medicredit,
Inc., a voluntary debt collection service provider, sent Flecha a series of
collection letters—including the one at the heart of this suit. That letter
stated:
      Your seriously delinquent Seton Medical Center Hays account
      remains unpaid despite past requests for payment.

      At this time, a determination must be made with our client as to
      the disposition of your account. Your failure to cooperate in
      satisfying this debt indicates voluntary resolution is doubtful.
      However, if it is now your desire to clear your account, you need to
      promptly remit the balance in full.

The letter concluded: “To discuss payment arrangements call our office.”
      Flecha never contacted Medicredit. But she did contact Seton and ask if
she was eligible for any debt repayment programs. Seton informed her that
she could enter into a payment plan if she made an upfront payment—one
Flecha could not afford. Over the course of these conversations, Flecha claims
she was given the impression that Seton would sue her to collect her debt.
      In response to both the letter from Medicredit and her subsequent
conversations with Seton, Flecha brought this suit under the Fair Debt
Collection Practices Act (FDCPA) against Medicredit (as well as its surety
bondholder, Fidelity and Deposit Company of Maryland). Flecha alleged that
Medicredit’s letter made a false threat of legal action against her, in violation
of the FDCPA, because Seton in fact never intended to sue her over her unpaid
medical debt.

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      Flecha sought class certification. She argued that everyone who received
the same letter from Medicredit was likewise falsely threatened with legal
action that Seton never actually intended to bring, and that everyone was
accordingly entitled to statutory damages under the FDCPA. Both Flecha and
Medicredit also filed cross-motions for summary judgment.
      The district court denied summary judgment.           It concluded that
questions of fact remained about (1) whether an unsophisticated consumer
would construe the Medicredit letter to threaten legal action, and (2) whether
Seton intended to take legal action against Flecha.
      After disposing of the summary judgment motions, the district court then
granted Flecha’s motion for class certification and appointed her class
representative. The court defined the class as all Texans who had received the
same letter from Medicredit that Flecha received:
      [A]ll persons in Texas from whom Medicredit attempted to collect
      and who received a form collection letter from Medicredit
      containing these statements:
            Your seriously delinquent Seton Medical Center Hays
            account remains unpaid despite past requests for
            payment.
            At this time, a determination must be made with our
            client as to the disposition of your account. Your
            failure to cooperate in satisfying this debt indicates
            voluntary resolution is doubtful. However, if it is now
            your desire to clear your account, you need to promptly
            remit the balance in full.
Flecha estimates that at least 7,650 people in Texas received such a letter.
      We granted Medicredit’s motion for leave to appeal the class certification
order under Rule 23(f).
                                      II.
      In a Rule 23(f) class certification appeal, our analysis must “begin[], of
course, with the elements of the underlying cause of action.” Erica P. John
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Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011). After all, “a court must
understand the claims, defenses, relevant facts, and applicable substantive law
in order to make a meaningful determination of the certification issues.”
Castano v. American Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996). Absent
such knowledge, it will be “impossible” for a court to determine, inter alia,
(1) whether the issues for trial will be individualized or common to all putative
class members, (2) whether the issues presented by the class representative
will be typical of class members, and (3) whether the common issues at trial
will predominate over individualized issues. Id. at 745.
      The FDCPA prohibits the use of “false, deceptive, or misleading
representation[s] or means in connection with the collection of any debt.” 15
U.S.C. § 1692e. As relevant here, it specifically forbids debt collectors from
making a “threat to take any action . . . that is not intended to be taken.” 15
U.S.C. § 1692e(5) (emphasis added).
      So the question in such suits is not only whether a consumer would
perceive a particular statement as threatening legal action, but also whether
such a statement is in fact true—that is, whether the creditor does indeed
intend to bring suit against the debtor. This element is significant to the class
certification question because some creditors may not have a uniform litigation
policy when it comes to all debtors. They may instead decide whether to bring
suit based on individualized circumstances. And there is no false statement
under the FDCPA (or as a matter of common sense) if the threat to bring suit
is in fact sincere and true.
                                      III.
      “We review class-certification decisions for abuse of discretion. . . . We
review de novo, however, whether the district court applied the correct legal
standards in determining whether to certify the class.” Gene & Gene LLC v.

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BioPay LLC, 541 F.3d 318, 325 (5th Cir. 2008) (citing Allison v. Citgo
Petroleum Corp., 151 F.3d 402, 408 (5th Cir. 1998)).
      To be certified by a district court, the putative class must first satisfy all
four threshold conditions of Rule 23(a)—namely, 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 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”—conditions commonly known as “numerosity, commonality,
typicality, and adequacy of representation.” FED. R. CIV. P. 23(a); Gen. Tel. Co.
of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980).
      In addition, Flecha pursued a class under Rule 23(b)(3), which
additionally requires “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”—conditions commonly known as
“predominance and superiority.” FED. R. CIV. P. 23(b)(3); Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 615 (1997).
      Courts must enforce the requirements of Rule 23 vigorously. As the
Supreme Court has made clear, the conditions of Rule 23 “do not set forth a
mere pleading standard. A party seeking class certification must affirmatively
demonstrate his compliance with the Rule—that is, he must be prepared to
prove that there are in fact sufficiently numerous parties, common questions
of law or fact, etc.” Dukes, 564 U.S. at 350 (first emphasis added).
      On appeal, Medicredit argues that Flecha failed to meet this exacting
standard.   It contends that the putative class fails the commonality and
typicality requirements of Rule 23(a) as well as the predominance requirement
of Rule 23(b)(3). We agree.
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      To establish liability under the FDCPA, the class must prove not only
that Medicredit’s letter threatened legal action, but that it did so despite the
fact that Seton did not intend to pursue legal action. Yet Flecha failed to
provide any evidence concerning Seton’s intent to sue (or lack thereof)—let
alone any evidence of class-wide intent. This lack of evidence concerning
Seton’s class-wide intent is fatal to class certification here.
      Under Rule 23(a)(2)’s “commonality” requirement, there must be
“questions of law or fact common to the class.” As the Supreme Court explained
in Dukes, commonality requires more than a shared cause of action or common
allegation of fact—it requires a common legal contention capable of class-wide
resolution:
      Commonality requires the plaintiff to demonstrate that the class
      members have suffered the same injury. This does not mean
      merely that they have all suffered a violation of the same provision
      of law. . . . Their claims must depend upon a common contention—
      for example, the assertion of discriminatory bias on the part of the
      same supervisor. That common contention, moreover, must be of
      such a nature that it is capable of classwide resolution—which
      means that determination of its truth or falsity will resolve an
      issue that is central to the validity of each one of the claims in one
      stroke.

Id. at 349–50 (citation and quotations omitted).         “What matters to class
certification . . . is not the raising of common ‘questions’—even in droves—but,
rather the capacity of a class-wide proceeding to generate common answers apt
to drive the resolution of the litigation. Dissimilarities within the proposed
class are what have the potential to impede the generation of common
answers.” Id. at 350 (quotations omitted).
      The putative Title VII sex discrimination class in Dukes failed because
the class members “wish[ed] to sue about literally millions of employment
decisions at once. Without some glue holding the alleged reasons for all those
decisions together, it will be impossible to say that examination of all the class
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members’ claims for relief will produce a common answer to the crucial
question why was I disfavored.” Id. at 352.
      This class fails for similar reasons. Every member of the putative class
received the same allegedly threatening letter from Medicredit.            But the
FDCPA penalizes empty threats, not all threats.             So the letter alone is
insufficient to certify a class. As in Dukes, there is no “glue” here “holding the
alleged reasons for all those [letters] together”—namely, evidence of a uniform
intention by Seton regarding suit. Id. So it is likewise “impossible to say that
examination of all the class members’ claims for relief will produce a common
answer to the crucial question” why was I threatened. Id.
      And that is because the record here is wholly devoid of any evidence of
Seton’s debt collection practices. Flecha presented no evidence concerning
Seton’s actual intent to sue—either to sue her or others like her.
      To be sure, her complaint declares that Seton “does not sue consumers
for medical debt.” But she presented no evidence to that effect to support class
certification. She did not depose anyone from Seton. And the deposition
testimony from Medicredit indicates that Seton’s practices were unknown even
to Medicredit.
      Rather than require evidentiary support, the district court simply
“presume[d] for the purposes of class certification that Medicredit and Seton
acted consistently in determining whether to sue the recipient of its letters.”
But courts must certify class actions based on proof, not presumptions. See,
e.g., Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982) (“[A]ctual, not
presumed, conformance with Rule 23(a) remains [] indispensable.”); Berger v.
Compaq Comput. Corp., 257 F.3d 475, 481 (5th Cir. 2001) (“The district court
unquestionably adopted an incorrect legal standard by stating that ‘[t]he
adequacy of the putative representatives and of plaintiffs’ counsel is presumed
in the absence of specific proof to the contrary.’ This is error; the party seeking
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                                 No. 18-50551
certification bears the burden of establishing that all requirements of rule
23(a) have been satisfied.”).
      So Flecha failed to carry her burden to “affirmatively demonstrate”
commonality. Dukes, 564 U.S. at 350. She failed to demonstrate that her claim
that Medicredit falsely threatened to take legal action against class members
is capable of classwide resolution. And so that leaves the class without a
common issue.
      Her failure to prove commonality also establishes her failure to prove
either typicality or predominance. After all, if there is no common issue uniting
the putative class, Flecha’s claim can’t be “typical of the claims or defenses of
the class.” FED. R. CIV. P. 23(a)(3). See also Falcon, 457 U.S. at 157 n.13 (“The
commonality and typicality requirements of Rule 23(a) tend to merge.”). Nor
can Flecha demonstrate that common issues “predominate over any questions
affecting only individual members,” when she hasn’t even established the
existence of a common issue to begin with. FED. R. CIV. P. 23(b)(2).
      In sum, the putative class fails under Rule 23 and cannot be certified.
                                      IV.
      Because the class fails under Rule 23, there is no need to separately
decide whether the class additionally fails under Article III. But the standing
issues in this case are real. Countless unnamed class members lack standing.
      Our court has not yet decided whether standing must be proven for
unnamed class members, in addition to the class representative. See, e.g., In
re Deepwater Horizon, 785 F.3d 1003, 1018–20 (5th Cir. 2015). But some
circuits have held that “no class may be certified that contains members
lacking Article III standing.” Denney v. Deutsche Bank AG, 443 F.3d 253, 264
(2d Cir. 2006).
      That is significant, because there are undoubtedly many unnamed class
members here who lack the requisite injury to establish Article III standing.
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After all, the putative class sweeps in “all persons in Texas . . . who received a
form collection letter” from Medicredit.        As a result, the putative class
inevitably includes people who received the letter, but ignored it as junk mail
or otherwise gave it no meaningful attention—and therefore lack a cognizable
injury under Article III.
      That said, we do not reach the issue. That is because the Supreme Court
has repeatedly instructed that we should first decide whether a proposed class
satisfies Rule 23, before deciding whether it satisfies Article III—and that
there is no need to answer the latter question if the class fails under the former.
See Amchem, 521 U.S. at 612 (“The class certification issues are dispositive;
because their resolution . . . is logically antecedent to the existence of any
Article III issues, it is appropriate to reach them first.”); Ortiz v. Fibreboard
Corp., 527 U.S. 815, 831 (1999) (“Ordinarily, of course, this or any other Article
III court must be sure of its own jurisdiction before getting to the merits. But
the class certification issues are, as they were in Amchem, ‘logically antecedent’
to Article III concerns.”) (internal citations omitted); Transcript of Oral
Argument at 13, Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (No. 97-1704)
(“The Court: If you can’t certify under [Rule 23](b)(1)(B), all the rest is beside
the point.”). See also, e.g., In re Hyundai & Kia Fuel Economy Litig., 926 F.3d
539, 565 n.12 (9th Cir. 2019) (declining to address jurisdiction “because the
certification issue . . . is dispositive”); Payton v. County of Kane, 308 F.3d 673,
680 (7th Cir. 2002) (beginning its “analysis with the question of class
certification, mindful of the Supreme Court’s directive to consider issues of
class certification prior to issues of standing”).
      After all, if there is no class action under Rule 23, then there are no
unnamed class members in the suit—and thus no attendant class standing
concerns.

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      To be sure, if it is the class representative who presents a standing
problem, then that standing issue must be addressed first, prior to deciding
class certification. After all, if the class representative lacks standing, then
there is no Article III suit to begin with—class certification or otherwise. See,
e.g., Rivera v. Wyeth-Ayerst Labs, 283 F.3d 315, 319 n.6 (5th Cir. 2002) (“In the
instant case, in contrast to Ortiz and Amchem, the standing question would
exist whether Rivera filed her claim alone or as part of a class; class
certification did not create the jurisdictional issue.”); Ford v. NYLCare Health
Plans, 301 F.3d 329, 333 (5th Cir. 2002) (same).
      But if it is only the unnamed class members who present a standing
problem, then we are duty-bound to follow Amchem and Ortiz. Under those
precedents, if there is no class action, then there is no need to analyze the
Article III standing of the unnamed members of a non-existent class.
      In this case, no one alleges that Flecha herself has an Article III problem.
The only issue is whether the unnamed class members have standing. And
under Amchem and Ortiz, that standing issue is “moot,” because the class fails
under Rule 23. See, e.g., In re Wellbutrin XL Antitrust Litig., 260 F.R.D. 143,
153 (E.D. Penn. 2009) (noting that if “certification of the proposed class was
improper, the issue of certain class members’ standing would have been moot”).
                                       ***
      The reversal of the class certification order here could mean that
legitimate claims will go unheard. This may be a “negative value suit,” “in
which class members’ claims ‘would be uneconomical to litigate individually.’”
In re Monumental Life Ins. Co., 365 F.3d 408, 411 n.1 (5th Cir. 2004) (quoting
Phillips Petroleum v. Shutts, 472 U.S. 797, 809 (1985)).
      But the Supreme Court has made clear that fear of underenforcement is
no justification for class certification. See, e.g., Am. Exp. Co. v. Italian Colors
Rest., 570 U.S. 228, 234 (2013) (Rule 23 does not “establish an entitlement to
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class proceedings for the vindication of statutory rights”).                   As we have
recognized, proof that a particular action is a negative value suit may satisfy
the requirement of superiority under Rule 23(b)(3). See, e.g., Castano, 84 F.3d
at 748 (noting “[t]he most compelling rationale for finding superiority in a class
action—the existence of a negative value suit’”). But superiority is only one of
the numerous conditions that must be met before a class may be certified under
Rule 23. Proof of a negative value suit may be necessary to prove superiority—
but it is not sufficient to warrant class certification under Rule 23(b)(3). 1
       Accordingly, we reverse the class certification order and remand for
further proceedings.

       1 Nor is class certification the only solution to a negative value suit. The ability of
prevailing parties to recover attorney fees (as is available here under the FDCPA) may also
help solve the problem. See 15 U.S.C. § 1692k(a)(3) (“[I]n the case of any successful action to
enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s
fee as determined by the court.”); see also Castano, 84 F.3d at 748 (“The expense of litigation
does not necessarily turn this case into a negative value suit, in part because the prevailing
party may recover attorneys’ fees under many consumer protection statutes.”) (citing Boggs
v. Alto Trailer Sales, 511 F.2d 114, 118 (5th Cir. 1975)).
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ANDREW S. OLDHAM, Circuit Judge, concurring:
      I agree with the Court’s excellent opinion that the class must be
decertified. I also agree with the Court’s conclusion that “[c]ountless unnamed
class members lack standing.” Ante, at 8. In my view, that lack of standing is
sufficient to decide the case.
                                          I.
      Standing is “an essential and unchanging part of the case-or-controversy
requirement of Article III.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992).
With it, the Constitution empowers us to hear a case before us and decide the
relevant issues of law. Without it, we can do nothing but announce the fact and
dismiss the case. See Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868).
After all, “[h]ypothetical jurisdiction produces nothing more than a
hypothetical judgment.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83,
101 (1998).
      It’s unclear to me why these venerable principles would not apply with
equal force at the class-certification stage. A plaintiff must show standing at
each “successive stage[ ] of the litigation.” Lujan, 504 U.S. at 561; see also
Arizonans for Official English v. Arizona, 520 U.S. 43, 64–65 (1997). Nothing
in Rule 23 could exempt the class-certification stage from this requirement.
See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997) (“Rule 23’s
requirements must be interpreted in keeping with Article III constraints
. . . .”); FED. R. CIV. P. 82 (“These rules do not extend . . . the jurisdiction of the
district courts.”); accord Ortiz v. Fibreboard Corp., 527 U.S. 815, 831 (1999). If
anything, I’d think our standing analysis would be particularly rigorous at this
stage, given the transformative nature of the class-certification decision. Cf.
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011) (noting certification
stage requires “rigorous analysis”).
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      Not only can certification change the number of plaintiffs from one to one
million, but it also can dramatically change the rights and obligations of the
plaintiffs. Class certification is the thing that gives an Article III court the
power to “render dispositive judgments” affecting unnamed class members.
Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 219 (1995) (quotation omitted);
see also Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874 (1984)
(“There is of course no dispute that under elementary principles of prior
adjudication a judgment in a properly entertained class action is binding on
class members in any subsequent litigation.”). That means, for example, that
a post-certification judgment can prevent unnamed class members from
bringing their claims again. See Taylor v. Sturgell, 553 U.S. 880, 894 (2008);
Cooper, 467 U.S. at 874. It also means we must consider unnamed class
members’ standing before adjudicating the merits of their claims: “The exercise
of judicial power, which can so profoundly affect the lives, liberty, and property
of those to whom it extends, is therefore restricted to litigants who can show
‘injury in fact’ resulting from the action which they seek to have the court
adjudicate.” Valley Forge Christian Coll. v. Americans United for Separation of
Church & State, Inc., 454 U.S. 464, 473 (1982).
                                       II.
      It’s true that the Supreme Court in both Amchem and Ortiz avoided the
Article III standing question. The Court did so, in part, by stating that
certification “pertain[s] to statutory standing.” Ortiz, 527 U.S. at 831. And at
the time, the Court held statutory standing “may properly be treated before
Article III standing.” Ibid. That makes sense where both questions—whether
the plaintiffs can sue under Rule 23 and whether the plaintiffs have Article III
standing—are jurisdictional.

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      But the Supreme Court subsequently told us they’re not. In Lexmark
Intern., Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the Court
emphasized that the label “statutory standing” is “misleading” because the
inquiry “does not implicate subject-matter jurisdiction, i.e., the court’s
statutory or constitutional power to adjudicate the case.” Id. at 128 n.4
(quotation omitted). That suggests it’s a merits question whether the unnamed
class members can sue under Rule 23—not a jurisdictional one. See id. at 128;
Steel Co., 523 U.S. at 89. And if Steel Co. teaches us anything, it’s that we must
do jurisdiction before the merits. That’s why our precedent holds that “though
the certification inquiry is more straightforward, we must decide standing
first, because it determines the court’s fundamental power even to hear the
suit.” Rivera v. Wyeth-Ayerst Labs, 382 F.3d 315, 319 & n.6 (5th Cir. 2002).
      Article III is just as important in class actions as it is in individual ones.
See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1053 (2016) (Roberts,
C.J., concurring) (“Article III does not give federal courts the power to order
relief to any uninjured plaintiff, class action or not.”). It’s why the Court has
reminded us that “[i]n an era of frequent litigation, class actions, sweeping
injunctions with prospective effect, and continuing jurisdiction to enforce
judicial remedies, courts must be more careful to insist on the formal rules of
standing, not less so.” Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125,
146 (2011). I’d do so here.

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