throbber
Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 1 of 23 PageID 323
`
`UNITED STATES DISTRICT COURT
`MIDDLE DISTRICT OF FLORIDA
`ORLANDO DIVISION
`
`
`RAY PALMER, JR., on behalf of himself
`and all others similarly situated,
`
`
`
`Plaintiff,
`
`Case No: 6:15-cv-59-Orl-40KRS
`
`
`v.
`
`DYNAMIC RECOVERY SOLUTIONS,
`LLC and CASCADE CAPITAL, LLC,
`
`Defendants.
`
`
`
`ORDER
`
`
`
`
`
`Plaintiff, Ray Palmer, Jr., initiated this putative class action against Defendants,
`
`Dynamic Recovery Solutions, LLC (“Dynamic”) and Cascade Capital, LLC (“Cascade”), to
`
`vindicate his rights and the rights of other similarly situated consumers under the Fair Debt
`
`Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p. Plaintiff claims that 1,181
`
`consumers received dunning letters from Defendants which violate the FDCPA’s
`
`proscriptions against false, misleading, and unfair debt collection practices. Both Dynamic
`
`and Cascade deny any wrongdoing. The parties advise that they have resolved their dispute
`
`and now move the Court to certify a settlement class and to preliminarily approve their
`
`settlement agreement. For the following reasons, and with the benefit of a preliminary
`
`fairness hearing, the Court finds that certification and preliminary approval are inappropriate
`
`at this time.
`
`I.
`
`BACKGROUND
`
`A.
`
`The Allegations
`
`Plaintiff alleges in his Complaint that he and the putative class members incurred and
`
`subsequently defaulted on credit card obligations owed to Bank of America. After the statute
`
`
`
`1
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 2 of 23 PageID 324
`
`of limitations had passed to legally enforce these defaulted obligations, Bank of America
`
`sold them to Cascade. Cascade then contracted with Dynamic to collect on the debts.
`
`In furtherance of its collection efforts, Dynamic mailed dunning letters to Plaintiff and
`
`the putative class members seeking payment of the defaulted credit card obligations. Each
`
`letter informed the recipient that he or she owed a debt, that the original creditor was Bank
`
`of America, and that Cascade currently owns the right to collect on the obligation. Each
`
`letter further outlined a number of payment plans through which the recipient could “settle”
`
`his or her account. Upon completion of a payment plan, each letter promised that the
`
`account would be considered “satisfied and closed” and that “a settlement letter [would] be
`
`issued.” The letters never disclosed that the underlying credit card obligations were no
`
`longer legally enforceable.
`
`By couching its collection efforts in terms of “settlement” and offering payment plans
`
`without disclosing the fact that the underlying credit card obligations were no longer legally
`
`enforceable, Plaintiff claims that the dunning letters misrepresent the character or legal
`
`status of the obligations and, as a result, constitute a false, misleading, and unfair debt
`
`collection practice. Both Dynamic and Cascade deny that the letters violate the FDCPA and
`
`maintain that, even if they do, any violation was the result of a bona fide error. Cascade
`
`additionally denies liability on the grounds that it cannot be held vicariously liable under the
`
`FDCPA for any misconduct by Dynamic.
`
`B.
`
`The Proposed Settlement
`
`The parties represent that, through their counsel, they have engaged in arms-length
`
`negotiations which have resulted in settlement. The terms of that settlement include the
`
`following:
`
`
`
`2
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 3 of 23 PageID 325
`
`• Dynamic will pay $12,000 to the class as statutory damages under the
`FDCPA, which will be distributed evenly among the 1,181 class
`members for a pro rata award of $10.16 per class member.
`
`• Dynamic will pay Plaintiff $2,000 in recognition for his service as class
`representative and $1,000 in statutory damages as permitted by the
`FDCPA, for a total award to Plaintiff of $3,000, which shall be paid
`separately from the class settlement fund.
`
`
`
`• Plaintiff will be deemed the prevailing party and Dynamic will pay
`Plaintiff’s reasonable attorney’s fees and costs.
`
`• Dynamic will pay
`administration.
`
`the costs of class notice, distribution, and
`
`• The class will release Defendants from all known and unknown claims
`which could have been brought in this lawsuit.
`
`• Defendants deny liability and retain the right to collect on the defaulted
`obligations.
`
`• Class members may opt out of the class and the settlement or may
`enter an appearance to object to the settlement’s fairness.
`
`• Any unclaimed amount from the $12,000 class settlement fund will be
`divided equally between the National Consumer Law Center and the
`National Association of Consumer Advocates as a cy pres remedy.
`
`DISCUSSION
`
`A.
`
`Class Certification
`
`
`
`
`
`
`
`
`
`
`
`
`II.
`
`“For a district court to certify a class action, the named plaintiffs must have standing,
`
`and the putative class must meet each of the [four] requirements specified in Federal Rule
`
`of Civil Procedure 23(a), as well as at least one of the requirements set forth in Rule 23(b).”
`
`Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1265 (11th Cir. 2009) (quoting Klay v. Humana,
`
`Inc., 382 F.3d 1241, 1250 (11th Cir. 2004)). The Court assumes for the purposes of this
`
`Order only that all class certification requirements are satisfied. But see note 6, infra. The
`
`Court therefore turns directly to the question of whether the parties’ proposed settlement
`
`should receive preliminary approval.
`
`
`
`3
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 4 of 23 PageID 326
`
`B.
`
`Preliminary Approval of the Settlement
`
`A class action may not be settled, dismissed, or otherwise compromised without the
`
`district court’s approval. Fed. R. Civ. P. 23(e). A district court should only approve a class
`
`action settlement if it is “fair, adequate and reasonable and is not the product of collusion
`
`between the parties.” Saccoccio v. JP Morgan Chase Bank, N.A., 297 F.R.D. 683, 691 (S.D.
`
`Fla. 2014) (quoting Bennett v. Behring Corp., 737 F.2d 982, 986 (11th Cir. 1984)). The
`
`Eleventh Circuit has enumerated six factors a district court should consider in evaluating the
`
`fairness, adequacy, and reasonableness of a class action settlement: (1) the plaintiff’s
`
`likelihood of success on the merits, (2) the range of the plaintiff’s possible recovery, (3) the
`
`point within the range of possible recovery at which settlement is fair, adequate, and
`
`reasonable, (4) the expected complexity, cost, and duration of litigation, (5) any opposition
`
`to the proposed settlement, and (6) the stage of the litigation at which settlement was
`
`reached. Faught v. Am. Home Shield Corp., 668 F.3d 1233, 1240 (11th Cir. 2011). While
`
`these six factors are helpful in answering the fairness inquiry, they are neither determinative
`
`nor exhaustive, and the court may consider other relevant factors based on the particular
`
`nuances of the case and the settlement proposed. Officers for Justice v. Civil Serv. Comm’n
`
`of S.F., 688 F.2d 615, 625 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983). Additional
`
`factors warranting consideration may include (7) an unjustifiably burdensome claims
`
`procedure, (8) unduly preferential treatment of the class representative, (9) the terms of
`
`settlement in similar cases, (10) an unreasonably high award of attorney’s fees to prevailing
`
`class counsel, and (11) impermissibly broad releases of liability. See In re Bluetooth
`
`Headset Prods. Liab. Litig., 654 F.3d 935, 946–47 (9th Cir. 2011); In re Prudential Ins. Co.
`
`
`
`4
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 5 of 23 PageID 327
`
`Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 317, 323–24 (3d Cir. 1998), cert.
`
`denied, 525 U.S. 1114 (1999); MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.62 (2004).1
`
`Although class action settlements should be reviewed with deference to the strong
`
`judicial policy favoring settlement, the court must not approve a settlement merely because
`
`the parties agree to its terms. Redman v. RadioShack Corp., 768 F.3d 622, 629 (7th Cir.
`
`2014), cert. denied, 135 S. Ct. 1429 (2015); Holmes v. Cont’l Can Co., 706 F.2d 1144, 1150
`
`(11th Cir. 1983) (finding that reliance on the recommendations of the parties and their
`
`counsel “fosters rubber stamping by the court rather than the careful scrutiny which is
`
`essential in judicial approval of class action settlements”). This maxim particularly holds true
`
`in the context of precertification settlement, where the parties’ speedy and seamless
`
`resolution of their dispute should prompt the court to consider whether the proposed
`
`settlement represents a bona fide end to the adversarial process or the collusive exploitation
`
`of the class action mechanism to the detriment of absent class members. See Lane v.
`
`
`1 The list of potential factors to consider could go on. On this point, two astute
`commentators observe:
`
`
`
`[F]actor tests . . . suffer from shortcomings. These tests grow by
`accretion. They are commodious closets into which the residues
`of past cases can be deposited—closets that never need to be
`reorganized or cleaned out because the tests are suggestive
`only. Appeals courts never need to consider whether a factor test
`should be overruled. Over time, despite the good intentions that
`motivated
`their creation,
`they become unwieldy and
`disorganized . . . .
`
`The sheer number of factors is a problem. A trial judge could
`hardly be blamed for feeling a sense of foreboding when
`contemplating the nineteen items on the Third Circuit’s checklist
`[in Prudential]. Running through them all seems a dreary task.
`Courts applying these tests often recite the litany and engage in
`pro forma analyses, but their hearts are not in it.
`
`Jonathan R. Macey & Geoffrey P. Miller, Judicial Review of Class Action Settlements,
`1 J. LEGAL ANALYSIS 167, 172 (2009) (footnotes omitted).
`
`
`
`5
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 6 of 23 PageID 328
`
`Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012), cert. denied, 134 S. Ct. 8 (2013). In these
`
`circumstances, the court must employ “a higher degree of scrutiny in assessing [a
`
`settlement’s] fairness.” D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001).
`
`Ultimately, the proponents of a settlement bear the burden of proving its fairness, adequacy,
`
`and reasonableness. Faught, 668 F.3d at 1239.
`
`After reviewing the proposed settlement in this case through the prism of the above-
`
`listed factors, three reasons counsel against its approval:
`
`1.
`
`The Proposed Settlement Does Not Fairly and Adequately
`Account for Plaintiff’s Likelihood of Success Against
`Defendants
`
`
`In describing why they believe their proposed settlement is fair, the parties rely heavily
`
`on what they perceive to be the uncertainty of Plaintiff’s case when weighed against
`
`Defendants’ defenses. However, upon review of those defenses and the relevant case law,
`
`the Court finds that the most significant deficiency in the parties’ proposed settlement arises
`
`out of the settlement’s low value despite Plaintiff’s high likelihood of succeeding against
`
`Defendants on the merits.
`
`a.
`
`Strength of Plaintiff’s Case
`
`In order to prevail under the FDCPA, Plaintiff will need to prove that (1) he was the
`
`object of collection activity arising out of consumer debt, (2) that Defendants are debt
`
`collectors under the FDCPA, and (3) that Defendants committed an act or omission
`
`proscribed by the FDCPA. Pescatrice v. Orovitz, 539 F. Supp. 2d 1375, 1378 (S.D. Fla.
`
`2008). Defendants do not dispute that they are debt collectors and that Plaintiff was the
`
`object of collection activity arising out of consumer debt. Instead, Defendants take the
`
`position that the dunning letter in this case does not violate the FDCPA.
`
`
`
`6
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 7 of 23 PageID 329
`
`Plaintiff alleges that attempting to collect a time-barred debt without disclosing the
`
`fact that it is time-barred constitutes the false or misleading representation of the debt’s
`
`character or legal status in violation of 15 U.S.C. § 1692e(2)(A). Defendants disagree,
`
`claiming that the letters are not misleading because they do not misrepresent the character
`
`or legal status of the debts to be collected and do not threaten legal action. In determining
`
`whether a collection practice is false or misleading under § 1692e, the Eleventh Circuit looks
`
`to the “least sophisticated consumer.” Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1175
`
`(11th Cir. 1985). “This unsavvy consumer is charged with a basic level of understanding
`
`and willingness to read with care, but is of below average sophistication or intelligence, and
`
`is uninformed or naïve.” Alborzian v. JPMorgan Chase Bank, N.A., 185 Cal. Rptr. 3d 84, 91
`
`(Cal. Ct. App. 2015) (quoting Gonzalez v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1062 (9th
`
`Cir. 2011)) (citations and internal quotation marks omitted); see also LeBlanc v. Unifund
`
`CCR Partners, 601 F.3d 1185, 1194 (11th Cir. 2010) (per curiam). A debt collection practice
`
`which tends to mislead the least sophisticated consumer violates the FDCPA. Jeter,
`
`760 F.2d at 1175. Therefore, Plaintiff can only prevail under § 1692e(2)(A) if the dunning
`
`letters sent by Dynamic would tend to mislead the least sophisticated consumer as to the
`
`character or legal status of the debt to be collected.
`
`The Eleventh Circuit has not yet had the occasion to answer the question of whether
`
`a debt collector’s failure to disclose that a debt is time-barred constitutes a false or
`
`misleading debt collection practice in violation of § 1692e(2)(A). Nevertheless, a plain
`
`reading of the statute indicates that it is and that the threat of litigation need not accompany
`
`the misrepresentation to impose liability on a debt collector. The Eleventh Circuit has
`
`reiterated many times that the FDCPA must be construed “to give full effect to each of its
`
`provisions,” must be interpreted with regard to its “entire statutory context,” must be
`
`
`
`7
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 8 of 23 PageID 330
`
`understood using the plain and ordinary meaning of the words chosen by Congress, and
`
`must be applied so as to achieve its purpose of “eliminate[ing] abusive debt collection
`
`practices.” Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309, 1312, 1315–16 (11th
`
`Cir. 2015) (quoting 15 U.S.C. § 1692(e) and United States v. DBB, Inc., 180 F.3d 1277, 1281
`
`(11th Cir. 1999)).
`
`The provision through which Plaintiff premises liability proscribes “[t]he false
`
`representation of the character, amount, or legal status of any debt.” 15 U.S.C.
`
`§ 1692e(2)(A). The conduct prohibited by the plain meaning of this language is the false
`
`representation of a debt’s character, amount, or legal status. Moreover, § 1692e(2)(A) does
`
`not contemplate that the threat of litigation must accompany a misrepresentation to be
`
`actionable as Defendants suggest. Indeed, had Congress intended to forbid threatening
`
`litigation in connection with the false representation of the character or legal status of a debt,
`
`it would have narrowed § 1692e(2)(A) accordingly; Congress’s omission on this point
`
`indicates that it held no such intent. See Animal Legal Def. Fund v. U.S. Dep’t of Agric.,
`
`789 F.3d 1206, 1217 (11th Cir. 2015) (“Where Congress knows how to say something but
`
`chooses not to, its silence is controlling.”) (quoting In re Haas, 48 F.3d 1153, 1156 (11th Cir.
`
`1995)). Further belying Defendants’ position is a subsequent provision which proscribes
`
`“[t]he threat to take any action that cannot legally be taken or that is not intended to be
`
`taken.” 15 U.S.C. § 1692e(5). This category seems more apt to include the threats of
`
`litigation which Defendants contend are tacitly included in § 1692e(2)(A). It would be strange
`
`indeed for Congress to forbid certain conduct in one provision of a statute through words
`
`and then forbid the exact same conduct in another provision of the same statute through
`
`silence. A plain reading of § 1692e(2)(A) therefore leads to the inescapable conclusion that
`
`
`
`8
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 9 of 23 PageID 331
`
`it prohibits the false representation of a debt’s character or legal status regardless of whether
`
`litigation is threatened.
`
`Applying the plain language of § 1692e(2)(A) to the dunning letter in this case,
`
`Plaintiff’s prospects of prevailing against Defendants appear strong. The letter sent by
`
`Dynamic seeks repayment of an unenforceable debt without disclosing that fact. Whether
`
`a debt is barred by an applicable statute of limitations is fundamental to the debt’s character
`
`and legal status. See Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1260 (11th Cir.
`
`2014) (explaining the significance to debtors of statutes of limitations in determining a debt’s
`
`legal status), cert. denied, 135 S. Ct. 1844 (2015). The failure to disclose that a debt is
`
`barred by the statute of limitations would likely mislead the least sophisticated consumer as
`
`to the character or legal status of his or her debt, thus violating § 1692e(2)(A). Although this
`
`nondisclosure is itself sufficient to violate the FDCPA, the letters go one step further by
`
`asking the consumer to “settle” his or her account. Such settlement offers serve only to
`
`compound confusion over the debt’s true character or legal status, as a consumer
`
`researching what “settlement” means would reasonably find the dictionary’s definition of the
`
`term: “an act of bestowing or giving possession under legal sanction.” Settlement, MERRIAM-
`
`WEBSTER, http://www.merriam-webster.com/dictionary/settlement (last visited May 4, 2016);
`
`see also Settlement, BLACK’S LAW DICTIONARY (10th ed. 2014) (defining the term to mean
`
`“[a]n agreement ending a dispute or lawsuit”). Consequently, the dunning letter in this case
`
`is doubly misleading by failing to disclose that the debt it seeks to collect is time-barred and
`
`by giving the false impression that Cascade could sue to enforce the debt.
`
`Other circuit courts have reached the same conclusion. In McMahon v. LVNV
`
`Funding, LLC, 744 F.3d 1010 (7th Cir. 2014), the Seventh Circuit faced a situation factually
`
`identical to what the parties present here. The plaintiff in McMahon incurred and defaulted
`
`
`
`9
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 10 of 23 PageID 332
`
`on a consumer debt which eventually ended up in the hands of a third party debt collector.
`
`Id. at 1013. After the statute of limitations had passed to sue on the debt, the debt collector
`
`mailed the plaintiff a dunning letter which offered to “settle [his] account in full.” Id. Like the
`
`dunning letter in this case, the letter in McMahon failed to disclose that the debt was barred
`
`by the applicable statute of limitations. Id.
`
`In concluding that failing to disclose that a debt is legally unenforceable constitutes a
`
`false or misleading debt collection practice, the Seventh Circuit relied on the plain meaning
`
`of the pertinent statutory language:
`
` The proposition that a debt collector violates the FDCPA
`when it misleads an unsophisticated consumer to believe a time-
`barred debt is legally enforceable . . . is straightforward under
`the statute. Section 1692e(2)(A) specifically prohibits the false
`representation of the character or legal status of any debt.
`Whether a debt is legally enforceable is a central fact about the
`character and legal status of that debt. A misrepresentation
`about that fact thus violates the FDCPA.
`
`Id. at 1020. In further support of its conclusion, the Seventh Circuit pointed to the fact that
`
`unsophisticated consumers2 would be misled by the inclusion of a “settlement offer” in a
`
`dunning letter because “a settlement offer on a timebarred debt implies that the creditor
`
`could successfully sue on the debt,” thus misrepresenting the debt’s character and legal
`
`
`2 The Seventh Circuit utilizes the “unsophisticated consumer” standard instead of the
`“least sophisticated consumer” standard in determining whether a debt collector’s
`conduct is misleading. Many commentators have attempted to differentiate between the
`two types of consumers, with most concluding either that there is no meaningful
`distinction or that the unsophisticated consumer standard is marginally more demanding
`for plaintiffs to satisfy. See, e.g., Jeffrey S. Peters, Note, Meaningful Involvement in
`Collections: Should Ethics or the FDCPA Govern?, 34 PACE L. REV. 1240, 1247–51
`(2014) (finding any variation between the two standards “to be more an issue of
`semantics than of an actual difference in the law”); Christian Stueben, Note, Judge or
`Jury? Determining Deception or Misrepresentation Under the Fair Debt Collection
`Practices Act, 78 FORDHAM L. REV. 3107, 3127–32 (2010) (finding the unsophisticated
`consumer standard “slightly more stringent”). In any event, whatever subtleties may exist
`are unimportant for the purposes of this Order.
`
`
`
`10
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 11 of 23 PageID 333
`
`status. Id. at 1021–22. The McMahon Court additionally found that “[m]atters may be even
`
`worse if the debt collector adds a threat of litigation, but such a threat is not a necessary
`
`element of a claim [under § 1692e(2)(A)].” Id. at 1020 (citation omitted). The Seventh Circuit
`
`therefore flatly rejected the argument Defendants make in this case that the nondisclosure
`
`of a debt’s character or legal status must be accompanied by the threat of litigation to be
`
`false or misleading; nondisclosure alone violates the FDCPA. Id.
`
`The Sixth Circuit agreed in Buchanan v. Northland Group, Inc., 776 F.3d 393 (6th Cir.
`
`2015). There, the plaintiff also incurred and defaulted on a consumer debt which was sold
`
`to a third party debt collector after the statute of limitations to legally enforce the debt had
`
`lapsed. Id. at 395. The debt collector mailed the plaintiff a dunning letter which offered to
`
`“settle” the debt, but did not divulge that the debt was no longer legally enforceable. Id. at
`
`395–96. Citing McMahon, the Sixth Circuit found that the enforceability of a debt is crucial
`
`to its character and legal status and that a debt collector violates the FDCPA when it fails to
`
`disclose in a dunning letter that the debt it seeks to collect is no longer enforceable. Id. at
`
`398–99. Also like McMahon, the Sixth Circuit found that framing a dunning letter in terms of
`
`“settlement” exacerbates its violative effect because “a ‘settlement offer’ falsely implies that
`
`the underlying debt is enforceable in court.” Id. at 399. See also, e.g., Carter v. First Nat’l
`
`Collection Bureau, Inc., No. 4:15-CV-1695, 2015 WL 5695273, at *5 (S.D. Tex. Sept. 11,
`
`2015) (finding that a debt collector misleads a consumer in violation of § 1692e(2)(A) when
`
`it uses the terms “settle” or “settlement” in connection with the recovery of a debt, but fails
`
`to disclose that the debt is barred by the statute of limitations); Finley v. Dynamic Recovery
`
`Sols., LLC, No. 14-cv-04028-TEH, 2015 WL 3750140, at *5 (N.D. Cal. June 15, 2015) (“[T]he
`
`least sophisticated consumer could view an offer to settle as a veiled threat of litigation, or,
`
`at the least, as a misrepresentation that a debt is still enforceable.”).
`
`
`
`11
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 12 of 23 PageID 334
`
`Based on the plain meaning of § 1692e(2)(A) and after considering the relevant case
`
`law, it appears that Plaintiff has a strong likelihood of proving that the dunning letter mailed
`
`by Dynamic violates the FDCPA by misleading the least sophisticated consumer as to the
`
`character or legal status of his or her debt.
`
`b.
`
`Strength of Defendants’ Defenses
`
`Defendants argue that should the dunning letter in this case violate the FDCPA, they
`
`will nevertheless prevail against Plaintiff. First, Cascade asserts that it cannot be held
`
`vicariously liable under the FDCPA for any misconduct attributable to Dynamic. Cascade’s
`
`position, however, is unfounded. “[W]hen Congress creates a tort action, it legislates against
`
`a legal background of ordinary tort-related vicarious liability rules . . . .” Meyer v. Holley,
`
`537 U.S. 280, 285 (2003). Among these rules is the well-established tenet that principals
`
`are vicariously liable for the misconduct of their agents when committed within their scope
`
`of authority, regardless of whether the principal authorized or even knew about the agent’s
`
`misconduct. Id. at 285–86; see also LeBlanc, 601 F.3d at 1201–02 (applying vicarious
`
`liability principles to FDCPA claim). In order to impose vicarious liability on a principal for its
`
`agent’s violation of the FDCPA, the plaintiff must show (1) that the principal controls or has
`
`the right to control the agent, and (2) the agent consents to act on the principal’s behalf. See
`
`Meyer, 537 U.S. at 286.
`
`Cascade bases its vicarious liability defense solely on the grounds that it does not
`
`exercise sufficient control over Dynamic to warrant imposing vicarious liability. Cascade
`
`contends that Dynamic is merely an independent contractor which collects debts for
`
`Cascade without Cascade’s input or direction. While courts continue to grapple with whether
`
`a non-debt collector principal can be held vicariously liable for its debt collector agent and,
`
`
`
`12
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 13 of 23 PageID 335
`
`if so, what level of control is needed,3 there is no doubt that a principal exercises the requisite
`
`level of control when it is itself a debt collector. See, e.g., Janetos v. Fulton Friedman &
`
`Gullace, LLP, No. 15-1859, 2016 WL 1382174, at *7 (7th Cir. Apr. 7, 2016); Pollice v. Nat’l
`
`Tax Funding, L.P., 225 F.3d 379, 404–05 (3d Cir. 2000). This approach makes sense, as
`
`the entire purpose of the FDCPA would be defeated if debt collectors were permitted to
`
`insulate themselves from liability by farming out their collection efforts to smaller debt
`
`collectors who face only nominal monetary judgments due to the FDCPA’s net worth caps.4
`
`Cascade does not dispute that it is a debt collector under the FDCPA. By virtue of its status
`
`as a debt collector, Cascade therefore exercises the requisite control over Dynamic to
`
`impose vicarious liability for Dynamic’s violation of the statute.
`
`Both Dynamic and Cascade also assert the FDCPA’s bona fide error defense as a
`
`means for escaping liability in this case. In order to avail themselves of the defense,
`
`Defendants will need to prove that their violation (1) was not intentional, (2) was the result
`
`of a bona fide error, and (3) occurred despite the maintenance of procedures reasonably
`
`adapted to avoid such an error. 15 U.S.C. § 1692k(c); Edwards v. Niagra Credit Sols., Inc.,
`
`
`3 Although it is unclear what level of control would be necessary, it at least appears that
`the Eleventh Circuit would take the position that a non-debt collector principal may be
`held vicariously liable for the actions of its debt collector agent. See LeBlanc v. Unifund
`CCR Partners, 601 F.3d 1185, 1201–02 (11th Cir. 2010) (per curiam) (focusing on the
`relationships among the parties and stating as dicta that it is “immaterial” for purposes of
`imposing vicarious liability whether a defendant is a debt collector under the FDCPA).
`4 As discussed in more detail below, the FDCPA limits a debt collector’s liability in a class
`action lawsuit in proportion to the debt collector’s net worth. See 15 U.S.C.
`§ 1692k(a)(2)(B). If debt collectors were not exposed to vicarious liability for the activities
`of their agents, debt collectors with high net worths would simply retain debt collectors
`with low net worths to collect on their behalf. These debt collectors could then engage
`in collection activities without regard to the FDCPA’s prohibitions and with relative
`impunity, as the possibility of facing a small monetary judgment based on their modest
`net worth would likely pale in comparison to the prospect of recovering delinquent debts
`the value of which would satisfy such a judgment many times over. Likewise, the higher
`valued debt collector would be indifferent to the lower valued debt collector’s compliance
`(or lack thereof) with the FDCPA because it would be shielded from liability entirely.
`
`
`
`13
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 14 of 23 PageID 336
`
`584 F.3d 1350, 1352–53 (11th Cir. 2009). However, the U.S. Supreme Court has limited
`
`the defense solely to clerical and factual mistakes made in the collection of debts. Jerman
`
`v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587 (2010). Such mistakes
`
`include typographical errors, miscalculations of amounts owed, and other inadvertent
`
`missteps in the debt collection process. See, e.g., Newman v. Ormond, 396 F. App’x 636,
`
`642–43 (11th Cir. 2010) (per curiam) (finding that bona fide error defense covered debt
`
`collector’s typographical error in deposition notice sent to consumer where the notice
`
`scheduled the consumer’s deposition at a time prohibited by the FDCPA); McGhee v.
`
`Weinerman & Assocs., No. 13-C-958, 2015 WL 2401928, at *5 (E.D. Wis. May 20, 2015)
`
`(granting bona fide error defense where computer software malfunction caused consumer’s
`
`account to be incorrectly designated as subject to collection); Puglisi v. Debt Recovery Sols.,
`
`LLC, 822 F. Supp. 2d 218, 227–30 (E.D.N.Y. 2011) (granting bona fide error defense where
`
`debt collector inadvertently attempted to process consumer’s payment before the date
`
`scheduled). A debt collector therefore cannot prevail on a bona fide error defense where its
`
`violation of the FDCPA stems from a mistaken interpretation of the statute’s legal
`
`requirements. Jerman, 559 U.S. at 587; see also, e.g., Bassett v. I.C. Sys., Inc., 715 F.
`
`Supp. 2d 803, 813 (N.D. Ill. 2010) (denying bona fide error defense where debt collector
`
`mistakenly believed that calling consumer thirty-one times over twelve days did not amount
`
`to harassment prohibited by the FDCPA). Because Defendants’ alleged violation in this
`
`case revolves around their misinterpretation of the law—that is, Defendants’ mistaken belief
`
`that the failure to disclose to a consumer that they cannot legally enforce a debt does not
`
`misrepresent the character or legal status of that debt—the violation would not be covered
`
`by the bona fide error defense.
`
`
`
`14
`
`

`
`Case 6:15-cv-00059-PGB-KRS Document 57 Filed 05/04/16 Page 15 of 23 PageID 337
`
`In light of the above, it is not difficult to see that Plaintiff enjoys a high likelihood of
`
`prevailing on the merits against Defendants. The dunning letter mailed by Dynamic seeks
`
`recovery of a debt rendered legally unenforceable by the applicable statute of limitations
`
`without disclosing that fact. The plain meaning of § 1692e(2)(A) prohibits such a practice.
`
`Moreover, Cascade’s theory that it cannot be held vicariously liable for Dynamic’s violation
`
`of the FDCPA is legally unsupportable and Defendants’ bona fide error defense appears to
`
`be unavailable.
`
`c.
`
`The Range of Recovery and Whether the Proposed
`Settlement Falls at a Fair, Reasonable, and Adequate
`Point Within that Range
`
`
`After this weighing of the parties’ respective cases, the Court next considers the range
`
`of Plaintiff’s possible recovery and whether the proposed settlement falls at a fair, adequate,
`
`and reasonable point on that range. In a class action lawsuit, the FDCPA permits an award
`
`of statutory damages up to $1,000 to each named plaintiff and up to the lesser of $500,000
`
`or 1% of the violating debt collector’s net worth, which is to be shared among the remaining
`
`class members. 15 U.S.C. § 1692k(a)(2)(B). The value of statutory damages is ultimately
`
`decided by the trier of fact after considering the frequency and persistence of the debt
`
`collector’s violation, the nature of the violation, the debt collector’s resources, the number of
`
`persons adversely affected by the debt collector’s misconduct, and the extent to which the
`
`debt collector intentionally violated the FDCPA. Id. § 1692k(b)(2).5
`
`

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.

We are unable to display this document.

Go back to the docket to see more.