United States: A Strategy For Defeating Class Certification In Fair Debt Collection Practices Act Putative Class Actions

Because not all obligations to pay are considered debts under the Fair Debt Collection Practices Act (FDCPA), a threshold issue in a suit brought under the FDCPA is whether or not the dispute involves a "debt" within the meaning of the statute. Turner v. Cook, 362 F.3d 1219, 1227 (9th Cir. 2003) (citing Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1075 (9th Cir. 2001) ("Slenk")). Consequently, when Plaintiffs bring a class action under the FDCPA, one effective way of opposing class certification is on the basis that a class is not proper because it requires an individual determination that each class member has a "debt" as defined in the FDCPA.

Federal Rule of Civil Procedure 23(b)(3) provides that a class action may be maintained if Rule 23(a)'s standards are met and the Court finds that "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." "Rule 23(b) (3) requires that common questions of law or fact predominate over any individual questions, and that a class action be superior to other available methods for the fair and efficient adjudication of the controversy." In re Hotel Tel. Charges, 500 F.2d 86, 88 (9th Cir. 1974). "While these two requirements are to some extent interrelated, they are not co-extensive and each requirement must be met." Id. "Determining whether common issues predominate does not involve the application of a precise test. Instead, it requires a pragmatic assessment of the entire action and the issues involved." Rodriguez v. Carlson, 166 F.R.D. 465, 477 (Wash. 1996). Certification under Rule 23(b)(3) is improper where individualized issues of fact or law will overwhelm questions common to the class. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432, 185 L. Ed. 2d. 515 (2013); Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. 1184, 1196, 185 L. Ed. 2d 308 (2013).

"Predominance of issues common to all class members, like the other requirements for certification of a suit as a class action, goes to the efficiency of a class action as an alternative to individual suits." Parko v. Shell Oil Co., 739 F.3d 1083, 1085 (7th Cir. 2014). Consequently, if resolving a common issue will not greatly simplify the litigation to judgment or settlement of claims of hundred or thousands of claimants, the complications, the unwieldiness, the delay, and the danger that class treatment would expose the defendant or defendants to settlement-forcing risk are not costs worth incurring. Id. "If proof of the essential elements of the cause of action requires individual treatment, then class certification is unsuitable." In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008).

The FDCPA defines a "debt" as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to a judgment." 15 U.S.C. § 1692a(5). To determine whether an obligation constitutes a "debt" under the FDCPA, a court must "examine the transaction as a whole, paying particular attention to the purpose for which the credit was extended in order to determine whether the transaction was primarily consumer or commercial in nature." Slenk, supra, 236 F.3d at 1075. Consequently, with very few exceptions, the argument can be made that a determination of who is a member of the class in a FDCPA class action necessarily requires a determination that each class member's debt qualifies as a consumer debt under the FDCPA. For example, if the debt in question is for credit card charges, the charges would not constitute a consumer debt under the FDCPA if the credit card was used to pay fines and/or business expenses, which are not "primarily for personal, family, or household purposes."

A second example is home owners' association dues. Such dues constitute a debt covered by the FDCPA only if the person purchased the property "in order to live in it, rather than rent it out . . . ." Beeks v. ALS Lien Services, No. CV 12-2411, 2014 U.S. Dist. LEXIS 182078 at *14-15 (C.D. Cal. Feb. 18, 2014) (emphasis added). In Beeks, the defendant moved for summary judgment on the ground that the plaintiff's claims for violation of the FDCPA lacked merit because the obligation at issue, homeowners association assessments, did not constitute a consumer debt under the FDCPA. 2014 U.S. Dist. LEXIS 182078 at *8-9. The Beeks court undertook an exhaustive analysis of what constitutes an actionable debt under the FDCPA, and noted that other courts which have confronted the matter all closely examined the plaintiff's intent when acquiring the properties at issue. Id. at *10-11. The Court concluded: "As such, the court should examine plaintiff's intent at the time she purchased her condominium. [Citations]. In other words, if plaintiff purchased her condominium in order to live in it, rather than to rent it out, her past-due assessments are debts covered by the FDCPA." Id. at *13-14; see also Aniel v. EMC Mortgage Corp., No. C 10-5170, 2011 U.S. Dist. LEXIS 21890 at *16 fn. 6 (N.D. Cal. March 4, 2011) (dismissing FDCPA claim where "it [was] apparent that Plaintiffs obtained the mortgage while the Property was being used as a rental"). The Beeks court then explained the rigorous, fact-intensive analysis necessary: "Here, plaintiff states that she 'resided at the above address [the relevant condominium] for approximately 4-years. For about the last 1-1/2 years, I have been renting it out to someone else.' [Citation to the Record]. Given the amount of time plaintiff occupied the condominium, it appears that she purchased it for her personal use. However, the evidence relating to plaintiff's intent is not completely clear. Adding together the four years plaintiff lived in the condominium plus one-and-one-half years of renting it out, accounts for a total of five-and-one-half years. However, according to the deed, plaintiff purchased the condominium on April 25, 2006, approximately seven years before plaintiff executed her declaration. [Citation to Record]. Thus, there is a period of approximately one and a half years that is unaccounted for and there is no evidence as to when that period occurred or to what use the property was put during that period. Accordingly, there is a genuine issue of material fact as to plaintiff's purpose at the time she purchased the condominium." 2014 U.S. Dist. LEXIS 182078 at *14.

In the context of opposing class certification, the argument is that the Court must effectively conduct mini-trials as to each proposed class member to determine whether the debt at issue constitutes a consumer debt under the FDCPA. The argument is that this issue, which is completely individualized, effectively overwhelms the common issues, and, thus, class certification is not appropriate.    

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