FDCPA Class Action Claims Certified as a (b)(2) Class after Modification of Class Definition but (b)(3) Class Lacked Predominance as Mini-Hearings would be Required to Establish Damages for each Class Member Ohio Federal Holds
Plaintiffs filed a class action against Cheek & Zeehandelar (an Ohio-based law firm that litigates debt collection actions) and two of its attorneys alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and Ohio’s Consumer Sales Practices Act (CSPA); specifically, the class action complaint alleged that defendant “seeks to garnish or attach the property of Ohio consumers who have defaulted on credit and loan agreements, without having first investigated the nature of the debtors’ property to determine if it is legally exempt from garnishment or attachment.” Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 387, 388-89 (S.D. Ohio 2008). Plaintiffs moved the district court to certify the litigation as a class action: the class action certification motion sought a Rule 23(b)(2) class for declaratory and injunctive relief, and a Rule 23(b)(3) sub-class for monetary damages. Id., at 389. . Id. The district court granted plaintiffs’ motion to certify the Rule 23(b)(2) class, but denied class action treatment as to the Rule 23(b)(2) sub-class.
Ohio law permits a judgment creditor to garnish property based on an affidavit stating “that the person named in the affidavit as the garnishee may have property, other than personal earnings, of the judgment debtor that is not exempt under” Ohio or federal law. Stewart, at 389. According to the class action, defendants execute such affidavits for the purpose of attaching property without conducting a proper investigation. Defendants, by contrast, testified to procedures they had in place to ensure that the affidavits were accurate, though the person who executed the affidavits “never personally contacted the debtors to determine whether their property or funds were exempt, nor did he contact the debtors’ banks, or conduct debtors’ examinations.” Id., at 389-90. Moreover, defendants testified that they did not being sending out discovery “to ascertain the status of their property or funds” until after the class action lawsuit had been filed, id., at 390.
With respect to the proposed Rule 23(b)(2) class, the district court noted that “due process considerations in a (b)(3) damages action are higher than in a (b)(2) declaratory/injunctive relief action because ‘monetary relief … is less of a group remedy and instead depends more on the varying circumstances and merits of each class member’s case.’” Stewart, at 391 (citations omitted). Preliminarily, the federal court determined that the requirements for class action certification under Rule 23(a) – ascertainability, numerosity, commonality/typicality, and adequacy of representation – had been satisfied. See id., at 391-94. It then held that the requirements for class action treatment of a Rule 23(b)(2) had been met because the standard applies where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Id., at 394 (quoting Rule 23(b)(2)). The district court explained at page 394 that “courts certify (b)(2) classes even where monetary relief is at issue, so long as the monetary relief is subordinate to the declaratory and/or injunctive relief” and that “courts regularly grant (b)(2) certification to statutory-damages claims under the FDCPA.” Defense attorneys argued that the class action primarily sought monetary damages but the federal court disagreed, finding, “Plaintiffs are broadly challenging the lawfulness of Cheek & Zeehandelar’s business practice of filing form garnishment affidavits without properly inquiring into the status of the property purportedly subject to garnishment or attachment.” Id. The class action thus sought primarily injunctive and declaratory relief, id.
The proposed definition of the class, however, was problematic. Plaintiffs’ defined the class as “all consumers who have been subject to an order of garnishment or attachment of exempt property or funds, whether temporary or permanent, based on an affidavit signed by any principal, partner, or employee of defendant Cheek & Zeehandelar, at any time on or after August 24, 2004.” Stewart, at 394. The district court found this definition to be “unworkable” because “membership in the class cannot be determined except through individualized factual inquiries”; specifically, “The Court would have to resolve whether the property or funds of each putative class member was actually exempt from garnishment or attachment just to determine whether that person is included within the class.” Id. As this would require a case-by-case analysis, the benefits of class action treatment would be lost, id. The district court elected to exercise its discretion to modify the definition of the class so as to “eliminate any reference to ‘exempt property or funds.’” Id. The court therefore modified the proposed definition of the class and granted plaintiffs’ motion for certification of a Rule 23(b)(2) class. Id., at 394-95.
With respect to the proposed Rule 23(b)(3) sub-class, however, the district court refused to modify the proposed definition of the class. The court readily recognized that the proposed definition of the sub-class “suffers from the same defect as Plaintiffs’ proposed class definition: The inclusion of the word ‘exempt’ makes it impossible to ascertain who is a member of the class without examining the unique circumstances of each putative class member to determine whether his or her attached or garnished property was exempt under either federal or state law.” Stewart, at 395. The district court did not modify the definition because it concluded that “modifying the sub-class definition, as the Court did with Plaintiffs’ proposed class, will not save it.” Id. The problem was that an identical modification to the definition of the proposed Rule 23(b)(3) sub-class “would necessarily include people who had suffered no injury, and therefore are not entitled to any damages, the very thing that the (b)(3) suit is meant to provide.” Id., at 396. Thus, even after the modification, determining which class members were entitled to recover damages would require mini-trials with respect to each class member, thereby defeating the predominance requirement for a (b)(3) class. Id. Accordingly, it denied the class action certification motion as to the Rule 23(b)(3) sub-class, id., at 397.