Certifiability Of Class Actions And The FDCPA’s Liability Cap

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Author: Austin B. Kenney

Courts differ as to whether the $500,000 statutory cap on class action recovery under the federal Fair Debt Collection Practices Act (“FDCPA”) (and its California counterpart, the “Rosenthal Act”) renders class certification the superior method for adjudicating mass unfair debt collection actions.

The FDCPA, by itself and as incorporated by the Rosenthal Act, caps class action recovery at “the lesser of $500,000 or 1 per centum of the net worth of the debt collector”. 15 U.S.C. § 1692k(a)(2)(B); Cal. Civ. Code § 1788.17. Plaintiffs in an individual case, however, can recover a maximum statutory penalty of $1,000 per case. 15 U.S.C. § 1692k(a)(2)(A). Thus, where the class is large, or where the net worth of the debt collector is small, the putative class members stand to recover significantly less than if they had filed suit individually.

As a general proposition, some courts hold that classes should not be certified where the class members’ recovery would be “de minimis”. See, e.g., Wilson v. Transworld Systems, Inc., 2002 WL 1379246 (M.D. Fla. Mar. 29, 2002) (holding that denial of class certification was appropriate in an FDCPA case to preserve rights of individuals to “pursue collection of actual damages (rather than some arbitrary and miniscule participation in a global award)”).

However, “[o]ther courts have held that a class action may be the superior method of adjudicating FDCPA claims even if the amount of potential recovery by each class member is small or negligible.” Durham v. Continental Cent. Credit, 2010 WL 2776088, at *6 (S.D. Cal. July 14, 2010). As the Ninth Circuit stated in Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (9th Cir. 2009), “[t]he overarching focus remains whether trial by class representation would further the goals of efficiency and judicial economy.” 571 F.3d at 946. Similarly, the costs of litigation may weigh more heavily than the likely result. See, e.g., Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168, 1175-76 (9th Cir. 2010) (“Where recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis, this factor weighs in favor of class certification.”).

Some courts recognize that the paucity of class recovery compared to individual recovery should not prevent certification where other procedural mechanisms–such as opt-out provisions–exist to protect class members. See, e.g., Wright v. Linkus Enterprises, Inc., 259 F.R.D. 468, 474 (E.D. Cal. 2009). The opt-out provision allows consumers the opportunity to weigh the benefit of the de minimis recovery against the cost and burden of filing their own lawsuit to collect a slightly higher penalty that might be available to them in an individual, non-class case.

Ultimately, the primary considerations for courts weighing class certification in FDCPA cases is whether putative class members have a sufficient interest in the action to warrant certification pursuant to Rule 23(b)(3) and whether the class members’ potential recovery can be reconciled with the rigors of class litigation.


For more information about the class action liability cap in the FDCPA, contact
Austin B. Kenney at abk@severson.com.

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