Appeals Court Rules Against Debt Collector for FDCPA Class Action Notification

A federal appeals court Friday ruled that a consumer’s Fair Debt Collection Practices Act (FDCPA) case against a collection agency can proceed even though the consumer was found to be part of a class that had previously settled with the firm. The panel found that the firm had given insufficient notice to all potential members of the class.

The Second Circuit Court of Appeals in New York sided with the consumer in Hecht v. United Collection Bureau, Inc. The three-judge panel noted that the company’s notification of a previous class action settlement for the exact violations Hecht alleged was not sufficient and that her case should be allowed to move forward.

Hecht initially filed suit against United Collection Bureau, Inc. (UCB), alleging that the debt collector violated the FDCPA by “plac[ing] telephone calls without meaningful disclosure of the caller’s identity,” and by failing to disclose in its initial communication “that the debt collector [wa]s attempting to collect a debt and that any information obtained w[ould] be used for that purpose.” UCB moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. UCB argued that Hecht’s suit was precluded under the doctrine of res judicata because Hecht alleged facts and violations already litigated, settled, and disposed of by a final judgment of the United States District Court for the Eastern District of New York in Gravina.

A District Court judge in Connecticut agreed with UCB and dismissed Hecht’s case.

In the Gravina case, UCB agreed to pay $13,254 to a class of consumers. Since the class was potentially so large (some two million people), the company paid the money to a charity. Each named plaintiff also received $1,000 under the FDCPA and an additional $1,500 “in recognition for their services to the Settlement Class Members.”

(This is a great place to point out that, while a class comprised of potentially two million people was awarded $13,000, the attorneys representing the class were awarded $90,000 for their trouble.)

To notify potential class members of the settlement, UCB ran one announcement in national newspaper USA Today.

In opposing her case’s dismissal, Hecht did not dispute that she was included in the Gravina Settlement Class definition, nor did she dispute that she had not attempted to opt out of the Gravina settlement, to ask the Gravina court to reconsider its Settlement Order, or to appeal the Settlement Order. Instead, Hecht argued that the Settlement Order did not bind her because the USA Today notice did not comport with due process.

The court agreed and overturned the ruling, sending it back down to the District Court for further action. Specifically, the panel said “aside from individual mailed notice, the defendant could have also undertaken a more extensive notification campaign—including electronic media, local publications, and the like—that would have been more than the ‘mere gesture’ exemplified by the one-time USA Today notice.”