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Babcock v. C. Tech Collections Inc.

United States District Court, E.D. New York

March 27, 2017

JENNIFER BABCOCK, an individual; on behalf of herself and all others similarly situated, Plaintiff,
v.
C. TECH COLLECTIONS, INC., a New York Corporation; JOEL R. MARCHIANO, individually and in his official capacity; JAMES W. ARGENT, individually and in his official capacity; CYNTHIA A. MICHELS, individually and in her official capacity; and JOHN AND JANE DOES NUMBERS 1 THROUGH 50, Defendants. LINDA CAMPBELL-HICKS, individually and on behalf of all others similarly situated, Plaintiff,
v.
C. TECH COLLECTIONS, INC., Defendant.

          ORDER

          MARILYN DOLAN GO UNITED STATES MAGISTRATE JUDGE

         Plaintiffs Jennifer Babcock and Linda Campbell-Hicks brought these consolidated actions alleging that defendants violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., by sending collection letters to consumers in which they attempted to collect unlawful fees for payments made by credit card. Plaintiff Babcock additionally asserted a claim for violation of § 349 of the New York General Business Law ("NY GBL"). After consenting to having me hear all matters in this action pursuant to 28 U.S.C. § 636(c), the parties have moved for final certification of the provisionally certified class pursuant to Fed.R.Civ.P. 23(a) and (b) and final approval of the settlement of this class action pursuant to Fed.R.Civ.P. 23(e).

         FACTUAL AND PROCEDURAL BACKGROUND

         On May 19, 2014, plaintiff Babcock commenced her class action on behalf of herself and similarly situated individuals against C. Tech Collections, Inc. ("C. Tech") and its controlling officers, Joel R. Marchiano, James W. Argent and Cynthia A. Michels (the "Babcock Action"). On June 6, 2014, plaintiff Campbell-Hicks filed her lawsuit against only C. Tech (the "Campbell-Hicks Action"). Both plaintiffs allege in their respective complaints that each and putative class members received collection letters stating that a "$3.00 convenience fee will be added for credit card payments." Plaintiffs claim that the letter is an unlawful attempt to collect an unauthorized fee for payments made using a credit card, in violation of the FDCPA and, as to the Babcock Complaint, section 349 of the New York General Business. See Babcock Action, DE 1[1] at ¶ 58 (alleging violation of 15 U.S.C. §§ 1692e, 1692e(2)(A), 1692e(2)(B), 1692f, and 1692f(1), and NY GBL § 349); Campbell-Hicks Action, DE 1 at ¶ 21 (alleging violation of 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), and 1692e(10)).

         After engaging in written discovery, the parties began settlement negotiations, including participating in several settlement conferences by telephone and in person with the Court. After the parties reached an agreement on the relief to the class, plaintiffs filed a motion for conditional certification of the class action and preliminary approval of the class action settlement on July 13, 2015. DE 30. Plaintiffs also filed a joint motion to consolidate the Babcock and Campbell-Hicks actions. DE 29.

         At a hearing held on July 23, 2015, the Court granted the parties' motion for consolidation. See minute entry dated 7/23/15. In the course of the hearing, the parties agreed to amend the Settlement Agreement to provide that the agreed upon service awards for the named plaintiffs would be subject to court approval and any disallowed amounts would revert to the settlement fund for class members. Id. On July 24, 2015, plaintiffs filed an amended settlement agreement (the "Settlement Agreement"). See DE 32.

         This Court then entered an order granting both motions, (1) conditionally certifying the proposed class for settlement purposes, (2) preliminarily approving the Settlement Agreement, (3) appointing plaintiffs' counsel as class counsel, and (4) approving the proposed class notices of settlement of the litigation. See DE 33. Specifically, this Court provisionally certified a settlement class consisting of two subclasses, the second of which was a subset of the first. The classes are defined as follows:

(1) All consumers to whom Defendants mailed a written communication in connection with an attempt to collect a debt, which included a statement that a "$3.00 convenience fee will be added for credit card payments, " regardless of whether such fee was paid or not, during a period beginning May 19, 2013, and ending June 9, 2014 ("Class #1"); and
(2) All consumers to whom Defendants mailed a written communication in connection with an attempt to collect a debt, which included a statement that a "$3.00 convenience fee will be added for credit card payments, " and who paid such a fee, during a period beginning May 19, 2011, and ending June 9, 2014 ("Class #2").

         Under the Settlement Agreement, the defendants agreed to fund a settlement in the total amount of $90, 726.00. From this fund, the named plaintiffs will each receive a payment of $1, 000.00 for their individual statutory damages claims under the NY GBL, plus a service award of up to $3, 500.00, subject to court approval; and plaintiff Babcock will receive an additional $153.00 for her claims brought under New York General Business Law § 349 for actual damages sustained. The remainder of the settlement fund will be distributed to members of the two subclasses who file timely claim forms. A minimum of $12, 000.00 will be made available to members of Class #1 and $69, 573.00 will be made available for Class # 2 members for actual damages sustained -- i.e., reimbursement of all payments made to the defendants for the $3.00 charge for payment by credit card. Any unclaimed portion of the $69, 573.00 fund for Class #2 members and any disallowed service award to the named plaintiffs will be added to the fund for Class #1. Each member of Class #1, including each member of Class #2, who timely submits a claim form is entitled to an equal[2] portion of the total fund for Class #1 members. To the extent that there are any funds from un-cashed, expired settlement checks, those funds will be paid over to a cy pres award to be distributed to the National Consumer Law Center. The parties further agreed that plaintiffs are the prevailing parties under 15 U.S.C. § 1692k, and that defendants would pay reasonable attorneys' fees and costs, which the parties would attempt to negotiate later.

         On November 10, 2014, Babcock filed her motion for final approval of the Class Settlement and indicated that 3, 710 members of the proposed classes had filed claims, [3] eight persons had requested to be excluded, and no one had objected. Radetich Decl. (DE 40-2) at ¶¶ 9, 10. Of the 3, 710 persons who returned a claim form, 3, 244 are from Class #1 and 466 are from Class #2. Id. at ¶ 9. At the fairness hearing, the Court granted plaintiffs' unopposed motion to extend the time to submit claim forms to November 17, 2015. Such extension permits inclusion of the late claims of James Joseph, Kelly Laterra, Janice Knight and Cherylann Hionas. See minute entry dated 11/17/15; ct. docs. 42, 45. By the Court's calculation, each member of Class #1 will receive approximately $21 and each member of Class #2 will receive reimbursement of all actual damages sustained, plus a per capita share of the fund for Class #1.

         On the eve of the fairness hearing, plaintiff Babcock entered into a stipulation with defendants in which defendants agreed to pay $55, 000 to counsel for Babcock for attorneys' fees and costs. See DE 40-3. After the fairness hearing, plaintiff Campbell-Hicks and defendant C. Tech entered into a stipulation for payment of $30, 000 to counsel for Campbell-Hicks for attorneys' fees and costs. See Campbell-Hicks Action, DE 29 at 29. These payments are separate and apart from the funds provided under the Settlement Agreement.

         DISCUSSION

         I. Final Certification of the Settlement Class

         The Court certifies the following classes under Fed.R.Civ.P. 23(e), for settlement purposes:

(1) All consumers to whom Defendants mailed a written communication in connection with an attempt to collect a debt, which included a statement that a "$3.00 convenience fee will be added for credit card payments, " regardless of whether such fee was paid or not, during a period beginning May 19, 2013, and ending June 9, 2014 ("Class #1"); and
(2) All consumers to whom Defendants mailed a written communication in connection with an attempt to collect a debt, which included a statement that a "$3.00 convenience fee will be added for credit card payments, " and who paid such a fee, during a period beginning May 19, 2011, and ending June 9, 2014 ("Class #2").

         This Court finds that plaintiffs meet all of the requirements for class certification under Fed.R.Civ.P. 23(a) and (b)(3). Rule 23(a) of the Federal Rules of Civil Procedure requires that any proposed class action: "(1) be sufficiently numerous, (2) involve questions of law or fact common to the class, (3) involve class plaintiffs whose claims are typical of those of the class, and (4) involve a class representative or representatives who adequately represent the interests of the class." Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010).

         Plaintiffs satisfy Fed.R.Civ.P. 23(a)(1) because there are over 70, 000 potential class members and therefore joinder is impracticable. See Consol. Rail. Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995) ("numerosity is presumed at a level of 40 members").

         Plaintiffs satisfy Fed.R.Civ.P. 23(a)(2), because plaintiffs and the class members share common issues of fact and law. The claims all arise from the same boilerplate collection letter sent by the defendants imposing a $3.00 charge for payments made by credit card. See Marisol A. ex rel. Forbes v. Giuliani, 126 F.3d 372, 376 (2d Cir.1997) ("The commonality requirement is met if plaintiffs' grievances share a common question of law or of fact").

         For the same reasons, plaintiffs satisfy Fed.R.Civ.P. 23(a)(3), typicality, because plaintiffs claims arise from the same factual and legal circumstances as those of the class members. See Prasker v. Asia Five Eight LLC, No. 08 Civ. 5811, 2010 WL 476009, at *2 (S.D.N.Y. Jan. 6, 2010).

         Plaintiffs also satisfy Fed.R.Civ.P. 23(a)(4) which requires that "the interests of the class" be "fairly and adequately protect[ed]." In making such a determination, the court must make sure that the members of the class possess the same interests, and that no fundamental conflicts exist among the members. Denney v. Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006). Plaintiffs' interests clearly are not antagonistic or at odds with the class members. See Diaz v. Eastern Locating Servs., Inc., 10 Civ. 4082, 2010 WL 2945556, at *2 (S.D.N.Y. July 22, 2010); Prasker, 2010 WL 476009, at *2.

         Plaintiffs also satisfy the requirements of Rule 23(b)(3). This requirement is met "if resolution of some of the legal or factual issues that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof." Myers, 624 F.3d at 547 (internal citation and quotation marks omitted). Plaintiffs' common legal claims clearly predominate over any factual or legal variations among class members given the allegations in the complaint. See Diaz, 2010 WL 2945556, at *2; Prasker, 2010 WL 476009, at *2. For the same reason, plaintiffs satisfy the superiority requirement because the class action mechanism will enable disposition of thousands of similar claims in one forum, conserving judicial resources and benefitting class members, particularly those who lack the resources to bring their claims individually. See Rodolico v. Unisys Corp., 199 F.R.D. 468, 479-80 (E.D.N.Y. 2001) (class actions provide a superior method for "the efficient resolution of the claims or liabilities of many individuals in a single action, as well as the elimination of repetitious litigation and possibly inconsistent adjudications").

         II. Approval of the Settlement Agreement

         In evaluating a proposed settlement under Rule 23(e) of the Federal Rules of Civil Procedure, the Court must determine whether the settlement, taken as a whole, is fair, reasonable and adequate. See Joel A. v. Giuliani, 218 F.3d at 138. Settlements are strongly favored as a matter of policy, because, "[b]y lessening docket congestion, settlements make it possible for the judicial system to operate more efficiently and more fairly while affording plaintiffs an opportunity to obtain relief at an earlier time." Evans v. Jeff D., 475 U.S. 717, 761 n.15 (1986). Courts should exercise their discretion "in light of the general judicial policy favoring settlement.'" In re Sumitomo Copper Litig., 189 F.R.D. 274, 280 (S.D.N.Y. 1999) (citation omitted); accord Maley v. Del Global Tech. Corp., 186 F.Supp.2d 358, 361 (S.D.N.Y. 2002).

         A court evaluating the fairness of a settlement should examine both procedural and substantive fairness. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005), citing D'Amato v. Deutsche Bank, 236 F.3d 78, 85-86 (2d Cir. 2001).

         A. Procedural Fairness

         In reviewing the procedural fairness of a settlement, a court "must pay close attention to the negotiating process, to ensure that the settlement resulted from 'arm's-length negotiations and that plaintiffs' counsel have possessed the experience and ability, and have engaged in the discovery necessary to effective representation of the class's interests.'" D'Amato, 236 F.3d at 85 (quoting Weinberger v. Kendrick, 698 F.2d 61, 74 (2d Cir. 1982)). A proposed class action settlement enjoys a strong presumption that it is fair, reasonable and adequate if, as is the case here, it was the product of arm's length negotiations conducted by capable counsel, well experienced in class action litigation. See Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 117 (2d Cir. 2005); see also McReynolds v. Richards-Cantave, 588 F.3d 790, 803 (2d Cir. 2009). In addition, "[i]n appraising the fairness of a proposed settlement, the view of experienced counsel favoring the settlement is 'entitled to [] great weight' . . . . [and] there is thus a strong initial presumption that the compromise as negotiated herein under the [c]ourt's supervision is fair and reasonable." In re Michael Milken and Assocs. Sec. Litig., 150 F.R.D. 46, 54 (S.D.N.Y. 1993) (internal citation omitted).

         The parties reached this settlement after the parties had conducted discovery regarding the boilerplate letter at issue. Defendants had provided documents and interrogatory responses with information regarding class size, net worth, identification of all potential class members and damages calculations. See letter dated Dec. 19, 2014 (DE 23) of Arthur Sanders, counsel for defendant. The parties then participated in extended settlement ...


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