Can Plaintiffs Evade The FDCPA’s Cap On Total Statutory Damages In A Class Action By Filing Multiple, Gerrymandered Class Actions?

Keywords: Class Action Fairness Act, Class Certification, D. Me., Fair Debt Collection Practices Act, LaRocque v. TRS Recovery Servs. Inc., Mace v. Van Ru Credit Corp., removal, Seventh Circuit, Standard Fire Ins. Co. v. Knowles, Superiority

The Fair Debt Collection Practices Act (FDCPA), which regulates the conduct of debt collectors, authorizes plaintiffs suing over violations to recover statutory damages of up to $1,000. Because these amounts can rapidly add up to exorbitant numbers in a class action for very minor, technical violations, Congress capped the total amount of statutory damages that may be sought for the absent class members in a class action at the lesser of $500,000 or 1 percent of the debt collector's net worth. 15 U.S.C. § 1692k(a)(2)(B).

Now imagine that you're a plaintiff's lawyer who has stumbled across what appears to be a very widespread FDCPA violation committed by a national debt collector—say, an error in the standard dunning letter sent to debtors across the country. Why would you ever file a single nationwide class action in which the class recovery tops out at a half- million dollars (or less, depending upon the defendant's assets)—which means that your fees in a settlement effectively would be capped at a third or a fourth of that amount—when you can file dozens, fifty, or a hundred smaller class actions in which you could recover the same amount in each case?

Of course, any such maneuver wouldbe a transparent evasion of FDCPA's cap on aggregate statutory damages. And it would frustrate Congress's goal of protecting debt collectors from being bankrupted by FDCPA class actions. Nonetheless, in LaRocque v. TRS Recovery Services Inc., No. 2:11-cv-91-DGH (D. Me. Jan. 2, 2013), a district court held that the nothing in the FDCPA prevents plaintiffs from atomizing their class actions in order to recover the statutory cap in a series of individual suits.

In LaRocque, the plaintiffor perhaps her granddaughter, who was a paralegal at a FDCPA class action firmnoticed that a debt-collection letter she had received regarding a bounced check arguably violated the FDCPA. The plaintiff then filed a class action on behalf of a putative class of recipients of similar letters in Maine, andafter that class was certifiedfiled state-specific class actions in four other federal courts. In the case in Maine, the defendants moved to expand the Maine-only class into a nationwide class, arguing that allowing the plaintiffs to pursue a...