Beck v. Maximus Inc, (3rd Cir. 2006)
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PRECEDENTIAL
U N IT E D STATES COURT OF APPEALS
F O R THE THIRD CIRCUIT
N o . 05-3530
D O N N A M. BECK,
O N BEHALF OF HERSELF AND ALL
O T H E R S SIMILARLY SITUATED
v. M A X IM U S , INC.,
Appellant
O n Appeal from the United States District Court
f o r the Eastern District of Pennsylvania
D .C . Civil Action No. 04-cv-02199
(H o n o ra b le Edmund V. Ludwig)
A rg u e d April 27, 2006
B e f o re : SCIRICA, Chief Judge, N Y G A A R D and ALARCÓN * , Circuit Judges (F ile d August 4, 2006 ) J A M E S A. KELLER, ESQUIRE (ARGUED) J A M E S F. KILCUR, ESQUIRE S a u l Ewing LLP C e n t re Square West 1 5 0 0 Market Street, 38th Floor P h ila d e lp h ia , Pennsylvania 19102 A tto rn e ys for Appellant J A M E S A. FRANCIS, ESQUIRE (ARGUED) F ra n c is & Mailman, P.C.
L a n d Title Building 1 0 0 South Broad Street, 19th Floor P h ila d e lp h ia , Pennsylvania 19110 D A V ID A. SEARLES, ESQUIRE D o n o v a n Searles, LLC 1 8 4 5 Walnut Street, Suite 1100 P h ila d e lp h ia , Pennsylvania 19103 A tto rn e ys for Appellee O P IN I O N OF THE COURT b e in g mistaken for one another. They had been confused on v o te r registration rolls, and their credit histories had been mixed u p by the credit information service that provided Maximus with e m p lo ym e n t information.
Before sending the Employment Verification Request, a M a x im u s representative telephoned Inolex at least twice, a tte m p t in g to reach Beck. On one call, Inolex's humanre so u rc e s department informed the Maximus representative that, b a se d on the social security number he provided, the debtor " D o n n a M. Beck" did not work there. The Maximus re p re s e n ta tiv e responded by contending Beck must be using two d i f f e re n t social security numbers. Notified of the inquiries, B e c k called Maximus to clarify she was not the debtor in q u e stio n . She also contacted the other Donna M. Beck, met her in person, and established she had an outstanding debt with the D e p a rtm e n t of Education. After this meeting, neither woman c o n ta c te d Maximus to clarify the situation. Beck testified that w h e n she saw the Employment Verification Request, she knew it was intended for the other Donna M. Beck and was sent to In o le x in error.
On May 20, 2004, Beck filed a complaint in the District C o u rt, alleging Maximus violated the Fair Debt Collection P r a c tic e s Act, 15U.S.C. §§ 1692b, 1692c, 1692d, 1692e, and 1 6 9 2 f . The Fair Debt Collection Practices Act is intended to p ro te c t both debtors and non-debtors from misleading and a b u s iv e debt-collection practices. See § 1692(e). Among other th in g s , the Act expressly prohibits "[a]ny debt collector c o m m u n ic a tin g with any person other than the consumer" from " sta t[ in g ] that such consumer owes any debt," § 1692b(2), and f ro m "indicat[ing] that the debt collector is in the debt collection b u s in e ss or that the communication relates to the collection of a debt," § 1692b(5). The complaint alleged Maximus violated th e Act by sending Beck's employer a form collection letter, w h ic h improperly identified the sender as a collection agency a n d implied the existence of a debt.
S e c tio n 1692k(c) of the Act offers a defense to a debt co llec to r whose violation results from a bona fide error. It provides: A debt collector may not be liable in any action u n d e r this subchapter if the debt collector shows b y a preponderance of evidence that the violation w a s not intentional and resulted from a bona fide e rro r notwithstanding the maintenance of p ro c e d u re s reasonably adapted to avoid such erro r.
1 5U.S.C. § 1692k(c).
B e c k filed a motion for class certification of 776 c o n su m e rs in Pennsylvania whose employers received an E m p lo ym e n t Verification Request from Maximus. Maximus re s p o n d e d it had a defense to Beck's claims under § 1692k(c) b e c au s e it made a bona fide error on the identity of the debtor " D o n n a M. Beck." Maximus contended this defense, unique to B e c k ' s claims, precluded Beck from being an adequate re p re se n ta tiv e with claims typical of the class. After the District C o u r t denied Maximus's motion to dismiss the class allegations, M a x im u s filed an answer to the complaint, again contending it h ad a defense to Beck's claims under § 1692k(c).
M a x im u s designated two corporate witnesses under Fed.
R . Civ. P. 30(b)(6)--the project manager who oversaw student lo a n collection, and the collection supervisor in charge of a ss u rin g compliance with the Fair Debt Collection Practices Act.
A t depositions prior to class certification, these witnesses ex p lain ed the Employment Verification Request was a standard f o rm letter, drafted by Maximus. It was used to verify whether a given debtor worked for the employer Maximus had listed in its records. The witnesses testified Maximus had no specific p r o c e d u res governing use of Employment Verification Requests.
T h e y also testified that sending the Employment Verification R e q u e st to Beck's employer did not violate any established p o lic y, and that it was not uncommon to send Employment V e rif ic a tio n Requests to the wrong employer.
Following oral arguments, the District Court certified a c la s s consisting of all individuals in Pennsylvania to whose e m p l o ye r Maximus had sent an Employment Verification R eq u est on or after May 20, 2003. The District Court d e sig n a te d Beck as class representative and the law firms of F r a n c is & Mailman, P.C., and Donavan and Searles, LLC, as c las s co-counsel.
In its "findings of facts" supporting class certification u n d e r Fed. R. Civ. P. 23(a),1 the District Court noted neither n u m e ro s ity nor commonality was in dispute. Numerosity was sh o w n by the existence of 776 class members, and commonality w a s satisfied because "[t]he principal question is whether d e f en d a n t violated the Fair Debt Collection Practices Act by se n d in g an `Employment Verification Request' or a substantially sa m e form to the person's employer(s) on or after the applicable d a te ." (App. 4a.) The court concluded typicality was satisfied b e c au s e "[t]he claims of plaintiff Donna M. Beck are typical of th e claims of the Class." (Id.) In a footnote, the court rejected M a x im u s 's contention that Beck was atypical because her c la im s were subject to a unique defense. The court stated: [ D ]e f e n d a n t says that sending the EVR to p la in tif f 's employer was the result of a bona fide e rro r and defensible. Plaintiff counters that it is irre le v a n t whether the communication was in e rro r, because the violation--the prohibited lan g u ag e included in all EVRs--was not an error.
P la in tif f cites deposition testimony of two re p re s e n ta tiv e s of defendant that (1) defendant d ra f te d the language of the EVR, (2) there was no sp e c if ic procedure for sending EVRs, and (3) it w a s not uncommon for EVRs to be sent to e m p l o ye rs for whom debtors did not work. Given th is evidence, the EVR does not appear to have b e e n sent to Ms. Beck's employer in error, and s h e will not be disqualified from representing the c la s s on this basis.
(A p p . 4a n.4 (internal citations to District Court record o m itte d ).) The court concluded adequacy of representation was a ls o satisfied, noting Beck "retained qualified counsel, appeared f o r deposition, and verified answers to interrogatories." (App.
5 a n.5.) The District Court concluded the class could be m ain tain e d under Rules 23(b)(1), (b)(2), and (b)(3). The court d i d not acknowledge Beck had previously withdrawn her request fo r certification under Rule 23(b)(2).
M a x im u s petitioned for an interlocutory appeal under F e d . R. Civ. P. 23(f), which we granted. Maximus contends if it prevails on its bona fide error defense, Beck will be precluded f ro m recovery on the class's claims. In its view, the District C o u rt abused its discretion in concluding Beck was a typical and a d e q u ate class representative, and in certifying the class. Beck re sp o n d s her interests are aligned with those of the class. That s h e was not the "Donna M. Beck" referred to in the Employment V e rif ic a tio n Request, she contends, is a factual variation that d o e s not create a conflict of interest between her and the class, a n d does not render her inadequate or atypical as a class r e p re s e n ta tiv e .
II.
T h e District Court had jurisdiction under 28U.S.C. § 1 3 3 1 . We have jurisdiction under 28U.S.C. § 1292(e). We re v ie w a district court's decision to certify a class for abuse of d is c re tio n . In re Prudential Ins. Co. Am. Sales Practice Litig., 1 4
I I I.
A.
T o evaluate typicality, we ask "whether the named p la in tif f s' claims are typical, in common-sense terms, of the class, thus suggesting that the incentives of the plaintiffs are a lig n e d with those of the class." Baby Neal v. Casey,
5 9 1 , 625 (1997). It "assures that the named plaintiffs' claims a re not antagonistic to the class and that the attorneys for the c las s representatives are experienced and qualified to prosecute th e claims on behalf of the entire class." Baby Neal, 43 F.3d at 55.
The Supreme Court has noted the typicality and adequacy in q u irie s often "tend[] to merge" because both look to potential c o n f lic ts and to "whether the named plaintiff's claim and the c la s s claims are so interrelated that the interests of the class m e m b e rs will be fairly and adequately protected in their a b s e n c e ." 2 Amchem, 521 U.S. at 626 n.20 (quoting Gen. Tel.
C o . Sw. v. Falcon, 457 U.S. 147, 157 n.13 (1982)). Because of th e similarity of these two inquiries, certain questions--like w h eth e r a unique defense should defeat class certification--are re le v a n t under both.
M a x i m u s contends its alleged bona fide error defense r e n d e r s Beck neither typical nor adequate as a class 2 Nevertheless, a court should address each Rule 23(a) factor in a certification decision. Despite areas of overlap, each factor in v o lv e s distinct considerations. The adequacy inquiry, for e x a m p le , "factors in competency and conflicts of class counsel," A m c h e m Products, Inc. v. Windsor, 521 U.S. 591, 626 n.20 (1 9 9 7 ), which the typicality requirement does not. rep rese n tativ e. Beck disputes that the alleged defense renders h e r atypical, but does not address its effect on her adequacy of re p re se n ta tio n . The District Court also addressed the issue e x c lu s iv e ly in terms of typicality. We believe the alleged unique d e f e n se is relevant under both inquiries. Accordingly, we will a d d re ss both the typicality and adequacy requirements of Rule 2 3 (a).
C o u rts of appeals have held that unique defenses bear on b o th the typicality and adequacy of a class representative. See, e .g ., Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, F e n n e r & Smith, Inc., 903 F.2d 176, 180 (2d Cir. 1990) (" R e g a rd le ss of whether the issue is framed in terms of the typ ic a lity of the representative's claims . . . or the adequacy of its representation . . . there is a danger that absent class members w ill suffer if their representative is preoccupied with defenses u n iq u e to it."); J.H. Cohn & Co. v. Am. Appraisal Assocs., 628 F .2 d 994, 999 (7th Cir. 1980) ("[T]he presence of even an a rg u a b le defense peculiar to the named plaintiff or a small su b se t of the plaintiff class may destroy the required typicality o f the class as well as bring into question the adequacy of the n a m e d plaintiff's representative."). Commentators agree. See 7 A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, F e d e ra l Practice and Procedure, § 1764 (3d ed. 2005) (noting s e c u ritie s class actions in which a unique defense defeated typ ica lity); id. at § 1765 (citing cases in which a unique defense d e f ea te d adequacy of representation); 5 James Wm. Moore et a l., Moore's Federal Practice § 23.24[5] (3d ed. 2006) (typicality); id. at § 23.25[2][b][iv] (adequacy of representation).
O th e r courts of appeals emphasize, as do we, the c h a l le n g e presented by a defense unique to a class re p r e s e n ta tiv e -- th e representative's interests might not be a lig n e d with those of the class, and the representative might d e v o te time and effort to the defense at the expense of issues th a t are common and controlling for the class. See, e.g., Gary P la s tic Packaging, 903 F.2d at 180 ("[T]here is a danger that a b s e n t class members will suffer if their representative is p re o c c u p ied with defenses unique to it."); see also Hanon v. D a ta p r o d u c ts Corp., 976 F.2d 497, 508 (9th Cir. 1992); J.H.
C o h n & Co., 628 F.2d at 999. A class representative should " n o t be permitted to impose such a disadvantage on the class." K o o s v. First Nat'l Bank of Peoria, 496 F.2d 1162, 1165 (7th C ir. 1974).
B.
D is tric t courts have discretion under Rule 23 to certify a c la s s . See Califano v. Yamasaki, 442 U.S. 682, 703 (1979). But a trial court must clearly articulate its reasons, in part, so we can a d e q u a te ly review the certification decision on appeal under R u l e 23(f). Under Rule 23(c)(1)(B), the trial court must " in c lu d e in class certification orders a clear and complete s u m m a r y of those claims, issues, or defenses subject to class tre a tm e n t." Wachtel v. Guardian Life Ins. Co. of America, No.
0 4 -4 3 0 4 , slip op. at 14 (3d Cir. June 30, 2006).
A class may be certified only if the court is "satisfied, a f te r a rigorous analysis, that the prerequisites of Rule 23(a) h a v e been satisfied." Falcon, 457 U.S. at 161. In addition, " p a rties seeking class certification must show that the action is m a in ta in a b le under Rule 23(b)(1), (2), or (3)." In re Warfarin S o d iu m Antitrust Litig., 391 F.3d 516, 527 (3d Cir. 2004).
D e p e n d in g on the circumstances, class certification questions a re sometimes "enmeshed in the factual and legal issues c o m p r is in g the plaintiff's cause of action," and "courts may d e lv e beyond the pleadings to determine whether the re q u i r e m e n ts for class certification are satisfied." Newton v. M e rr ill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 167 (3 d Cir. 2001) (quotations omitted).
H ere , we have difficulty discerning the District Court's r e a so n s for concluding Beck was a typical and adequate class re p re s e n ta tiv e . We note two problems in particular. First, we a r e unclear whether the court concluded the alleged violation w a s based on the content of the Employment Verification R e q u e st or on the transmission of the form to third-party e m p l o ye rs . This issue, which the parties contest, is central to a p ro p e r certification analysis in this case. Second, we are unclear w h e th e r the court considered the three requirements of a s u c c es s f u l bona fide error defense in concluding that the E m p lo ym e n t Verification Request had not been sent to Inolex in e rro r, and that Beck should not be disqualified on these grounds a s a class representative. Because these two issues are closely related , we address them together.
T o qualify for the bona fide error defense under the Fair D e b t Collection Practices Act, a defendant's alleged violation of th e Act must have been "unintentional" and must have "resulted f ro m a bona fide error notwithstanding the maintenance of p ro c e d u re s reasonably adapted to avoid such error." 15U.S.C.
§ 1692k(c). Accordingly, to avail itself of the defense, Maximus w ill have to establish: (1) the alleged violation was u n in te n tio n a l, (2) the alleged violation resulted from a bona fide e rro r, and (3) the bona fide error occurred despite procedures d e s ig n e d to avoid such errors. See Johnson v. Riddle,
B e c k contends the alleged violation resulted from the c o n te n t of the Employment Verification Request. She explains th e "standardized language" of the form gave rise to identical c l a i m s on behalf of each class member, and concludes " [ w ]h e th e r the language of the EVR violates the [Act] is the c o m m o n overarching issue in this case." 3 (Appellee's Br. 11.) 3 At some points in her brief, Beck concedes the importance o f the communication of the Employment Verification Request.
S h e states, "[t]ypicality was satisfied because all the claims are b a se d on the sending of the improper EVR form to third-party e m p l o ye rs ." (Appellee's Br. 12.) And in contending her in t e re s ts were aligned with those of the class, she states, " M a x im u s sent the EVR to Ms. Beck's employer just as it sent th e same EVR to Class members' employers." (Appellee's Br.
M a x im u s takes the opposite position--that the transmission and n o t the content of the Employer Verification Request gave rise t o the class's claims. Maximus contends a debt collection le tte r's content alone cannot violate the Fair Debt Collection P r a c tic e s Act, and it is only when the content is communicated to a consumer or a third party that a violation can occur.
T h e District Court appears to have adopted each party's p o s itio n at different points in its analysis.4 In the text of the o p in io n , the court focused on the form's transmission, a rticu latin g the principal "question[] of law or fact common to th e class" as "whether defendant violated the Fair Debt C o lle c tio n Practices Act by sending an `Employment V e rif ic a tio n Request' or a substantially same form to the p e rs o n 's employer(s) on or after the applicable date." (App. 4a.) T h is is Maximus's position. But in footnote seven, the court ad o p ted Beck's contrary position, focusing on the form's c o n ten t as the basis of the violation. The court stated, "[i]t is u n d is p u te d that the dispositive issue is whether the display of `M A X IM U S Collection Center' at the top and bottom of the E V R violated the [Act]." (App. 5a n.7.) The difference between the parties' positions is central to d e te rm in in g whether Maximus could possibly establish the three re q u ire m e n ts of a bona fide error defense, and possibly defeat B e c k 's typicality and adequacy as a class representative. The re c o rd demonstrates the drafting of the Employment V e rif ic a tio n Request was neither unintentional nor the result of a bona fide error under the first two requirements of the defense.
M a x im u s's witnesses testified--and Maximus concedes--that M a x im u s drafted the form's language. But the transmission of th e form to Beck's employer, Inolex, may have been both u n in te n tio n a l and the result of a good faith, bona fide error on th e identity of the debtor "Donna M. Beck." Maximus relied on a credit agency that reported the debtor Beck worked for Inolex.
A t issue is whether Maximus was aware this information was in c o rre c t.5 5 Maximus was arguably alerted to its mistake when Inolex's h u m an resources department informed a Maximus representative th a t Inolex did not employ the debtor "Donna M. Beck." But at o ra l argument, Maximus explained it is often informed a person f o r whom it is looking is not located or employed at a certain If the error resulted from the transmission of the form, a n d if Maximus can establish the third requirement of the d e f en s e -- a d e q u ate procedures to avoid such errors--Maximus m ay have a bona fide error defense that might defeat Beck's typ ica lity and adequacy. The District Court did not address this p o s s ib ility. Rather, it concluded "[b]ased on this evidence, the E V R does not appear to have been sent to Ms. Beck's employer in error." (App. 4a.) This conclusion does not follow from the e v id e n c e the court cited, which constitutes the entirety of the c o u r t' s analysis.6 T h e court cited testimony that Maximus had no p ro c e d u re s in place governing the sending of Employment V e rif ic a tio n Requests. It did not address Maximus's contention t h a t Maximus "provided written materials, training, and s e m in a rs to its employees about the pertinent provisions of the [ F a ir Debt Collection Practices Act]," (Reply Br. 3), nor did it a c k n o w le d g e a Maximus employee's testimony that through "[ s]em in ars, lectures and materials and testing," (App. 262a), M a x im u s provided "continuous training." (App. 264a.) A t oral argument on appeal, Maximus conceded it had no p ro c e d u re s in place "reasonably adapted to avoid" the specific e rro r that occurred here--a confusion between two individuals w ith the same name. But it contends the "`reasonable p ro c e d u re s' must be directed at addressing the enumerated [Fair D e b t Collection Practices Act] violation (here, improper c o m m u n ic a tio n with a third party), not the exact act (here, s e n d in g a unique type of EVR form)." (Reply Br. 2.) Maximus c i t e s Kort v. Diversified Collections Services, Inc. for the p r o p o s itio n that the bona fide error defense "does not require d e b t collectors to take every conceivable precaution to avoid e rro rs ," but rather "requires reasonable precaution." 394 F.3d a t 539; see also Hyman v. Tate, 362 F.3d 965, 968 (7th Cir. 2 0 0 4 ) (explaining a debt collector could have done more to p re v e n t the specific error, but "§ 1692k(c) only requires c o lle c to rs to adopt reasonable procedures" to avoid errors under th e Fair Debt Collection Practice Act). The District Court did n o t consider whether Maximus's training materials were re a so n a b l y designed to avoid violations of the Fair Debt C o lle c tio n Practices Act, sufficient to establish a bona fide error d e f en se .
W e are unable to conclude whether the District Court e x e rc is e d its sound discretion in certifying the class with Beck a s the class representative. The court should have (1) d is tin g u is h e d between a violation based on the content of the E m p lo ym e n t Verification Request and a violation based on its t r a n s m is s io n , and (2) addressed the three requirements of the b o n a fide error defense. We will vacate the certification order a n d remand for further consideration by the District Court, c o n sis te n t with this opinion.
C.
M a x im u s contends the District Court erred by applying th e wrong standard in determining whether its alleged bona fide erro r defense defeated class certification. It contends the court re q u ire d it to prove the defense in order to disqualify Beck as th e class representative. We are unclear what standard the D is tric t Court applied in concluding the defense did not render B e c k atypical or inadequate.
To defeat class certification, a defendant must show some d e g re e of likelihood a unique defense will play a significant role a t trial. If a court determines an asserted unique defense has no m e rit, the defense will not preclude class certification. See, e.g., H a r d y v. City Optical Inc., 39 F.3d 765, 770 (7th Cir. 1994).
In Zenith Laboratories, Inc. v. Carter-Wallace, Inc., 530 F .2 d 508 (3d Cir. 1976), we addressed what a defendant must d e m o n s tr a te to defeat class certification through a defense u n iq u e to the class representative. Bulk purchasers of a patented d ru g brought an action to recover royalties after discovering the p a te n t had been obtained fraudulently. 530 F.2d at 510. In a f f i rm in g the district court's holding that a unique defense d e f ea te d the adequacy of the putative class representative (Z e n ith ), we explained, If Zenith were allowed to represent the alleged c las s, Carter could assert defenses against it w h i c h would not be applicable to the class as a w h o le , such as res judicata based on the d is p o s itio n of Zenith's counterclaims in the e a rlier suit. Since these unique defenses could co n ce iv ab ly become the focus of the entire litig a tio n and divert much of Zenith's attention fro m the suit as a whole, the remaining members o f the class could be severely disadvantaged by Z e n ith 's representation.
Id . at 512 (citing Koos, 496 F.2d at 1164Â65).
S e v e ra l of our sister courts of appeals have addressed this iss u e and articulated standards under which certification is im p ro p e r if the defense might become a "focus" or a "major f o c u s " of the litigation. See, e.g., Hanon, 976 F.2d at 509 ("[I]t is predictable that a major focus of the litigation will be on a d e f e n s e unique to [the class representative]. Thus, [the class re p re se n tativ e ] fails to satisfy the typicality requirement of Rule 2 3 (a ).") ; Gary Plastic Packaging, 903 F.2d at 180 ("[C]lass c e r tif ic a t i o n is inappropriate where a putative class re p re se n ta ti v e is subject to unique defenses which threaten to b e c o m e the focus of the litigation."); Koos, 496 F.2d at 1164 (7 th Cir. 1974) ("Where it is predictable that a major focus of th e litigation will be on an arguable defense unique to the named p lain tiff or a small subclass, then the named plaintiff is not a p ro p er class representative.").
W e note that these cases set forth standards, while Zenith a p p e ars to describe the defense at issue. Nonetheless, to the e x ten t Zenith does prescribe a standard, we believe it is s u b s ta n tia lly similar to the standards set forth by our sister c o u rts of appeals. Though phrased slightly differently, they all a s k whether it is predictable that the unique defense will play a m a jo r role in the litigation. Where a defense "could conceivably b e c o m e the focus of the entire litigation," Zenith, 530 F.2d at 5 1 2 , it also "threaten[s] to become the focus of the litigation." G a r y Plastic Packaging, 903 F.2d at 180. It is also " p re d ic ta b le " that the defense will be "a major focus of the litig a tio n ," Hanon, 976 F.2d at 509; Koos, 496 F.2d at 1164.
W e note that Zenith cites Koos, which articulates the standard as d isq u a lifyin g a named plaintiff "[w]here it is predictable that a m a j o r focus of the litigation will be on an arguable defense u n iq u e to the named plaintiff." Koos, 496 F.2d at 1164. Despite s o m e variations in language, we believe all of these cases set f o rth standards that are, in substance, the same.
In articulating a single standard, we align ourselves with o u r sister courts of appeals. A proposed class representative is n e ith e r typical nor adequate if the representative is subject to a u n iq u e defense that is likely to become a major focus of the litig a tio n . We believe this standard strikes the proper balance b e tw e e n protecting class members from a representative who is n o t focused on common concerns of the class, and protecting a c la ss representative from a defendant seeking to disqualify the re p re s e n ta tiv e based on a speculative defense.
D.
In addition to satisfying the requirements of Rule 23(a), p a rties seeking class certification must establish the class is m a in ta in a b le under one of the categories of Rule 23(b). In re W a r fa r in Sodium Antitrust Litig., 391 F.3d at 527. Each c a te g o ry of Rule 23(b) has different purposes and different r e q u ir e m e n t s.
R u le 23(b)(1) authorizes the use of class actions when n e c e ss a ry to prevent potentially adverse effects of separate a c tio n s. Subsection (b)(1)(A) addresses possible prejudice to th e party opposing the class and is intended to eliminate the p o s s ib ility of separate actions imposing inconsistent courses of c o n d u c t on the defendant. Subsection 23(b)(1)(B) addresses p o s s ib le prejudice to members of the proposed class, and applies if individual actions "would have the practical if not technical e f f e c t of concluding the interests of the other members as well, o r of impairing the ability of the others to protect their own in te re s ts ." 7AA Wright et al., supra, § 1774 (citation omitted).
R u le 23(b)(2) authorizes class certification when "the p a rty opposing the class has acted or refused to act on grounds g e n e ra lly applicable to the class, thereby making appropriate f in a l injunctive relief or corresponding declaratory relief with re sp e c t to the class as a whole." Fed. R. Civ. P. 23(b)(2). This ru le applies when the putative class seeks injunctive or d e c la ra to ry relief, and "does not extend to cases in which the a p p ro p ria te final relief relates exclusively or predominantly to m o n ey damages." Fed. R. Civ. P. 23(b)(2) advisory committee's n o te .
Rule 23(b)(3) authorizes class certification when " q u e s tio n s of law or fact common to the members of the class p r e d o m in a te over any questions affecting only individual m e m b e r s " and a class action would be "superior to other a v a ila b le methods for the fair and efficient adjudication of the c o n tro v e rs y." Fed. R. Civ. P. 23(b)(3). Class actions certified u n d e r Rule 23(b)(3) are subject to specific notice and opt-out re q u ire m e n ts . See Fed. R. Civ. P. 23(c)(2)(B).7 H e re , the District Court certified the class under Rules 2 3 ( b ) (1 ) , 23(b)(2), and 23(b)(3). But it did not provide its 7 Fed. R. Civ. P. 23(c)(2)(B) provides, in part: F o r any class certified under Rule 23(b)(3), the c o u rt must direct to class members the best notice p ra c tic a b le under the circumstances, including in d iv id u a l notice to all members who can be id e n tif ie d through reasonable effort. The notice m u st concisely and clearly state . . . that the court w ill exclude from the class any member who re q u e sts exclusion, stating when and how m e m b e r s may elect to be excluded. re a s o n s for doing so. It did not distinguish between the two s u b s e c tio n s of Rule 23(b)(1), nor did it acknowledge that Beck w ith d re w her request for Rule 23(b)(2) certification in light of o u r decision in Weiss v. Regal Collections, 385 F.3d 337, 3 4 1 Â 4 2 (3d Cir. 2004), holding declaratory and injunctive u n a v a ila b le under the Fair Debt Collection Practices Act.
We cannot discern why the District Court certified the c la ss under all categories of Rule 23(b). We note the conflict b e tw e e n certification under Rules 23(b)(1) and (b)(2)--which is binding on all class members--and under Rule 2 3 (b )(3 )-- w h ic h allows class members to opt-out. On remand, th e District Court should further reconsider the class c e rtif ic a tio n issues and set forth its reasoning.
IV .
F o r the reasons set forth, we will vacate the order c e rtif yin g the class and remand to the District Court for further p ro c e ed in g s consistent with this opinion.
* The Honorable Arthur L. Alarcón, United States Circuit J u d g e for the Ninth Judicial Circuit, sitting by designation. S C IR IC A , Chief Judge. In this consumer class action against a debt collector, the is s u e on appeal is whether the District Court erred in certifying a class when defendant asserted a defense unique to the claims o f the class representative. We will vacate and remand. I. M a x im u s , Inc. has a contract with the U.S. Department o f Education to collect overdue student loans. Between May 20,
2 0 0 3 , and May 20, 2004, Maximus sent a form collection letter e n title d "Employment Verification Request" to the employers of
7 7 6 Pennsylvania individuals. The Employment Verification R e q u e st displayed "MAXIMUS Collection Center" in boldface typ e at the top and bottom of the page and requested information a b o u t the individual's location and employment. On May 28,
2 0 0 3 , Maximus sent an Employment Verification Request to a p p e lle e Donna M. Beck's employer, Inolex Chemical C o m p a n y. Beck did not have an outstanding loan with the D e p a rtm e n t of Education. Maximus had confused her with a n o th e r woman, with the same name, who lived in the same P h ila d e lp h ia neighborhood. The two women had a history of 1 In deciding whether to certify a class, a court must first d e te rm in e whether the proposed class satisfies the four re q u ire m e n ts of Fed. R. Civ. P. 23(a): numerosity, commonality, typ ic a lity, and adequacy. 15.) 4 The District Court briefly noted the parties's respective p o s itio n s in footnote four, stating: [ D ] e f e n d a n t says that sending the EVR to p la in tif f 's employer was the result of a bona fide e rro r and defensible. Plaintiff counters that it is irre lev a n t whether the communication was in e rro r, because the violation--the prohibited lan g u ag e included in all EVRs--was not an error. (A p p . 4a n.4 (internal citations to District Court record o m itte d ).) place. Maximus contended if it were to believe every such s ta te m e n t, it would be entirely unsuccessful in the debt c o l le c tio n business.
6 The District Court cited testimony that: (1) Maximus drafted th e Employment Verification Request's language; (2) Maximus h a d no specific procedures governing the sending of E m p lo ym e n t Verification Requests; and (3) it was not u n c o m m o n for Maximus to send Employment Verification R e q u e sts to employers for whom the debtor in question did not w o rk .
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- U.S. Court of Appeals for the Third Circuit - United States of America, Appellant No. 96-1848, v. Franklin Uzo Igbonwa A/K/a Franklin Uzowa, A/K/a Francis Igwe, A/K/a Laz Igbonwa. United States of America, v. Franklin Uzo Igbonwa A/K/a Franklin Uzowa, A/K/a Francis Igwe, A/K/a Laz Igbonwa Franklin Igbonwa, Appellant No. 97-1054., 120 F.3d 437 (3rd Cir. 1997)
- U.S. Court of Appeals for the Seventh Circuit - Cheryl L. Hyman, Plaintiff-Appellant, v. Dick Tate and Harry Kirlin, D/B/A/ Tate & Kirlin Associates, Defendants-Appellees., 362 F.3d 965 (7th Cir. 2004)
- U.S. Supreme Court - General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982)
- U.S. Supreme Court - Califano v. Yamasaki, 442 U.S. 682 (1979)
- U.S. Court of Appeals for the Seventh Circuit - Lisa Hardy, Individually and on Behalf of all those Similarly Situated, Plaintiff-Appellant, v. City Optical Incorporated, Dr. Lawrence Tavel, and Dr. Edward Friel, and all Other Doctors Employed By or Under the Control of City Optical, Incorporated, Defendants-Appellees., 39 F.3d 765 (7th Cir. 1994)
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